You can start crying because, yep…. Today, you lost $4,546.
Let me explain.
If you have ever read one of my budget updates, you will know that I am very skeptical of anything that they say will happen in the future.
That’s because it rarely happens. And that’s because Governments are basically useless. That’s because they can never agree on anything and have no idea what is going to happen in 3 months’ time let alone what is going to happen in 3 years’ time. I am pretty sure if you tried to get them to organise a beer-drinking competition in a brewery somehow, they would end up arguing over which beer, the volume of beer, the colour, the way it must be delivered and how it should be drunk that in the end, everyone ends up at home without a drop being consumed yet it will be deemed a success. Ahh…. Politics, we love it, really.
But today, there was a backflip, or can I call it a full-frontal flip? Because that is what it was. A few years ago, a Liberal Government decided to make the tax code easier, and this meant giving high-income earners (almost all medical professionals) more money. It managed to get through parliament, which meant it became law. It was known as the stage 3 cuts, and during the last election, the Labor Government loved it so much that they promised to keep them.
But a lot has changed from a few years ago,
The Government changed, interest rates have skyrocketed, and our Labor Government did not think it would be a good look to give a bunch of high-income guys money when ordinary folk of Australia were doing it a bit tough with the cost-of-living crisis. What the government does not realise is that just because you earn more, it does not mean you don’t have the same money pressure.
The result is that the high-income earners will still get a tax cut…. Just not as much. So, if you happen to be in the top tax bracket, instead of getting $9K, you will ‘only’ get back $4.5K.
And that means you just lost $4,546. Yes, I know what you are thinking. $4,546 has just been stolen from you, and you would like it back. Sorry, but that is not going to happen.
If you happen to be like my wife, who calculates everything in terms of handbags, you just lost about 3-4 decent handbags, and if you are lucky, maybe a pair of heels, too. In her mind, you will still be getting $4,529, which is still about 3-4 decent handbags and, if you are lucky, maybe a pair of heels. So it’s still not a bad deal. It’s just not a great deal.
But it is interesting to see what lower-income earners get. Anyone with income under about $60K would have got the equivalent of a muffin a week ($375 a year). Now they can upgrade to a decent handbag of approx. $1,700.
If you are on $100K then you have the luxury of moving from a decent handbag ($1,375) to a Louis Vuitton because you will now get approx. $2,200.
The Government will do this by changing tax rates or increasing the income levels when you must pay higher tax rates.
The tax cuts will provide relief for 13.6 million Australians, “ensuring that hard working Australians are keeping more of the wages they earn” is what the government said. I am not so sure it is good for the nation.
Here’s why.
We are a nation that does not save or invest. We are a nation of spenders. If you give a spender more money, will they spend it or will they save it? Because if they save it, then yes, ‘Australians will be keeping more of the wages they earn.’ But if they don’t and spend it, the big corporates will get the money, and we all know what then happens.
There’s another thing too.
We are living with high-interest rates. Why? Well, that is because inflation got out of control. How did that happen? Well, during COVID-19, the government gave out so much money we had it coming out of our ears…… and we spent it.
So, if 13 million people now have more money to spend, is it likely inflation will go up or down? I think there is a chance it will go up, and I don’t care what Mr. Albo tells me. And that could mean higher interest rates for longer, which means we pay more for our mortgages, which kind of defeats the idea of giving a tax cut.
But if you happen to be a medical professional, it is a lot worse. You lose $4,546 and pay higher interest on your mortgage for longer. Yep, you just got shafted.
But if you find yourself crying and throwing darts at Mr. Albo, don’t. Because rather than think about what you have just lost just ask what you must do to get it back again.
Because this is what I do know. Many medical professionals ignore their true financial position but if they concentrate on it just a bit more, they would more than double what they have lost to tax cuts within a month. So don’t cry; pick up the phone with a professional you trust and get them to make some money for you.
Tax and using your money wisely is step 2 and 3 of working less hours, having daily money freedom and building wealth. If you want to know more, contact Hitesh at hitesh@medisuccess.com.au or call 1800 281 038.
