Welcome to another financial year.

Of course it will bring its challenges as well as its opportunities, but there is one thing we do know for certain: the new year has ushered in another round of tax cuts.

The 15% band will now stretch from $6000 to $34000, the 30% band will now range between $34001 and $80,000 and the top rate of 45% will now cut in when income reaches $180,000, not $150,000 as it is now.

The power of the tax cuts over the last eight years will become apparent when you consider that in the financial year ending June 2000 just prior to the introduction of GST, a rate of 20% was levied on taxable incomes between $5401 and $20700 and at 47% on incomes of $50,001 and over.

The July 1, 2008 tax cuts mean an extra $600 a year for a person on $70,000 a year, $1100 a year for those on annual incomes between $80,000 and $150,000 and $2600 a year for high income earners.

The tax cuts give you the opportunity to understand some very powerful principles. These include “you don’t miss what you don’t get”, “pay yourself first” and “little things add up”.

If you have a home loan the simplest and most effective strategy is to contact the bank tomorrow and increase your home loan repayments by the amount of your tax saving.

Even small amounts can make a huge difference over time.

For example, if you had a home loan of $200,000 over 30 years at 9% the present payments would be $1609 a month and you pay over $380,000 interest in that 30 year period.

Just raising the payments by $92 a month would chop the term by six years and save a massive $94,000 in interest. If rates dropped to 8%, as forecast, the higher repayments would shorten the loan to just 20 years.

If you don’t have a home loan simply arrange for a direct debit to a high interest online savings account or talk to an adviser about starting an investment loan.

A tax cut of $1100 a year in after tax dollars is equivalent to a tax deductible interest payment of $1709 a year for a person in the 40% tax bracket.

This would go close to funding the interest on a margin loan of $20,000. Imagine the feeling of converting your “tiny tax cut” to a portfolio of shares worth $20,000.

These are just two ideas to get your mind working, but above all you must act right now and have faith in the power of money growing.

If you put it off for a few weeks I guarantee you will never get around to it.

Remember your hard earned tax cuts are going to end up in somebody's pocket – make sure it is yours.