2024/25 Federal Budget Briefing
2024/25 Federal Budget Briefing
On Tuesday, 14 May 2024, Treasurer Jim Chalmers handed down the 2024/25 Federal Budget, his 3rd Budget and projects a second surplus during the current government’s term.
Key points
· Higher than expected commodity prices and lower unemployment rates backed the 2023-year surplus. The 2024-year surplus carries over these effects.
· Weaker commodity prices and geopolitical tensions place downward risk on estimated cash balances beyond 2024. Forward estimates place the underlying cash balance at a deficit of $112.8b over 5 years to June 2028.
· Government debt is expected to increase from its current level of $889.8b (34.7% of GDP) to $1,112.0 (34.9% of GDP) to June 2028.
· Cost of living pressures are cited as driving a number of proposed measures, including:
o Energy bill rebate $300 per household
o Bulk billing doctors
o Job Seeker payments
o Waiver of student debts
o Superannuation on government paid parental leave
o Cheaper medicines (5-year freeze for PBS medications for pensioners)
o 10% increase in Rental Assistance
· Care economy spending, including:
o Childcare funding
o Higher wages for aged care and child care workers
o NDIS sustainability measures (expenditure in some areas, largely offset by savings in other areas)
· GST top-up payments from the Federal Government to the states and territories are set to increase by $429.6m.
“Future Made in Australia” $22.7b investment in the move to net zero emissions over the next decade to encourage private sector investment in the green energy sector.
Inflation
The Federal Government and the Reserve Bank of Australia (RBA) seem to be at odds around inflation, and in that regard, the RBA is weighing up not an interest rate cut, but a rate rise. The budget overview states that “the Government’s tax changes have been designed to ensure they will not add to the inflation outlook.”
PRIVATE BUSINESS MEASURES
Instant Asset Writeoff
This measure has been extended to 30 June 2025 and allows full write off of the cost of assets. This includes second-hand assets for most businesses (turnover less than $10m).
| For assets acquired AND installed and ready for use by 30 June 2025 |
A write-off is available up to asset cost |
|---|---|
| From 7:30pm on 14 May 2024 – 30 June 2025 |
$20,000 |
Assets that cannot be written off in full can be pooled and depreciated at 30% / (15% in the first year).
Small Business Statement
In total $641.4 million will be funded for the benefit of the small business sector, through:
· $325 energy bill relief,
· Extension of the instant asset write off,
· e-invoicing adoption,
· abolition of “nuisance tariffs”, and
· expanding digital ID system.
ATO resourcing
Additional financial resources will allow the ATO to “continue its focus on emerging risks to the tax system”, including:
· Review of Rental property deductions,
· “Shadow economy” compliance,
· Counter fraud activities, and
· Extension of the tax avoidance taskforce to focus on key tax avoidance risks.
PERSONAL MEASURES
Individual income tax rates
Previously legislated personal tax cuts will come into effect.
Changes to the individual tax rates mean the “effective” tax free threshold (taking into account the maximum Low Income Tax Offset of $700) changes to $22,575.
| Taxable Income |
Tax on this income* |
|---|---|
| 0 - 18,200 |
Nil |
| 18,201 – 45,000 |
16% over $18,200 |
| 45,001 - 135,000 |
$4,288 + 30% over $45,000 |
| 135,001 - 190,000 |
$31,288 + 37% over $135,000 |
| 190,000 + |
$51,638 + 45% over $190,000 |
*for resident individuals, not including Medicare levy
CPI increases impact the Medicare levy low income threshold, the threshold for singles increases from $24,276 to $26,000 and the family threshold will be increased from $40,939 to $43,846 (+ $4,027 for each dependent child).
Migration
Migration will be halved from current levels citing the pressures caused by population growth (260,000 places for 2024-25).
SUPERANNUATION
Commonwealth funded Paid Parental Leave
Superannuation will be paid by the government on paid parental leave for births/ adoptions after 1 July 2025.
Rate of contribution
The rate of super guarantee contributions will increase to 11.5%, up from 11.0% from 1 July 2024. The rate of super guarantee will increase again from 1 July 2025.
| Year |
Rate of SG Contribution |
|---|---|
| 2025 | 11.5% |
| 2026 | 12.0% |
Payday superannuation was announced in last year’s budget. This measure is not yet law. It is expected to apply from 1 July 2026 and will compel employers to pay its employees superannuation obligations on payday, as the name suggests.
Concessional contribution limit
The concessional contribution limit increases from $27,500 to $30,000. Taking into account an individual’s ability to make additional contributions under the carry forward rule (where the super balance at 30 June of the previous financial year is less than $500,000), there may be an advantage in making a significant deductible contribution, especially if a windfall gain is made, including from a CGT event.
Non concessional contribution limit
Non-concessional or after-tax contributions increase to $120,000 per annum (or $360,000 every three years) using the year-bring forward rule. An individual’s superannuation balance as at 30 June of the prior year impacts whether an individual can utilise the bring forward rule as follows:
| Individual’s Total Super Balance as at 30 June 2024 |
NCC bring forward rules |
|---|---|
| >$1.9m |
$0 – not eligible to make NCCs |
| $1.78m > $1.9m |
$120,000, no bring forward |
| $1.66m >$1.78m |
$240,000, 2 year bring forward period |
| Less than $1.66m |
$360,000, 3 year bring forward period |
Superannuation Pensions
Minimum withdrawal requirements
The percentage of the capital value on the previous 30 June funding your pension that needs to be withdrawn each year is as follows:
| Age |
Minimum withdrawal (in all other cases) % |
|---|---|
| Under 65 |
4.00% |
| 65-74 |
5.00% |
| 75-79 |
6.00% |
| 80-84 |
7.00% |
| 85-89 |
9.00% |
| 90-94 |
11.00% |
| 95 or older |
14.00% |
BUSINESS TAX
Other Reminders
Pay as you go (PAYG) instalments
June 2024 Activity statements (and/or instalment notices) will be issued in late June by the ATO. If business profitability/ investment income has significantly changed over the year (for instance due to asset write-offs, as a result of downturn or a decline in the value of employee share interests) then it may be an opportune time to vary the PAYG instalment. In some cases, an additional credit may be available for instalments paid in earlier quarters. Please be mindful of the due date for lodgement of the statement (as early as 28 July 2024) as late variations cannot be accepted.
How can Virtue Private Advisory help?
Here are some ways that Virtue Private Advisory helps business and their owners:
· Strategic tax planning;
· Reviewing tax structure and efficiency of your business/ investment asset holdings;
· Providing tax advice in relation to a particular transaction;
· Managing your group’s compliance obligations;
· Ongoing accounting assistance;
For more details about Virtue Private Advisory visit our website virtuepa.com.au
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