The 2024-25 Federal Budget, unveiled by Federal Treasurer Dr. Jim Chalmers on 14 May 2024, forecasts a surplus of $9.3 billion in 2023-24, to be followed by deficits of $28.3 billion in 2024-25 and $42.8 billion in 2025-26. The Budget was being framed “in fraught and fragile global conditions”, with the increasing living costs and interest rates to slow the economic growth.
The Budget introduces tax cuts for every taxpayer, reshaping the Stage 3 tax cuts to ensure a fairer distribution of benefits. The changes reduce the bottom tax rate for incomes below $45,000, providing up to $804 in tax relief annually to all taxpayers, while moderating benefits for higher earners.
A pivotal measure in the Budget is the introduction of a new energy bill relief payment, extending existing relief measures. Commencing from July 1, 2024, households will receive rebates of $300, with around one million small businesses receiving $325. Additionally, the Budget enhances support for renters by increasing maximum rates of Commonwealth Rent Assistance and freezing social security deeming rates.
The Budget implements changes to higher education funding, reducing the indexation of accumulated student contribution debts and introducing a new ‘Commonwealth Prac Payment’ to support higher education students during clinical and professional placements.
Providing further insight into the ‘Future Made in Australia’ plan, the Budget allocates resources to support domestic industry growth and innovation. In addition, substantial funds are designated to accelerate housing construction, with additional support for social and affordable housing initiatives.
Treasurer Jim Chalmers forecasts a second successive surplus of $9.3 billion, accompanied by promises of cost-of-living relief and careful management to avoid inflationary pressures. Despite a projected decline in commodity prices and a softer job market, the Budget maintains a focus on economic growth and stability. Economic growth is anticipated to remain subdued, with real GDP forecasted to grow by 2% in 2024-25 and 2¼% in 2025-26. Inflation is expected to decrease gradually from 6.0% in 2022-23 to 2 ¾% in 2024-25 and 2025-26.
Our Summary
Individual
- Stage 3 tax cuts
- Foreign resident CGT regime to be strengthened
- Cost of living
- Expansion of Pt IVA general anti-avoidance rule delayed
Business
- Small business depreciation — instant asset write-off threshold of $20,000 extended to 2024–25
- New penalties for large group entities mischaracterising or undervaluing royalty payments
- Deductible gift recipients list to be updated
- Measure to deny deduction for payments relating to intangibles discontinued
Social security
- Social security deeming rates frozen
- Greater flexibility for carer payment recipients
- Eligibility for higher rate of Jobseeker payment to be extended
- Commonwealth Rent Assistance to increase
- Social security means testing and the Douglas decision
- Social security agreement between Australia and Uruguay
- Lower foreign investment fee for build-to-rent properties
Superannuation
- Super to be paid on government-funded paid parental leave
- Recovery of unpaid super from liquidated or bankrupt employers
Tax administration
- Statutory discretion for ATO to deal with tax refunds and debts on hold
- Student loans indexation reform
- Strengthening ATO’s ability to combat fraud and extension of compliance programs
GST
Excise and customs duty
Individual
The Government’s changes to the Stage 3 tax cuts are a key element of the Budget. They broaden the benefit of the original tax cuts, halving the tax break for wealthier taxpayers and increasing the benefit for those on lower incomes.
The changes cut the bottom tax rate which applies to incomes below $45,000, from 19 per cent to 16 per cent. That will give a tax cut of up to $804 a year to all tax-filers, including those on higher incomes.
At the same time Stage 3 tax cuts for higher earners are reduced. The result is that people with taxable incomes of less than about $146,486, or nearly 90 per cent of all tax-filers, will get either the same or a larger tax cut, whereas the 10 per cent with higher incomes will get smaller tax cuts than under the original Stage 3.
From 1 July 2024, the new individual tax rates and thresholds will be applicable for 2024–25 financial year. This table compares the individual income tax rates and thresholds for 2023–24 with the new tax rates and thresholds for 2024–25.
| Thresholds in
2023–24 ($) |
Rates in 2023–24
(%) |
Thresholds in
2024–25 ($) |
Rates in 2024–25
(%) |
| 0 – 18,200 | Tax free | 0 – 18,200 | Tax Free |
| 18,201 – 45,000 | 19 | 18,201 – 45,000 | 16 |
| 45,001 – 120,000 | 32.5 | 45,001 – 135,000 | 30 |
| 120,001 – 180,000 | 37 | 135,001 – 190,000 | 37 |
| Over 180,000 | 45 | Over 190,000 | 45 |
Source: Budget Paper No 2, p 12-13.
Foreign resident CGT regime to be strengthened
The foreign resident CGT regime will be strengthened for CGT events that occur on or after 1 July 2025. In respect of such CGT events, the amendments will:
- clarify and broaden the types of assets that foreign residents are subject to CGT on
- change the point-in-time principal asset test to a 365-day testing period, and
- 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. This new ATO notification process will improve oversight and compliance with the foreign resident CGT withholding rules, where a vendor self-assesses their sale as not being taxable real property.
This measure will ensure that Australia can tax foreign residents on direct and indirect sales of assets with a close economic connection to Australian land, more in line with the existing tax treatment applying to Australian residents. It will also align Australia’s taxation of foreign resident capital gains more closely with OECD standards and international best practice.
Source: Budget Paper No 2, pp 17–18.
The Budget’s key new cost-of-living measure is a new energy bill relief payment, extending existing energy relief measures. From 1 July 2024, the Budget provides rebates of $300 to every household and $325 to around one million small businesses.
Source: Budget Paper No 2, p 179.
Expansion of Pt IVA general anti-avoidance rule delayed
The start date of a 2023–24 Budget measure to expand the scope of the general anti-avoidance rule in Pt IVA of ITAA 1936 will be deferred to income years commencing on or after assent of enabling legislation.
The government had announced in the 2023–24 Budget that the general anti-avoidance rule would be expanded to capture schemes that result in reduced Australian tax via lower withholding tax rates on income paid to foreign residents. The changes announced also included extending Pt IVA to schemes with a dominant purpose to reduce foreign income tax where the scheme achieved an Australian income tax benefit.
When first announced, the changes were to apply for income years starting on or after 1 July 2024. The changes will now apply for income years commencing on or after assent of enabling legislation, regardless of whether the scheme was entered into before that date.
Source: Budget Paper No 2, p 10-11.
Business
Small business depreciation — instant asset write-off threshold of $20,000 extended to 2024–25
The instant asset write-off threshold of $20,000 for small businesses applying the simplified depreciation rules will be extended for 12 months until 30 June 2025.
Small businesses (aggregated annual turnover less than $10 million) may choose to calculate capital allowances for depreciating assets under a simplified regime in Subdiv 328-D of ITAA 1997. Under these simplified depreciation rules, an immediate write-off applies for low-cost depreciating assets. The measure will apply a $20,000 threshold for the immediate write-off, applicable to eligible assets costing less than $20,000 that are first used or installed ready for use by 30 June 2025.
The measure extends a 2023–24 Budget measure to increase the instant asset write-off threshold to $20,000 for the 2023–24 income year. A Bill containing amendments to increase the instant asset write-off threshold for 2023–24 is currently before parliament. The Bill was amended by the Senate to increase the instant asset write-off threshold for 2023–24 to $30,000 and extend access to the instant asset write-off to entities that are not small business entities but would be if the aggregated turnover threshold were $50 million.
Source: Budget Paper No 2, pp 14–15; Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023.
New penalties for large group entities mischaracterising or undervaluing royalty payments
A new penalty will be introduced from 1 July 2026 for taxpayers who are part of a group with more than $1 billion in annual global turnover that are found to have mischaracterised or undervalued royalty payments, to which royalty withholding tax would otherwise apply.
Source: Budget Paper No 2, p 11.
Deductible gift recipients list to be updated
The list of specifically listed deductible gift recipients (DGRs) will be updated to list the following organisations as DGRs:
- The Hillview Foundation Australia Limited for gifts received from 1 July 2024 to 30 June 2029
- Skip Foundation Ltd for gifts received from 1 July 2025 to 30 June 2030, and
- Combatting Antisemitism Fund Limited for gifts received from 1 July 2025 to 30 June 2030.
DGR status has also been approved for the Australian Muslim Advocacy Network’s AMAN Foundation Ltd.
The listing of Combatting Antisemitism Fund Limited and Skip Foundation Ltd is subject to charity registration with the Australian Charities and Not-for-profits Commission.
In addition, the listing of Skip Foundation Ltd is subject to the condition that DGR funds can only be used for purposes consistent with existing DGR categories in the tax law, and it will maintain minimum annual distributions consistent with the current requirements for ancillary funds.
Source: Budget Paper No 2, pp 13–14.
Measure to deny deduction for payments relating to intangibles discontinued
The Labor government’s 2022–23 Budget measure to deny deductions for payments relating to intangibles held in low- or no-tax jurisdictions is being discontinued.
An anti-avoidance rule was proposed in the 2022–23 Budget to prevent significant global entities (SGEs) from claiming tax deductions for payments made directly or indirectly to related parties in relation to intangibles held in low- or no-tax jurisdictions. The measure would apply to payments made on or after 1 July 2023. Exposure draft legislation was then released on 31 March 2023. In its 2023–24 Mid-Year Economic and Fiscal Outlook (MYEFO) the government announced that further amendments would be made to better target this measure.
This measure is now being discontinued. The integrity issues will instead be addressed through Australia’s implementation of the global and domestic minimum taxes as part of the OECD’s Two Pillar solution to address the tax challenges arising from the digitalisation of the economy under Action 1 of the Base Erosion and Profit Shifting (BEPS) project.
Source: Budget Paper No 2, p 11.
Social security
Social security deeming rates frozen
Social security deeming rates will be frozen at their current levels for a further 12 months until 30 June 2025. The lower deeming rate will remain at 0.25% and the upper deeming rate will remain at 2.25%.
Source: Budget Paper No 2, p 170.
Greater flexibility for carer payment recipients
Carer payment recipients will have greater flexibility with their participation requirements.
From 20 March 2025, the existing 25 hours per week participation limit for carer payment recipients will be amended to 100 hours over 4 weeks. In addition, the participation limit will only apply to employment and will no longer include study, volunteering activities and travel time.
Carer payment recipients exceeding the participation limit, or their allowable temporary cessation of care days will have their payments suspended for up to 6 months, rather than cancelled. Recipients will also be able to use single temporary cessation of care days where they exceed the participation limit, rather than the current 7-day minimum.
Source: Budget Paper No 2, p 166.
Eligibility for higher rate of Jobseeker payment to be extended
Eligibility for the higher rate of Jobseeker payment will be extended to single recipients with a partial capacity to work of zero to 14 hours per week from 20 September 2024.
The higher Jobseeker payment rate is currently provided to single recipients with dependent children and those aged 55 and over who have been receiving an income support payment for 9 continuous months or more.
Source: Budget Paper No 2, p 164.
Commonwealth Rent Assistance to increase
The maximum rates of the Commonwealth Rent Assistance (CRA) will increase by 10% from 20 September 2024 to help address rental affordability challenges for recipients.
Source: Budget Paper No 2, p 167.
Social security means testing and the Douglas decision
Funding will be provided to implement a social security means test treatment for military invalidity payments affected by the Full Federal Court’s decision of FC of T v Douglas 2020 ATC ¶20-773; [2020] FCAFC 220. In that case, the court held that, from 1 July 2007, certain invalidity pension payments for veterans and their beneficiaries were to be treated as superannuation lump sums, not as superannuation income stream benefits.
The funding of $11.9 million over 5 years from 2023–24 (and $0.9 million per year ongoing) will ensure that the Douglas decision does not affect income support payment rates for veterans who receive an invalidity payment from the Military Superannuation and Benefits Scheme and the Defence Force Retirement and Death Benefits Scheme, relative to the pre-Douglas arrangements.
Source: Budget Paper No 2, p 171.
Social security agreement between Australia and Uruguay
Funding will be provided to enable Australia to enter into a bilateral social security agreement with Uruguay. Social security agreements enable Australia and the agreement countries to share the costs of providing retirement income support to those who have split their working life between countries. Australia currently has 32 bilateral social security agreements in operation.
Source: Budget Paper No 2, p 169.
Lower foreign investment fee for build-to-rent properties
Foreign investors will be allowed to purchase established build-to-rent properties with a lower foreign investment fee.
The lower foreign investment fee will be conditional on the property continuing to be operated as a build-to-rent development. Foreign investors are generally prohibited from purchasing established dwellings unless the purchase is to redevelop the land resulting in an increase in dwellings or for a temporary resident’s accommodation during the period of their Australian residency. An exception also applies for foreign companies providing accommodation for Australian-based staff.
The measure was first announced on 1 May 2024.
Source: Budget Paper No 2, p 75.
Superannuation
Super to be paid on government-funded paid parental leave
Superannuation will be paid on government-funded paid parental leave (PPL) for parents of babies born or adopted on or after 1 July 2025. Eligible parents will receive an additional payment based on the superannuation guarantee (12% of their PPL payments), as a contribution to their superannuation fund.
Payments will be made annually to individuals’ superannuation funds from 1 July 2026.
Source: Budget Paper No 2, p 166; Budget Factsheet — Broadening opportunity and advancing equality.
Recovery of unpaid super from liquidated or bankrupt employers
The Fair Entitlements Guarantee Recovery Program will be recalibrated to pursue unpaid superannuation entitlements owed by employers in liquidation or bankruptcy from 1 July 2024.
Source: Budget Paper No 2, p 96
Tax administration
Statutory discretion for ATO to deal with tax refunds and debts on hold
The Commissioner of Taxation will be given a discretion to not use a taxpayer’s refund to offset old tax debts where that debt had been put on hold before 1 January 2017. The tax law will be amended to provide for this ATO discretion which will apply to individuals, small businesses and not-for-profits. The discretion will maintain the ATO’s current administrative approach to such debts.
Source: Budget Paper No 2, p 12.
Student loans indexation reform
Indexation of the Higher Education Loan Program (and other student loans) debt will be limited 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. The measure will apply retrospectively.
Source: Budget Paper No 2, p 63.
Strengthening ATO’s ability to combat fraud and extension of compliance programs
The ATO will be provided additional funding to continue various compliance programs. The current ATO Personal Income Tax Compliance Program will be extended for another year from 1 July 2027 to enable the ATO to continue its focus on emerging risks to the tax system. The Shadow Economy Compliance Program and the Tax Avoidance Taskforce will be extended for 2 years from 1 July 2026.
Funding will be provided to the ATO to improve its detection of tax and superannuation fraud, including to upgrade its information and communications technologies to be able to identify and block suspicious activity in real time. A new compliance task force will also be established to recover lost revenue and block attempts to obtain refunds fraudulently. Funding will also be provided to improve ATO’s management and governance of its counter-fraud activities.
The ATO will also be given additional time within which to notify a taxpayer if it intends to retain a business activity statement (BAS) refund for further investigation. The current required notification period of 14 days will be extended to 30 days, aligning it with time limits for non-BAS refunds. This measure will take effect from the start of the first financial year after assent of the enabling legislation.
Source: Budget Paper No 2, pp 15–17.
GST
Refunds of indirect tax extended under Indirect Tax Concession Scheme
Refunds of indirect tax (including GST, fuel and alcohol taxes) will be extended under the Indirect Tax Concession Scheme (ITCS).
Source: Budget Paper No 2, p 11.
Excise and customs duty
Tariffs identified as a nuisance across a range of imported goods will be removed from 1 July 2024.
The measure will permanently set to “free” the rate of duty in sch 3 and sch 4A–15 of the Customs Tariff Act 1995 on 457 tariff lines. These tariffs had been identified as a nuisance to Australian businesses, imposing unnecessary administrative costs and compliance burdens. Tariffs that will be removed relate to a range of imported goods, including household necessities such as toothbrushes, tools, fridges, dishwashers and clothing.
A consultation paper for this measure was released on 11 March 2024.
Source: Budget Paper No 2, p 7; Tariff reform: removal of nuisance tariffs
