Time to start planning for stage 3 tax cuts: technical manager

Advisers should start planning how to take advantage of the stage three tax cuts due to come into force next year, says a leading technical expert.


Craig Day, head of technical services, said in the latest FirstTech podcast that there are going to be planning opportunities that will arise from the stage-three tax cuts such as bringing forward eligible tax deductions in the current financial year and delaying events that can trigger higher assessable income into a future financial year.

“One way we can bring forward deductions is making personal deductible contributions, and potentially using the carry forward concessional contribution rules in this year rather than in the next year,” he said.


Linda Bruce, a senior technical services manager, said it’s important to consider the timing of using carry-forward contributions to ensure they are the most tax-effective.

“From a timing perspective, it's important to remember that any unused concessional contributions cap amount accrued in a financial year can only be used in the following five years before it expires,” Ms Bruce said.

“The carry-forward concessional contributions measure commenced in 2018-19 financial year. If you count the five financial years following the 2018-19 financial year, you find that this financial year is the last year an eligible client can use the carry forward unused concessional contributions amount accrued in 2018-19.”

Mr Day said to use the carry-forward concessional contributions, the client’s total super balance on the last day of the previous financial year must be less than $500,000.

“If they're starting to get close to that $500,000 threshold, this financial year may be their last opportunity to utilise these carry-forward amounts,” he said.

“It's not only those amounts accrued in 2018-19, but also in the following years. Subject to a client’s taxable income, they might want to try and get in as much as they can in this year because once their total super balance passes the $500,000 threshold, unless they come back down again at some point in the future, then they’ve lost the ability to use these carry forward concessional contributions.”

Ms Bruce said that the stage three tax cuts will commence on 1 July 2024, which means many clients will have higher disposable income from the next financial year. It is important for advisers to start talking to their clients about potential opportunities to salary sacrificing additional amount to super or make additional personal deductible super contributions strategies from the next year, she said.

“On or after 1 July 2024, there may be extra cash flow that could potentially be used for salary sacrifice, or the client may re-direct that money into superannuation as personal deductible contributions or non-concessional contributions which would make a big difference to their retirement savings over the next five to 15 years,” Ms Bruce said.

“You really want to set that up and get that going right from the first day because human nature is that once you get used to that level of disposable income, and your expenditure rises to meet it, it is hard to then make the change to save it,” she said.




Keeli Cambourne
09 January 2024

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Sofie Korac is an Authorised Representative (No. 400164) of Prudentia Financial Planning Pty Ltd, AFSL 544118 and a member of the Association of Financial Advisers.

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