Tax cuts come into effect today. Will households spend or save it?

But whether it will be enough extra cash to spend on a "little treat", as ACT Chief Minister Andrew Barr has urged, is uncertain.

Under the tax changes, someone earning an annual income of $100,000 will pay $2179 less tax over the entire year, or about $42 a week.

Someone earning $60,000 a year will pay $1179 less tax under the changes, or about $23 a week.

While households won't get a lump sum from the Tax Office, many taxpayers will keep more of what they earn under the changes.

Though higher costs of fuel, groceries, education and insurance may leave little in the budget for discretionary spending.

It was a "bit short-sighted" to suggest households would have extra money to spend, Kristen Sobeck, Research Fellow at the Australian National University's Tax and Transfer Policy Institute said.

She said it would depend on the individual household whether or not people will be able to spend or save their tax cuts.

The bulk of people who pay income tax are between the ages of 30 and 50, Ms Sobeck said.

While they may be of the age when their wages are likely to be growing, they also tend to have the biggest expenses, she said.

"This is when people are buying their homes. They have small little kids or bigger kids that are in school, that eat a lot of food," she said.

"I suspect these households are the ones that tend to have the most expenses; they're going to be putting it towards those expenses."

Canberra financial planner Nick Lucey said the extra income may ease the pressure for households grappling with the cost of living.

"I know a lot of people are struggling with mortgage, rent, groceries," he said.

"So I think the extra income will give a lot of people some breathing room and relief."

Mr Lucey said the tax cuts were not a "major conversation" among his clients at Nest Advisory Group.

But those who do wish to save their additional income from tax cuts have a few options, he said.

"For a homeowner the easiest, most effective thing to do would be to make extra repayments to their owner-occupied loan or offset account," he said.

"For non-home owners, look for the best high interest savings account."

Another option could be to consider salary sacrificing some of the extra money to put towards superannuation.

"Just be sure to check the contribution rules before commencing a strategy like that or seek personal financial advice," Mr Lucey said.

Changes to the planned stage three tax cuts were passed in February 2024 to shift the savings towards middle and lower income earners.

The changes mean those earning below $150,000 a year will receive a larger tax cut than initially planned under the former Coalition government, and those earning more than $150,000 will see less of a tax cut.

In June, Mr Barr said the ideal scenario would be for people to spend, if they were able to, their extra income in parts of the economy without inflationary pressure in a way that supported ACT businesses.

He acknowledged households who already paid a smaller amount of tax would not feel the benefits as strongly as those on higher incomes.

Those with the propensity to spend the money saved by tax cuts were likely people in their late 50s and early 60s, Ms Sobeck said.

"Those who are perhaps most flush with cash will probably be those closer to retirement because they've likely paid off all their mortgage, their kids are probably grown," she said.