Federal Budget 2024/25 - Part 2

It is worth noting that a lot of the announcements in the federal budget come into play at different times and over various periods. Any proposed changes in government revenue or expenditure need to be legally authorised. This means some decisions within the budget need to go through the parliamentary process before becoming law. Without passing the necessary legislation, the government cannot legally implement budget measures, particularly those involving new expenditures or changes to taxation. Legislative approval is a critical step in the Australian budget process.

Individuals

In addition to the preannounced stage 3 tax cuts, additional benefits announced include:

• HELP relief cap on indexation, where the lower of either consumer price index (CPI) or wage price index (WPI) will be used as the calculation methodology going forward, and will also be backdated to 1 June 2023.
• Increasing rental assistance payments by 10%
• Freeze on social security deeming rates.

Tax relief through revised tax brackets and Medicare Levy threshold increases

The budget has attempted to tackle bracket creep for low to middle income households, with higher income earners worse off under the revised cuts. It is the intention of the government to proceed with the revised stage 3.

Source: https://www.pbo.gov.au/publications-and-data/publications/costings/labors-revised-stage-3-tax-cuts-distributional-analysis

Medicare levy low-income threshold increases for singles, families, seniors, and pensioners to combat inflation. The threshold has increased to $26,000 for individuals and $43,846 for families.

For single seniors and pensioners, the threshold has been increased to $41,089 while the family threshold for seniors and pensions will increase to $57,198.

Family income thresholds will now increase by $4,027 for each dependent child, up from $3,760. These changes will most benefit working families, particularly those struggling with high mortgage rates. Individuals may consider putting to work the additional tax savings towards other places, such as superannuation, mortgage repayments, shares, or property.

Subsidies

Energy bill relief worth $300 per household applied to electricity bills is projected to equate to a 17% saving per bill.

PBS medicines will freeze at $31.60 per medicine for two years, and for concession card holders and pensioners a freeze will apply for up to five years at $7.70 per medicine.

Eligible renters

The maximum commonwealth rent assistance payment will increase by 10% from September this year (an increase between $12.50 to $18.80 per fortnight, depending on rental circumstance).

Students

HELP debts, VET student loans, Australian Apprenticeship Support Loans and other student loans will have debts reduced as the calculation of increases to these debts will now apply the lower of either CPI or WPI. This will be backdated to June 2023, where the indexation rate was 7.1%.

Age Pensioners

There will be a freeze on social security deeming rates at current levels until 30 June 2025. This is expected to benefit around 876,000 income support recipients, including 450,000 age pensioners. The deeming rate is the figure used to estimate how much money financial investments are earning and are a key determinant for the level of welfare you may receive. The current maximum rate is 2.25%.

Aged care

24,100 announced additional home care packages are aimed at reducing pressure on the aged care system. It will also reduce the average wait times and to support people to age at home if that is their preference.

Superannuation

With a focus on balancing the superannuation gender gap, the government will ensure the superannuation guarantee will be paid as a contribution to the superannuation funds of parents accessing Government funded Paid Parental Leave. This includes both partners.

Small Businesses

Some small businesses will be eligible to receive a $325 rebate against their electricity bills during 24/25FY, applied as a quarterly reduction during the FY. In addition to this, the instant asset write-off threshold has temporarily increased to $20,000 and applied to small businesses with aggregated annual turnover of less than $10m.

The Government will permanently end 457 tariffs from 1 July 2024 on a wide range of imported goods including toothbrushes, hand tools, fridges, dishwashers, clothing, and menstrual and sanitary products. This should cut the red tape and administrative burden for importing for small businesses.

Further measures announced to provide targeted support to small businesses, include:

• Several initiatives to support small businesses to improve their cyber security vigilance, including access to free training, cyber incident support services and a cyber security self-assessment tool.
• Access for small business owners to mental health support under the New Access for Small Business Owners program and financial counselling services through an extension of the Small Business Debt Helpline.
• A focus on supporting First Nations small businesses through increased capital, leveraging opportunities and First Nations business procurements.
• Significant investment in measures to reduce red tape and increase the opportunities.

Corporate

The budget introduces initiatives in relation to corporate and international taxation. The focus being on multinational tax, with a few previously announced tax measures adjusted, deferred, or discontinued.

The highlights being:

• Expansion of the foreign resident capital gains tax regime.
• Discontinuation of intangibles integrity measure.
• Penalties for mischaracterised or undervalued royalty payments
• Amended start date of previously announced measure to expand the general anti-avoidance rule.

Indirect Tax

The Government will extend the timeframe for the ATO to notify a taxpayer if it intends to retain a Business Activity Statement (BAS) refund for further investigation. The ATO’s mandatory notification period for BAS refund retention will be increased from 14 days to 30 days. Any legitimate refunds retained for over 14 days would result in the ATO paying interest to the taxpayer (as is currently the case).

Employment Taxes

The move to payday superannuation (where super will need to be paid on payday) will likely create concern for employers and put pressure on existing processes and systems to comply. Whilst there is time between now and the expected implementation date of 1 July 2026, employers will likely need to invest in appropriate education, processes, and system capabilities well in advance. The Budget’s allocation of $60m towards a variety of employer assistance measures, including payday superannuation maybe a stretch to provide significant support to employers.

Visas

There are a few adjustments relating to immigration visas, with a focus on skilled workers to assist in growing the economy.?

• 2024-25 permanent migration program will be capped at 185,000 places. With the program aimed at helping to fill skill shortages in priority sectors.
• Pre-application ballot process for people from China, Vietnam and India applying for working and holiday visa programs with a ballot charge of $25.
• Reduced planning levels for the Business Innovation and Investment Program (BIIP) from 1,900 visas in 2023–24 to 1,000 visas for the 2024–25 permanent Migration Program.

You can access the full Budget overview here.

Please contact us on 03 9268 1118 or [email protected] to discuss our services further.

The information presented is solely for educational purposes and is of a general nature. Material and information has been extracted from The Commonwealth of Australia Budget Paper 2024 and may be subject to change at the Government’s own discretion at any time.

Alex, Anu and the team.

This report has been prepared by Alex Henderson & Anu Souvannavong

Shaw and Partners, Morrissey Wealth Management

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Melbourne VIC 3000

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