Everything your family needs to know about the 24/25 financial year

We're all feeling it. Families Australia-wide are finding things a little tight, as cost of living pressures push us to the limit.

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As we approach the 24/25 financial year, new legislation and cost of living tax cuts have opened up opportunities to get some control back and save smartly.

In this article, we’re digging into everything from the benefits of stage 3 tax cuts to realistic financial strategies your family can actually implement. (There are compromises we make gladly, but others – like streaming access to Bluey – might be a harder sell).

We’re crunching the numbers for you.

Australian tax laws and entitlements for parents

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As of July 1 this year, several changes have been made to Australian tax laws and entitlements that could affect parents. And yep, that means tax cuts.

Tax rate adjustments

We’re running through the tax breaks for your income tax rates and tax breaks for 24/25 financial year.

First off, the 19 per cent tax rate has been slashed down to a friendly 16%. That means every dollar Australian taxpayers earn in that bracket gets taxed less on their taxable income. Whether you’re a single earner or part of a dual-income household, this reduction is a win-win for you and your paycheck.

For middle-income earners, a 30.5 per cent tax rate applies now instead of the 32.5 per cent (which used to nibble a bit more of your income) So, income earners in that range, you’re now pocketing more of what you earn.

Highest income earners have also seen new tax brackets. The 37 per cent tax rate now kicks in at $135,000 instead of $120,000, and the 45% rate starts at $190,000 instead of $180,000. What does this mean for you? If you’re earning at those levels, you’re keeping more of your money before hitting those higher tax brackets.

Enhanced pre-fill services

Forget spending hours inputting every detail of your government benefits like Allowance or Pension payments into your tax return, because this process just got a lot more convenient. Under the Albanese government, these finer details come pre-filled for you.

What if there’s a mistake? Don’t panic. If you spot an error in your pre-filled data, all you need to do is select a reason from a handy list provided to explain the discrepancy. It’s a streamlined process that keeps your tax filing on track without the paperwork, customer helplines, or headaches.

Self-education deductions

This financial year, work-related self-education expense claims have been revamped. All deductions related to self-education are to be claimed specifically under the ‘self-education expenses’ section of your tax return, so you don’t have to hunt down self-education expenses under ‘Other work-related expenses.’

The government’s making sure to recognise every dollar spent on improving your skills or knowledge this tax season.

Whether you’re taking courses to advance your career, attending workshops to stay current in your field, or pursuing certifications to boost your credentials, these expenses can add up – so let’s not leave them unnoticed.

Parental Leave Pay increase

For parents juggling newborns or newly adopted bubs, the Australian government has extended the duration of Parental Leave Pay. Now, instead of 18 weeks, eligible employees who are primary carers can receive support for up to 22 weeks based on the national minimum wage. This is a big step in the right direction.

This extension in parental leave was initiated to give new parents the support they need financially, emotionally and physically during that important bonding period.

Flexible unpaid parental leave

On July 1st, the government introduced a boost on flexibility for unpaid parental leave. Previously capped at 100 days, parents now have the option to take up to 110 days of flexible unpaid parental leave for children born or adopted between specific dates.

This increase in unpaid parental leave allows all parents (of kids within those specific dates) to take time off in chunks that suit their family’s wants and needs. Whether it’s a day here and there or longer blocks of time, this flexibility is giving parents the perfect opportunity to secure that work-life balance.

These provisions are set to expand further in the coming years, offering even more flexibility for parents.

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The 2024 childcare subsidy entitlements

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In short, there are four main components that determine your subsidy: income, activity level, number of children, and the type of child care. But as a more in-depth explanation, read the following.

Income

Your family’s income affects how much childcare subsidy you’re eligible for.

If your family earns up to $80,000 per year, you qualify for a 90% subsidy rate. As your income increases beyond this threshold, the subsidy gradually decreases by 1% for every additional $5,000 in income, until it phases out completely at $530,000 or more annually.

Activity level

The amount of subsidised child care you can access is also tied to your activity level.

This includes work, study, training, or volunteering. The more hours you and your partner engage in these activities, the more hours of subsidised care you’re entitled to each fortnight.

Number of children

The number of children you have is also accounted for when applying for a Child Care Subsidy this financial year. If you’ve got more than one child aged 5 or younger in child care, you may be eligible for a higher subsidy rate for each child. So, what’s good here is that it’s a scheme that recognises the added costs and commitments of caring for a bunch of kids at once.

Type of childcare

The type of approved childcare service you choose also affects your subsidy. Whether it’s daycare, kindergarten, or occasional care, each type has its own subsidy rate and hourly rate caps based on the age of your child.

What’s perfect with this is that families receive fair and equitable support tailored to their childcare choices. It’ll hopefully provide relief to many Aussie families.

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Hypothetical Australian families and the new tax rate adjustments

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Let’s consider some hypothetical Australian families and how the new tax rate adjustments put in place as of July 1 could potentially save them money.

These are some relevant tax rate changes to keep in mind.

• The 19% tax rate will be reduced to 16%.
• The 32.5% tax rate will be reduced to 30%.
• The income threshold for the 37% tax rate will increase from $120,000 to $135,000.
• The income threshold for the 45% tax rate will increase from $180,000 to $190,000.

Example 1: Sophie, single parent

Sophie is a single parent with an income of $85,000. She would likely get a tax refund of around $1000.

Income: $85,000

Old Tax: ($18,200 + 32.5% of the amount over $45,000) = $18,200 + ($85,000 – $45,000) * 0.325 = $18,200 + $13,000 = $31,200.

New Tax: ($18,200 + 30% of the amount over $45,000) = $18,200 + ($85,000 – $45,000) * 0.30 = $18,200 + $12,000 = $30,200.

Savings: $31,200 – $30,200 = $1,000.

Example 2: Chris and Louis, dual-income family

Chris and Louis make $75,000 each with a combined income of $150,000. They would likely save around $1500.

Combined Income: $150,000 ($75,000 each)

Old Tax: 2 ($18,200 + 32.5% of the amount over $45,000) = 2 ($18,200 + $30,000 0.325) = 2 ($18,200 + $9,750) = $55,900.

New Tax: 2 ($18,200 + 30% of the amount over $45,000) = 2 ($18,200 + $30,000 0.30) = 2 ($18,200 + $9,000) = $54,400.

Savings: $55,900 – $54,400 = $1,500.

Example 3: Henda and Ariyan, dual-income family

Henda makes $180,000 while Ariyan is a person earning $120,000. Together, their income is $300,000 and gets them $4,500 in savings.

Combined Income: $300,000 ($180,000 and $120,000)

Old Tax: ($29,467 + 37% of the amount over $120,000) + ($51,667 + 45% of the amount over $180,000) = $29,467 + $0 + $51,667 + ($180,000 – $180,000) * 0.45 = $81,134.

New Tax: ($29,467 + 30% of the amount over $120,000) + ($51,667 + 45% of the amount over $190,000) = $29,467 + ($135,000 – $120,000) 0.30 + $51,667 + ($180,000 – $190,000) 0.45 = $29,467 + $4,500 + $51,667 = $85,634.

Savings: $81,134 – $85,634 = -$4,500 (Note: this family actually pays more due to their high income not benefiting from the higher threshold adjustments on the second earner).

How can a family save on taxes?

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Types of investments eligible for tax deductions

If you own an investment property, you might be able to get some money off related expenses to lower investment income taxes.

That means interest on loans, maintenance costs, property management fees, and depreciation.

Types of health and medical expenses that are tax-deductible

Parents earning over $90,000, who don’t have private health insurance, will have a Medicare surcharge of 1-1.5%, depending on their overall income. Private health insurance means you can avoid this levy surcharge, which can save you a fair bit of money.

Wrapping it up

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Importantly, all of the above insights are general and apply differently to different families. When working through these inflationary pressures, consider seeking independent legal, financial, taxation or other advice to check how this information relates to your unique situation.

But hopefully, you can walk away from this with a clearer head on this year’s tax changes.

Sources

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Individual income tax rates and threshold changes (2024) Australian Taxation Office. Available at: https://www.ato.gov.au/about-ato/new-legislation/in-detail/individuals/individual-income-tax-rates-and-threshold-changes

Self-education expenses (2024) Australian Taxation Office. Available at: https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/deductions-you-can-claim/education-training-and-seminars/self-education-expenses 

Changes if you get family payments (2024) Services Australia. Available at: https://www.servicesaustralia.gov.au/changes-if-you-get-family-payments?context=64479