On 14 May 2024, the Australian Federal Government presented the 2024/25 Federal Budget. This budget outlines a comprehensive plan to strengthen the country’s economy and provide more support to its citizens. Announced in a time of changing economic conditions, the budget introduces major policy changes and funding across various sectors.
Key areas of focus include changes to individual tax policies, such as new stage three tax cuts and adjustments to the Medicare levy for low-income earners, aimed at providing tax relief and promoting fair economic participation. The budget also promises increased support for small businesses, stricter tax rules for foreign investors, improved superannuation policies, and other measures to ensure strong economic growth and sustainable development. These initiatives demonstrate the government’s commitment to building a resilient economy and meeting the needs of both businesses and individuals.
1. Refinements to Individual Taxation Policies
Implementation of Revised Stage Three Tax Cuts
The budget confirms the enactment of the previously announced stage three personal tax cuts. These adjustments include updated tax rates and threshold changes for both Australian and foreign resident taxpayers, effective from the 2025 income year. For example, for Australian residents, the tax rate for income between $18,201 and $45,000 will decrease from 19% to 16%, and the upper threshold for the 32.5% tax rate will extend from $120,000 to $135,000.
Australian resident individual income tax rates
Foreign Resident Tax Rates 2024-25
Upgraded Thresholds for Medicare Levy for Low-Income Earners
The government has raised the thresholds at which the Medicare levy applies. This means more low-income individuals and families will either be exempt from the levy or face reduced rates. The adjustments are designed to alleviate the financial burden on lower-income taxpayers by increasing the income thresholds for singles, families, and seniors/pensioners eligible for the Medicare levy relief starting from the 2023 income year.
2. Enhanced Support Initiatives for Small Enterprises
Expansion of the Instant Asset Write-Off Threshold
To support small business investment in assets, the budget introduces a significant temporary increase in the instant asset write-off threshold. Small businesses can now deduct the full cost of eligible assets priced below $20,000, up from the previous threshold of $1,000. This adjustment applies to assets first used or installed by 30th of June 2025, allowing businesses to write off multiple assets under this threshold, which will revert to $1,000 from 1 July 2025.
Modifications to Business Activity Statement Refund Rules
The budget extends the Australian Taxation Office’s (ATO) period to retain Business Activity Statement (BAS) refunds from 14 days to 30 days. This extension aims to give the ATO more time to investigate and ensure the legitimacy of refund claims, thereby enhancing fraud prevention without affecting legitimate refunds.
3. Tightening Tax Regulations for Foreign Investors
Strengthened Tax Compliance for Foreign Residents Under CGT
The budget strengthens the CGT regime to ensure foreign residents adequately contribute to tax revenues from economic activities tied to Australian assets. Changes include clarifying asset types subject to CGT, expanding the principal asset test to a full-year period, and mandating prior notification to the ATO for significant transactions. These measures, effective from 01 July 2025, aim to improve compliance and align foreign residents’ tax obligations more closely with those of Australian residents.
4. Enhancement of Superannuation Policies
Superannuation Contributions for Paid Parental Leave
Starting 01 July 2025, the government will enhance support for new parents by including superannuation contributions on paid parental leave. This policy applies to Commonwealth-funded parental leave for births and adoptions, providing an additional superannuation payment equivalent to 12% of the parental leave payments.
Recovery of Unpaid Superannuation from Insolvent Employers
The budget recalibrates efforts to pursue unpaid superannuation entitlements through the Fair Entitlements Guarantee Recovery Program. This initiative targets employers undergoing liquidation or bankruptcy and is set to commence from 01 July 2024.
5. Expansion and Enhancement of Other Budgetary Measures
Flexible Handling of Refunds Against Old Tax Debts
The budget grants the Commissioner of Taxation the discretion to not offset refunds against pre-existing tax debts under certain conditions. This flexibility aims to support taxpayers, especially small businesses and non-profits, by preserving their cash flow.
Extension of ATO Compliance Programs
Various compliance programs, such as those targeting personal income tax, the shadow economy, and tax avoidance, are extended to strengthen the ATO’s capabilities in addressing tax compliance and fraud. These initiatives include continuing efforts against non-compliance in areas like overclaimed deductions and incorrect income reporting.
Safeguarding Against Tax Evasion and Unfair Tax Practices
While withdrawing a previously proposed measure related to deductions for payments on intangibles in low-tax jurisdictions due to overlaps with new global and domestic minimum tax rules, the budget introduces new penalties for mischaracterising or undervaluing royalty payments to low-tax countries, effective from 01 July 2026.
Support for Social Security Recipients and Tertiary Education Reforms
The budget freezes deeming rates for social security calculations to assist pensioners and other recipients in managing cost-of-living pressures. Additionally, it invests in the first stage of tertiary education reforms to support students, particularly through funding aimed at reducing financial burdens during mandatory placements.
Energy Bill Relief for Households
To help households cope with energy costs, the government will provide a $300 energy bill rebate, automatically provided to the Electricity companies via four quarterly installments of $75 against each customer’s electricity account starting 01 July 2024. People will have their next four quarters’ power bills reduced by $75 each, instead of getting $300 in their bank account.
We’re here to help
Navigating these changes can be complex. At Chan & Naylor Pymble, our team of highly skilled accountants is here to help. We offer professional advice tailored to your unique needs, ensuring you can take full advantage of the new budget measures. Reach out to us today to learn how we can support your financial growth and success.
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Disclaimer
This guide serves as general advice and may not account for the unique circumstances of individual readers. For personalised and strategic solutions tailored to your specific situation, we invite you to seek professional advice from Chan & Naylor. Our highly experienced team is dedicated to helping you navigate the complexities of Australian taxation, ensuring that your financial strategies align with the latest regulations. Contact us today to embark on a path of informed and customised tax planning for your property investments.
