Federal Budget 2024-2025 Tax Implications

Federal Budget 2024-2025 Tax Implications

Major tax cuts were the centrepiece of the Albanese government’s third Federal Budget, even though the changes have already been announced and legislated.

Small businesses can breathe a sigh of relief, with the popular $20,000 instant asset write-off hanging on for another year and a valuable bill rebate on the way to help with the burden of high energy bills.

Tax cuts for everyone

From 1 July 2024, all 13.6 million Australian taxpayers will receive a tax cut, with the average taxpayer’s tax bill being $1,888 (or $36 a week) lower.

Under the new rules, the lowest tax rate reduces from 19 per cent to 16 per cent, with the 32.5 per cent marginal tax rate reducing to 30 per cent for individuals earning between $45,001 and $135,000.

The current 37 per cent marginal tax rate will be retained for people earning between $135,001 and $190,000, while the existing 45 per cent rate now applies to income earners with taxable incomes exceeding $190,000.

Low-income earners (under $45,000 p.a.) are the biggest winners from the changes. A single taxpayer with a taxable income of $40,000 who pays $4,367 in tax in 2023 24, would have received no benefit from the original Stage 3 tax plan, but now receives a tax cut of $654.

Boost for tax compliance

On the revenue side, the Budget includes savings of $2.5 billion in tax receipt measures through a crackdown on the shadow economy, fraud, and tax avoidance.

Taxpayers can expect the ATO to continue its recent tougher stance, with technology upgrades to enable better identification and blocking of suspicious activities in real-time and a new compliance taskforce focussed on recovering lost revenue and stopping fraudulent refunds.

Foreign residents will pay an additional $600 million over the next three years due to strengthening of the capital gains tax rules applying to this group.

Law change for old tax debts

However, one controversial measure, labelled ‘robotax’ by the media, may be abandoned, according to the Budget papers.

The ATO had been calling in historical tax debts, some accrued more than a decade ago, saying it had no choice under current laws. But the government now intends to change the tax law to give the ATO discretion about whether to collect the individual, small business, and not-for-profit debts.

Instant asset write-off retained

The deadline for the $20,000 instant asset write-off will be extended to 30 June 2025, allowing small businesses with annual turnovers of less than $10 million to immediately deduct eligible assets.
In addition, $23.3 million will be spent boosting adoption of eInvoicing to help improve small business’ cash flow and productivity.

Relieving energy bill pressure

Direct relief for small business energy bills will come in the form of a $325 rebate, while there will also be new funding for reforms to help businesses find their best electricity contract.

Assistance for smaller entities

With trading conditions remaining difficult, small business will receive $641.4 million in new targeted support. This includes $10.8 million to extend both the NewAccess for Small Business Owners program providing free mental health support and the free phone-based Small Business Debt Helpline.

An additional $25.3 million will be provided to expand the Payment Times Reporting Regulator and help improve payment times.

Nuisance tariffs abolished

From 1 July 2024, 457 nuisance tariffs will be abolished by the government to cut business compliance costs.
New funding to expand the government’s Digital ID system is designed to lower the administration burden for small businesses storing identification data on their customers and employees.

Anti-money laundering crackdown

The Budget includes $168 million over four years to pay for reforms to Australia’s anti-money laundering and counter-terrorism financing regime. Tighter rules are expected to result in lawyers, accountants and real estate agents being required to undertake due diligence on their customers and report any suspicious activities.

Information in this article has been sourced from the Budget Speech 2024-25 and Federal Budget Support documents.

It is important to note that the policies outlined in this article are yet to be passed as legislation and therefore may be subject to change.

This article is intended as an information source only and to provide general information only. The comments, examples, words and extracts from legislation and other sources in this publication do not constitute legal advice, financial or tax advice and should not be relied upon as such. All readers should seek advice from a professional adviser regarding the application of any of the comments in this article to their particular situation.