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Federal Budget 2024/25

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The new federal budget was released on 14 May 2024. Here are some highlights.

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Revised individual tax rates

 

The Government has confirmed the revised stage three personal tax cuts which were announced

before the Federal Budget.

 

From 1 July 2024, the tax cuts will:

• reduce the 19 per cent tax rate to 16 per cent

• reduce the 32.5 per cent tax rate to 30 per cent

• increase the threshold above which the 37 per cent tax rate applies from $120,000 to $135,000

• increase the threshold above which the 45 per cent tax rate applies from $180,000 to $190,000.

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Under the new tax cuts, a person earning around $80,000 a year will save $1,679, while a person earning around $200,000 a year will save $4,529.

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No changes were made to the low income tax offset (LITO) in the budget. The LITO will continue to apply for the income year 2023/24 and onwards.

 

From the income year 2023/24, the Medicare levy low income threshold for singles has been increased to $26,000 (up from $24,276 for 2022/23). For couples with no children, the family income threshold is $43,846 (up from $40,939 for 2022/23). The additional amount of threshold for each dependent child or student is $4,027 (up from $3,760).

 

The tax rates for foreign residents for the income year 2024/25 and later income years will be:

• $0 to $135,000: 30%

• $135,001 to $190,000: 37%

• $190,001+: 45%

 

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Small business instant asset write-off

 

The Government will extend the $20k instant asset write-off concession for another 12 months until 30 June 2025. From 1 July 2025, the instant asset write-off threshold will revert back to $1,000. Eligible small businesses will 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.

 

 

Retaining Business Activity Statement (BAS) refunds

 

The ATO’s mandatory notification period for BAS refund retention will be increased from 14 days to 30 days. Legitimate refunds will be mostly unaffected. Any legitimate refunds retained for over 14 days will result in the ATO paying interest to the taxpayer.

 

 

Superannuation on Paid Parental Leave

 

The Government will pay superannuation on Commonwealth government-funded Paid Parental Leave for births and adoptions on or after 1 July 2025. Eligible parents will receive an additional payment based on the Superannuation Guarantee (12% of their Paid Parental Leave payments), as a contribution to their superannuation fund.

 

 

Unpaid superannuation entitlements

 

From 1 July 2024, the Government will alter the Fair Entitlements Guarantee Recovery Program to cover unpaid superannuation entitlements owed by employers undergoing liquidation or bankruptcy.

 

 

Changing foreign resident capital gains tax (CGT) rules

 

The Government will change the following foreign resident CGT rules:

 

• 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 to determine whether foreign residents hold indirect interests in taxable Australian properties (via a company or trust).

• 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.

 

 

Tertiary education system reforms

 

The Government will provide funding to implement the first stage of reforms to Australia’s tertiary

education system, including:

 

• 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).

• 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 reduce the significant financial burden of mandatory placements and improve retention rates in courses for careers in sectors facing shortages.

 

 

Discretion to not offset a refund against old tax debts

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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.

 

 

ATO compliance programs

 

The Government has announced it will extend the following compliance programs:

 

• 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 and incorrect reporting of income. 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.

 

• 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.

 

• 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 wealth individuals.

 

• The Government will strengthen ATO’s ability to detect, prevent and mitigate fraud against the tax and superannuation systems. This will include funding: for 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.

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Vincent Wan

CPA, Registered Tax Agent

May 2024