Stage 3 Tax Cuts: Invest or spend? How to maximise your extra income

Sydney, Australia 6/6/2024: As the stage three tax cuts approach, many Australians will face an important decision: invest, save, or spend the extra cash in the bank. Assuming there are no pressing debts, the tax cuts present a unique opportunity for wealth creation. 

InvestSMART, a leading digital wealth adviser and portfolio manager, has analysed how Australians earning an average of $70,000, $100,000 and $130,000 could grow their wealth over 10 years by investing the extra earnings after the stage three tax cuts come into effect. 

If an Australian earning $100,000 invests their additional $181 each month in a high growth portfolio returning an average of 8% a year, they could earn $31,465 after 10 years. That's $7,265 more than a high interest savings account earning an average of 2.38% over 10 years. Of course, past performance is not an indication of future performance. 

*Assumes 8% average return for a high growth portfolio over 10 years and an average 2.38% return on savings accounts. 

Effie Zahos, InvestSMART's money expert said: 

"The average tax saving amounts to $1,888 annually or $36 a week. For most workers it will have a modest impact on their take-home pay. If you don't have a plan in place, it's very easy for the extra income to slip through your fingers. 

"Ideally, every extra dollar should have a purpose. If you're in the position to invest it's the perfect opportunity to get started on your wealth creation journey. Whether that be to save for a home deposit or add to your super through salary sacrificing."