Table of Contents
Federal Treasurer Jim Chalmers MP presented the Australian Labor Party’s 2024-25 budget last night.
The budget emphasised efforts to alleviate the cost of living crisis, increase housing construction, support local manufacturing (“A Future Made in Australia”), facilitate upskilling and education access, enhance Medicare, and bolster the care economy.
The budget this year is expected to show a surplus of $9.3bn thanks to a continuing revenue windfall, but slip back into bigger deficits from next year for at least another 5 years. Significant extra spending risks adding to inflation.
Structural budget deficits remain in the medium term as the revenue windfall fades and spending remains high. Bigger government looks increasingly locked in.
Summary of key proposals
Revised Stage 3 tax cuts will deliver tax savings from 1 July 2024.
The Stage 3 tax cuts will make the following changes from 2024/25:
• reduce the 19% tax rate to 16%
• reduce the 32.5% tax rate to 30%
• increase the 37% tax rate threshold from $120,000 to $135,000
• increase the 45% tax rate threshold from $180,000 to $190,000
From 1 July, 13.6 million taxpayers will pay less tax compared to the current financial year, when the re-worked Stage 3 tax cuts take effect. The tax savings depend on taxable income. The table below outlines the new rates and thresholds from 1 July 2024, as well as the current financial year. The tax cuts aim to provide cost-of-living relief, but may also be used to reduce debt, invest or top-up super.
Cost of Living Relief
Energy bill relief is on the way from 1 July 2024
All households will receive a $300 a year rebate in quarterly instalments on their energy bills. Eligible small businesses will receive $325 a year.
Securing cheaper medicines from 1 January 2025
There will be a temporary freeze on indexing the Pharmaceutical Benefits Scheme (PBS) co-payment.
In 2024, the co-payments are $31.60 for general patients and $7.70 for concessional patients.
From 1 January 2025, the Government will introduce: a 1-year freeze on indexation for PBS co-payments for general patients up to a 5-year freeze for concessional patients.
The $1 discount will gradually be removed without leaving patients worse off.
Small Business and ATO Administration
Instant asset write-off extended to FY2025:
Small businesses with a turnover less than $10 million will be able to claim an immediate tax deduction for the full cost of eligible assets costing less than $20,000 for another 12 months until 30 June 2025.
The $20,000 threshold applies to each eligible asset purchased. Also, the asset must be first used or installed ready for use between 1 July 2024 and 30 June 2025.
Under current law, the small business instant asset write-off threshold is (less than) $1,000 for the 2025 income year.
However, the Government has announced that it will temporarily set the instant asset write-off threshold for small business entities at (less than) $20,000 for the 2025 income year.
Small businesses with an aggregated annual turnover of less than $10 million will generally be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use by 30 June 2025. The asset threshold applies on a ‘per asset’ basis, so small businesses can instantly write off multiple assets.
Assets valued at $20,000 or more (i.e., which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first Income year and 30% each income year thereafter.
The provisions that prevent small businesses from re-entering the simplified depreciation regime for five years if they opt-out will continue to be suspended until 30 June 2025.
From 1 July 2025, the instant asset write-off threshold will revert back to (less than) $1,000.
Retaining Business Activity Statement (‘BAS’) refunds
The Government will strengthen the ATO’s ability to combat fraud by extending the time the ATO has to notify a taxpayer if it intends to retain a BAS refund for further investigation. The ATO’s mandatory notification period for BAS refund retention will be increased from 14 days to 30 days to align with time limits for non-BAS refunds.
Legitimate refunds will be largely unaffected. Any legitimate refunds retained for over 14 days would result in the ATO paying interest to the taxpayer. The ATO will publish BAS processing times online.
This change will have effect from the start of the first income year after Royal Assent of the enabling
legislation.
Strengthening the foreign resident CGT regime
The Government will strengthen the foreign resident CGT regime to ensure foreign residents pay their fair share of tax in Australia and to provide greater certainty about the operation of the rules.
The amendments will apply to CGT events commencing on or after 1 July 2025 to:
- clarify and broaden the types of assets that foreign residents are subject to CGT on;
- amend the point-in-time principal asset test to a 365-day testing period; and
- require foreign residents disposing of shares and other membership interests exceeding $20
million in value to notify the ATO, prior to the transaction being executed.
This measure will ensure that Australia can tax foreign residents on direct and indirect sales of assets with a close economic connection to Australian land, more in line with the tax treatment that already applies to Australian residents.
The new ATO notification process will improve oversight and compliance with the foreign resident CGT withholding rules, where a vendor self-assesses their sale is not taxable real property.
Unpaid superannuation entitlements
The Government will recalibrate the Fair Entitlements Guarantee Recovery Program to pursue unpaid superannuation entitlements owed by employers in liquidation or bankruptcy from 1 July 2024.
ATO Given discretion to not offset a refund against old tax debts
The Government has proposed to amend the tax law to give the Commissioner a discretion to not use a taxpayer’s refund to offset old tax debts, where the Commissioner had put that old tax debt on hold prior to 1 January 2017.
This discretion will apply to individuals, small businesses and not-for-profits, and will maintain the Commissioner’s current administrative approach.
Franchising Code of Conduct
$3.0 million over two years from 2024–25 to implement the Government’s response to the Review of the Franchising Code of Conduct, including by investigating the feasibility of a licensing model and remaking and updating the Franchising Code of Conduct prior to its expiration in April 2025
Australian Small Business and Family Enterprise Ombudsman
$2.6 million over four years from 2024–25 (and $0.7 million per year ongoing) for the Australian Small Business and Family Enterprise Ombudsman to support unrepresented small businesses to navigate business to business disputes through alternative dispute resolution. Extending ATO compliance programs
The Government has announced it will extend the following ATO compliance programs:
(a) Personal Income Tax Compliance Program
The Government will extend the ATO’s Personal Income Tax Compliance Program for one
year from 1 July 2027. This extension will enable the ATO to continue to deliver a combination
of proactive, preventative and corrective activities in key areas of non-compliance, including
overclaiming of deductions, incorrect reporting of income and inappropriate tax agent
influence. This will enable the ATO to continue its focus on emerging risks to the tax system,
such as deductions relating to short-term rental properties.
(b) Shadow Economy Compliance Program
The Government will extend the ATO Shadow Economy Compliance Program for two years
from 1 July 2026. This extension of the Shadow Economy Compliance Program will enable
the ATO to continue to reduce shadow economy activity, thereby protecting revenue and
preventing non-compliant businesses from undercutting competition.
(c) Tax Avoidance Taskforce
The Government will extend the ATO Tax Avoidance Taskforce for two years from 1 July 2026.
Extending the Taskforce ensures the ATO continues to be well-resourced to pursue key tax
avoidance risks, with a focus on multinationals, large public and private businesses, and high net wealth
individuals.
(d) ATO counter fraud measures
The Government will provide $187.0 million over four years from 1 July 2024 to the ATO to
strengthen its ability to detect, prevent and mitigate fraud against the tax and superannuation
systems. This will include funding:
- or upgrades to information and communications technologies to enable the ATO to identify and block suspicious activity in real time;
- for a new compliance taskforce to recover lost revenue and intervene when attempts to
obtain fraudulent refunds are made; and - to improve the ATO’s management and governance of its counter-fraud activities, including
improving how the ATO assists individuals harmed by fraud.
Help for students with HELP Loans and Tertiary Education Reform
The Government will provide funding to implement the first stage of reforms to Australia’s tertiary
education system. Of note, this includes funding:
- to limit the indexation of the Higher Education Loan Program (and other student loans) debt to the lower of either the Consumer Price Index or the Wage Price Index, effective from 1 June 2023, subject to the passage of legislation; and
- to establish a new ‘Commonwealth Prac Payment’ of $319.50 per week (benchmarked to the single Austudy rate) from 1 July 2025 for tertiary students undertaking supervised mandatory placements as part of their nursing (including midwifery), teaching or social work studies.
This will help alleviate the significant financial impact of mandatory placements and increase retention in courses for careers in sectors experiencing shortages.
The Government will backdate this relief to all HELP, VET Student Loan, Australian Apprenticeship Support Loan and other student support loan accounts that existed on 1 June last year.
This will benefit all Australians with a HELP debt, fixing the issue of last year’s spike in the CPI indexation rate of 7.1 per cent and preventing growth in debt from outpacing wages in the future.
The 2023 indexation rate based on WPI would only have been 3.2 per cent.
An individual with an average HELP debt of $26,500 will see around $1,200 wiped from their outstanding HELP loans this year, pending the passage of legislation.
Superannuation
Paying super on Government-funded Paid Parental Leave From 1 July 2025
In recognition of the important contribution that parents make, the Government has announced that, subject to the passage of legislation, it will pay super on the Government funded Paid Parental Leave for babies born or adopted on or after 1 July 2025.
Eligible parents will receive an additional 12% of their Government-funded Paid Parental Leave as a contribution to their superannuation fund
Payday super From 1 July 2026
As part of the Government’s workplace relations agenda, funding was provided to boost workplace productivity including supporting workplaces to implement policy changes such as the introduction of payday superannuation.
Payday superannuation was previously announced in the 2023-24 Federal Budget, requiring employers to pay their employees’ SG entitlements at the same time as their salary and wages. Currently, employers are required to pay their employees’ superannuation guarantee contributions on a quarterly basis.
The Government released a consultation paper on 9 October 2023 providing industry and stakeholders an opportunity to provide input on implementing payday superannuation as well as a redesigned compliance framework to encourage employers to pay their super as close as possible to payday. Social
Security and Aged Care
Deeming rates to stay frozen in 2024/25: The ‘deeming rates’ that are used to assess income from financial investments (such as bank accounts, shares, and managed funds) will remain unchanged until 30 June 2025. Instead of assessing actual investment and bank account earnings, the deeming rates are used to determine the income that certain financial investments earn for the purpose of calculating entitlements to certain payments and benefits. This may benefit Age Pensioners, other income support recipients and concession card holders.
- Support for renters: On 20 September 2024, the maximum Commonwealth Rent Assistance payment will increase by 10%, in addition to the regular half-yearly indexation. Rent Assistance may be available for people who pay rent and receive certain payments from Services Australia.
- More work flexibility for carers: From 20 March 2025, Carer Payment recipients will be able to work up to 100 hours at any time in a four week period without losing their payment. This is known as the ‘participation limit’ and it’s currently a maximum of 25 hours every week. Also, travel time, education and volunteering activities will no longer count towards the participation limit; only actual hours worked.
- More home care packages: An additional 24,100 home care packages will be made available in 2024/25. These packages will provide ongoing care to help older Australians to stay in their homes for longer.
Note: These measures are proposals only and may or may not become law.
