Most clients know that we watch tax rates and tax regulations fairly closely.

Despite what was said in last year’s Budget, the tax rates announced and passed during the COVID-19 pandemic to start on 1 July 2024 have changed.

Relative to the previous Stage 3 plan, the redesigned cuts broaden the tax cut’s benefits by focusing on individuals with taxable income below $150,000.

The tables below show the new tax rates.

Personal income tax rates from 1 July 2024

Resident Individuals

Non-resident individuals

Working holiday markers

Medicare levy low-income thresholds increase

The Medicare levy low-income thresholds will be increased for singles, families, seniors and pensioners from 1 July 2023.

The threshold increases take account of recent movements in the CPI, so low-income taxpayers are generally still exempt from paying the Medicare levy.

[1] The family income threshold increases by the stated amount for each dependent child or student.

Superannuation on paid parental leave

As previously announced, from 1 July 2025, superannuation will be paid on Paid Parental Leave payments.
Eligible parents will receive an additional payment based on the superannuation guarantee (i.e. 12% of their PPL payments) as a contribution to their superannuation fund.
This payment is in addition to the changes that saw families provided with an extra two weeks of leave (22 weeks total), which will increase to 24 weeks from July 2025 and 26 weeks from July 2026.

Superannuation & investors

The foreign resident capital gains tax (CGT) regime will undergo expansion through several measures:

• Types of assets subject to CGT for foreign residents will be clarified and broadened.
• The point-in-time principal asset test will transition to a 365-day testing period.
• Foreign residents selling shares or membership interests exceeding $20 million must notify the ATO before the transaction.

Currently, foreign residents are taxed on assets classified as ‘taxable Australian property’ (TAP), which ensures they pay Australian CGT on assets with significant connections to Australia. The expansion aims to align foreign resident CGT treatment more closely with Australian standards and international best practices.
The new ATO notification process will enhance oversight and compliance with CGT withholding rules for foreign residents, improving tax law alignment with OECD standards. The reforms are estimated to increase government receipts by $600 million and payments by $8 million over five years from 2023–24.

Those with large superannuation balances will now pay a 30% tax on super earnings on balances above $3 million, commencing 1 July 2025.
On the face of it, Superannuation will still be the most tax-effective vehicle, even at an extra 15%, as the tax outside Super is still higher than 30% when you have an income of over $135k.

There are some Cost of Living changes in the budget to help most Australians

$300 energy relief for households

Households will receive a credit of $300 on their energy bills credited as automatic quarterly instalments across 2024-25.

Energy relief will also be provided to eligible small businesses through a $325 rebate.

The measure will cost $3.5bn over three years from 2023-24 and expand the Energy Bill Relief Fund.

Pharmaceutical Benefits Scheme co-payments

The Government will ensure that the cost of medicines remains low by freezing indexation:

• PBS general co-payments to not be indexed between 1 January 2025 and 31 December 2025 (inclusive), with indexation resuming on 1 January 2026
• PBS concessional co-payments to not be indexed between 1 January 2025 and 31 December 2029 (inclusive), with indexation resuming on 1 January 2030

The $1 optional discount available on patient co-payments for subsidised prescriptions will be reduced each year by the relevant notional indexation amount until the $1 discount has been reduced from $1 to zero.

From 1 January 2024, you may pay up to $31.60 for most PBS medicines or $7.70 if you have a concession card. The Australian Government pays the remaining cost (except for brand premiums and certain other allowable charges).

$325 energy relief for small business

Around one million small businesses will receive $325 off their energy bills over 2024–25. The support will apply as an automatic quarterly credit to energy bills.

(Energy relief will also be provided to households through a $300 rebate.)

The measure will cost $3.5bn over three years from 2023-24 and expand the Energy Bill Relief Fund.

$20k Small business instant asset write-off extended

Small businesses with an aggregated turnover of less than $10 million will be able to immediately deduct the full cost of eligible depreciating assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2025. This measure extends the 2023-24 Budget announcement to the 2024-25 financial year.

“Immediately deductible” means a tax deduction for the asset can be claimed in the same income year that the asset was purchased and used (or installed ready for use).
If the business is registered for GST, the asset’s cost needs to be less than $20,000 after subtracting the GST credits that can be claimed for the asset. If the business is not registered for GST, it is less than $20,000, including GST.

The write-off applies per asset so that a small business can deduct the cost of multiple assets.

The rules only apply to assets that fall within the scope of the depreciation provisions. Expenditure on capital improvements to buildings that fall within the scope of the capital works rules is not expected to qualify.

Assets valued at $20,000 or more (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 after that if the asset has been acquired by a small business entity that chooses to apply the simplified depreciation rules.

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.

The increased small business instant asset write-off announced in the 2023-24 Federal Budget still needs to be law. Senate amendments proposed raising the threshold from $20,000 to $30,000 and expanding the measure to apply to medium entities.

Small business support services

The Government has announced $41.7 million in funding over four years from 2024–25 for a series of initiatives to support small businesses:

• Improving payment times to small businesses, including naming and shaming — increased resourcing for the Payment Times Reporting Regulator so that it can deliver its expanded functions, which include naming slow-paying businesses.
• Mental health and financial well-being of small business owners:
  • Extending the NewAccess for Small Business Owners program provides tailored, free, confidential mental health support.
  • Extending the Small Business Debt Helpline.
• Franchising sector code changes — In response to the 2023 Schaper Review of the Franchising Code of Conduct, the Government is providing $3 million to:
  • Remake and improve the Code.
  • Promote best practice conduct between franchisors and franchisees.
  • Make it easier for small businesses to operate in the sector including through better dispute resolution access.
• Access to justice — $2.6m in funding to the Australian Small Business and Family Enterprise Ombudsman. The ASBFEO assists and advocates for small businesses including helping to resolve disputes.

Improving aged care support

The Government will provide $2.2 billion over the next five years to deliver key aged care reforms and continue implementing recommendations from the Royal Commission into Aged Care Quality and Safety.

This funding includes releasing an additional 24,100 home care packages in 2024-25.

The Government has also agreed to defer the commencement date of the new Aged Care Act to 1 July 2025.

The Government is considering and implementing changes to how aged care is funded, following the Royal Commission into Aged Care Quality and Safety report released in 2021.
This will likely impact home care and residential care fees in the future. Generally, with past reform, we have seen existing residents and home care recipients ‘grandfathered’ under the rules when they entered.

Increased flexibility for carer payment

Currently, to receive the Centrelink Carer Payment, the caregiver must only be involved in work, study, or training for up to 25 hours per week. This reflects the requirement that the caregiver should provide the care recipient with ‘constant care’ to receive this payment.

The existing 25 hours per week will be amended to 100 hours over four weeks from 20 March 2025.

This limit will no longer include study, volunteering, or travel time and will only apply to employment.

In addition:

• Carer Payment recipients exceeding the participation limit or their allowable temporary cessation of care days will have their payments suspended for up to six months rather than cancelled.
• Recipients will also be able to use single temporary cessation of care days when they exceed the participation limit rather than the current seven-day minimum.

Higher JobSeeker rate for partial capacity to work

The Government will extend eligibility for the existing higher rate of JobSeeker payment to single recipients with a partial capacity to work (zero to 14 hours per week) from 20 September 2024.

Currently, those on JobSeeker payments aged 55 or over and who have been on the payment for nine continuous months receive a higher payment rate. These are:

Up to now, not much has been done for the housing and rental crisis.

The current issue is the lack of housing. This is a supply issue, as not enough houses are being built.

Federal, state and territory governments focus on housing

Housing initiatives address three key areas:

• Private commercial development of future housing supply – the Government has outlined an ambitious goal of building 1.2 million homes by the decade’s end. The 2023-24 Budget announced new measures to encourage investment and development of housing, particularly build-to-rent developments that included affordable housing. However, the Treasury has only recently released the draft legislation enabling the announced incentives. Encouraging large-scale investment is difficult if you do not follow through with legislation that provides certainty. No new measures have been announced to date.
• Support to help ease the path to homeownership for first-home buyers – also a policy dominant in the 2023-24 Budget with $5.5bn over a decade committed to the Help to Buy scheme. No new incentives have been announced to date.
• Crisis and social housing support—The Government has announced $1bn directed towards crisis and transitional accommodation for women and children fleeing domestic violence and youth. This measure is on top of the 15% increase to Commonwealth Rent Assistance in the 2023-24 Budget.

As previously announced, much of the Budget funding, however, flows to the States and Territories to increase housing stock, increase social housing, and provide crisis accommodation. New measures include:

• $1bn for states and territories to build the roads, sewers, energy, water and community infrastructure; and
• A new $9.3 billion 5‑year National Agreement on Social Housing and Homelessness – for states and territories to combat homelessness, provide crisis support and build and repair social housing. This includes doubling the Commonwealth’s homelessness funding to $400 million every year, matched by states and territories.

Increasing Commonwealth rent assistance

The Commonwealth rent assistance maximum rates will increase by 10% from 20 September 2024.

Centrelink/Department of Veterans Affairs payment recipients and family tax benefits recipients may also receive rent assistance if they pay rent or other rent-like payments over a minimum fortnightly threshold.

The current maximum fortnightly rates are $188.20 for a single person and $177.20 combined for a couple.

The measure will cost $1.9 billion over five years from 2023–24 (and $0.5 billion per year ongoing from 2028–29) and builds on the 15% increase in September 2023, taking the maximum rates over 40% higher than in May 2022.

Capping indexation of HELP debts

As previously announced, the Government will cap the HELP indexation rate at the lower of either the CPI or the Wage Price Index (WPI) with effect from 1 June 2023. The change will apply to all HELP, VET Student Loans, Australian Apprenticeship Support Loans, and other student support loan accounts that existed on 1 June 2023.

By changing the calculation of HELP indexation from 1 June 2023, the indexation rate is reduced from:

• 7.1% to 3.2% in 2023, and
• 4.7% to around 4% in 2024.

The change resolves an issue for more than 3 million Australians with HELP debt, who experienced a spike in the CPI indexation rate to 7.1% last year.

Pending the passage of legislation, an individual with an average HELP debt of $26,500 will see around $1,200 wiped from their outstanding HELP loans this year.

Estimated indexation for HELP debts

*Actual credit amount will vary depending on individual circumstances, including repayments made during the year. All HELP debts indexed in 2023 and subject to indexation on 1 June 2024 will receive an indexation credit.

As previously announced, the Government has committed almost $1bn over five years to permanently establish the Leaving Violence Program so that those escaping violence can receive financial support, safety assessments, and referrals to support pathways. Those eligible will be able to access up to $5,000 in financial support along with referral services, risk assessments, and safety planning.

$39.9 million over five years from 2023–24 will be provided for the development of policies and capability to support the adoption and use of artificial intelligence (AI) technology safely and responsibly, including:

• $21.6 million over four years from 2024–25 to establish a reshaped National AI Centre (NAIC) and an AI advisory body within the Department of Industry, Science and Resources
• $15.7 million over two years from 2024–25 to support industry analytical capability and co-ordination of AI policy development, regulation and engagement activities across government, including reviewing and strengthening existing regulations in the areas of health care, consumer and copyright law
• $2.6 million over three years from 2024–25 to respond to and mitigate against national security risks related to AI.

The Digital Transformation Agency will also develop and implement policies to position the government as an exemplar in using AI, with costs to be met from within existing resources.

Previously announced tax and superannuation policy decisions that are still before Parliament include:

Policy decisions that are in the consultation phase include:

• International tax — country-by-country reporting and global and domestic minimum tax
• Investment in housing — build-to-rent tax concessions
• Medicare and lump sum payments — exempting lump sum payments in arrears from the Medicare levy
• Strengthening the tax system’s integrity: The tax regulator has information–gathering powers and reviews and regulates accounting, auditing, and consulting firms in Australia.
• Payday super:  A consultation process has been undertaken for payday superannuation
• Transfer balance credit provisions — amendments to the transfer balance credit provisions for successor fund transfers.

Key statistics

• GDP – Real GDP growth of 1.75% in 2023–24. Growth is expected to remain subdued at 2% in 2024-25 and 2.25% in 2025-26.
• Inflation – The Government expects inflation to be within target by the end of 2024. The RBA’s most recent view is that inflation will not likely return to the target range of 2-3% until the second half of 2025 and to the midpoint in 2026. Global inflation remains elevated and is not expected to return to central bank targets until 2025.
• Unemployment—The unemployment rate remains near its 50-year low at 3.8%, while the participation rate is near its record high at 66.6%. Unemployment is expected to rise but remain below pre-pandemic levels.
• Wages – Nominal wages over 2023–24 have grown at their fastest rate in nearly 15 years. It is expected to soften to 3.25% in 2024-5 and 2025-6. Real wages are expected to increase and grow by 0.5% the year to the June quarter 2024.
• Business investment – growth of 8.3% last year.

The first four years of this decade have tested the economy and the resilience of all Australians: floods and bushfires, a once-in-a-century global pandemic, and the most significant international energy crisis in 50 years. The combined impact of these events resulted in economic consequences on supply chains, energy prices, inflation, and interest rates. These events may seem like distant memories, but they continue to impact the economy.

Australia continues to face ongoing global uncertainty stemming from persistent inflation in North America, growth slowing in China and other major economies, the United Kingdom and Japan finishing the year in recession, and tensions rising in the Middle East and Eastern Europe.1

Inflation and cash rate

Inflation is moderating but still high compared to the 2 to 3% target range required by monetary policy.

Michelle Marquardt, ABS head of prices statistics :
“Annually, the CPI rose 3.6 per cent to the March 2024 quarter. While prices continued to rise for most goods and services, annual CPI inflation was down from 4.1 per cent last quarter and has fallen from the peak of 7.8 per cent in December 2022.”

Inflation has increased the cost of living, as Australian households pay more to purchase the same goods and services.

The surplus in 2022–23 took some pressure off inflation, allowing the Government to fund its priorities and reduce debt interest. These are all encouraging signs, but the Government acknowledges it still needs to reduce inflation further and faster. The budget measures seek to ease inflation rather than add to it.

The cash rate is currently at 4.35%. The RBA last raised it by 0.25% on 7 November 2023 to return inflation to the target range in a reasonable timeframe. The price of goods is moderating, but services remain inflated. Overall, higher interest rates have led people to cut back on spending. This is slowing economic growth and bringing demand into better balance with supply.

Most clients know that we watch tax rates and tax regulations fairly closely.

The good news is that the tax rates announced and passed during the COVID Pandemic to start on 1 July 2024 are staying in place.

As a refresher, the table below summarises the middle tax bracket removal.

No changes to incoming tax rates from 1 July 2024

The much-touted $3m Superannuation cap, which caused a lot of angst for clients and within the adviser/accountant community, came out with an additional 15% tax for those with earnings over and above $3m (and only on the excess).

It is another case of an additional surcharge for those with more significant balances, but at least it isn’t the worst case that we had to consider of clients having to move funds out of Super.

On the face of it, Superannuation will still be the most tax-effective vehicle, even at an extra 15%, as the tax outside Super is still higher than 30% when you have income over $45k.

There are some Cost of Living small amounts of money in the budget to help pensioners and others on lower incomes.

The significant change is in pharmacies. We have several clients in the Pharmaceutical Industry, and they provide a valuable service to assist the community with health care.

The Government has announced a cut in their funding to allow for 60 days’ worth of scripts to be paid to the pharmacy to help with scripts.

There are a raft of issues with this, which range from the cost of delivery (so some Pharmacies won’t be able to deliver drugs to their customers in need) to customers wanting to keep 60 days’ worth of drugs (instead of 30 days if they are monthly).

We can’t understand the Government’s stance when on the one hand, they are pushing free Flu Shots to be administered by pharmacies. Still, then on the other, they are taking funds away from pharmacies for the day-to-day administration of services.

The announcements for business were not much, and the Government appears to have wound back some of the previous write-offs and incentives.

The Government has not extended the following:

• The Instant Asset Write-Off, as it stands, finishes on 30 June 2023.
• The Technology Boost of an additional 20% on the cost of software and other technology to help with the business now ends on 30 June 2023.
• The Skills Boost, which provides an additional 20% for the cost of training and development of staff, ends on 30 June 2024.

New initiatives at a high level:

• A new Asset Write-Off starts from 1 July 2023, allowing small businesses with a turnover of under $10m to write off assets costing less than $20,000.
• An extra tax deduction for assets that are “Energy Efficient” for businesses with less than $50m turnover, and up to $100k asset purchase. The amount of the additional tax deduction is 20% of the cost (net of GST).

There is more money for Aged Care, but the details of how this will play out are sketchy.

We will send more detail in due course. Any clients with concerns in this area should contact us to assist you.

Not much has been done for the housing and rental crisis.

The current issue is the lack of housing available. So, this is a supply issue, as not enough houses are being built.

The announcements from the Government are to:

• Expand the First Home Owners Guarantee schemes that already exist.
• Increase the tax deductions for building a house for what is termed “Build to Rent” to try to encourage investors to build rental properties.

The Government already has the NRAS Scheme (National Residential Affordability Scheme), which is now closed. So, this would have been a better program to reignite.

The issue we see is that banks are still not lending to people who want to build investment properties (not investors, nor developers, nor builders). So, we doubt that any of these announcements will have any significant impact.