Income Tax Cuts

Most taxpayers in Australia will be better off with the cuts to income tax recently legislated.  They will receive a refund (or a reduced bill) for the 2019 year and should also see reduced tax in their next or subsequent pay cheques.

This brings up two questions:

  1. What will they do with it?
  2. What should they do with it?

For some it will increase their discretionary income (and the government hopes that they will spend it). For others they will reduce debt in terms of credit cards, personal loans and mortgages.

Many, particularly lower paid workers, have endured very low or no wage growth over the past five years.  They will welcome the extra money they have available, but it should not distract them from looking for better employment or upskilling themselves for the future.

Parkinson’s Law says that: ‘expenditure expands to meet the money available’, and very quickly the effects of tax reduction will have evaporated as if the money was never received.  Those with a money management system in place will be able to trap the benefit and decide what to do with it, whether to spend it now, spend it in the future or invest it.  Their extra income will be ‘discretionary’ compared to ‘disposable’ for those who are not disciplined with money.  Most of us are not saving enough for retirement. The proposed SGC (super guarantee charge) increases have been shelved and the retirement age extended so we will have to work longer for two reasons, one is we won’t have enough money and the other is access to superannuation will be later than we think.

What will you do?  I’d love to hear your thoughts on this, email me at