3 ways to make the most of your tax cut

Whether it’s cost-of-living pressures, housing affordability or rate rises, Aussies have been doing it tough lately.

So when there’s good news, let’s not miss the chance to celebrate it.

If you’re a working Australian you woke up on 1 July this year with a little more money in your pocket. Yes, the long-awaited tax cuts to help with the cost of living have arrived.

Now the changes are locked in, we know how much tax we’re getting back. Here’s what we all received.

Tax cuts on 1 July 2024

In practice, the tax cuts mean the average Australian with an annual salary of $73,000 will be better off by around $29 a week¹.

This may not sound like a huge amount but can easily add up and make a real difference over time.

For many Australians the extra money back in their pockets could simply provide much-needed respite from cost-of living pressures.

But for some it could also present a great opportunity to help pay off debt, invest, save for a home or retirement…or even just getting back to saving for a rainy day.

Here are some ways you can use your tax cut

Boost your borrowing power

If you’re in the market to buy a home – or even top up your current loan or buy an investment property you could boost your borrowing power.

As you can see in the table below, the 1 July tax changes mean that Australians earning $100,000 would be able to borrow an extra $21,800. And those with an overall household income of $250,000, could borrow $59,180 more. 

Assumed interest rate 6.40%. Based on a lower than 80% loan-to-value ratio (LVR) so lenders mortgage insurance (LMI) is not required.

Get on track to paying off your mortgage

If you have a mortgage, you could pay off it off sooner by using your tax cut to make extra repayments and potentially pay off your mortgage sooner.

Let’s look at paying down an average home loan over 30 years. As you can see below, the more you earn, the more time you’ll save.

For example, if you earn $140,000, and you put all your savings from the tax cut towards your mortgage repayments, you’ll save five years and five months – time back to really enjoy your later years, footloose and fancy free!

Assumptions: Average home value $636,597 and interest rate 6.27%.

Top up your super

If you’re looking to boost your retirement savings, you could contribute a little extra to your super.

This could make a big difference to your retirement savings over the long term.

Now, let’s see what happens if you contribute your additional take home pay every month for 30 years from age 30 to 60. As you can see in the table below you could get a  pretty hefty super boost, depending on how much you earn. For example, Australians earning $100,000 could get a $88,520 super boost after 30 years. Now, where’s that cruise brochure?

The following graph shows how your retirement savings could increase over time if you make regular additional contributions to your super. Each line on the bar graph represents a different income level. 

Contribution is indexed by 2.5% each year (CPI inflation). 6.09% return on balanced (70% growth) option. Investment fees and fund fees are based on the current AMP MySuper Lifestage option.

No insurance costs or advice fees are taken into account.

The after-tax contribution for the year is within the persons’ annual non-concessional contributions cap. Tax on earnings within super is at 15% each year (worst case scenario). Government co-contribution and low-income super tax offset are not taken into account.​

You can learn more about the tax cuts and what they mean for you on the Treasury website or estimate how much you're getting back using the Tax cuts calculator.

We're here to help

If you’re curious about how your super is going, how much more you could borrow on your home loan or what your retirement could look like, check out the below.

• Understand your income and expenses with AMP’s Budget planner calculator.
• Find out how much you can borrow with our Borrowing power calculator.
• See how much income you might have in retirement with our My retirement simulator.
• If you’re an AMP Super member, get closer to your super by speaking to a super coach at no extra cost.
• And if you’re buying your dream home, refinancing or looking to invest in property, we’ve got an AMP home loan that’s right for you.

_{1 Treasury.gov.au Tax cuts government fact sheet}