In the third Federal Budget of the Government’s current term, Treasurer Jim Chalmers has handed down a second consecutive surplus budget following his first surplus last year.
The Budget for “every Australian” seeks to strike a delicate balance between addressing the cost of living crisis, keeping inflation at bay, and supporting the future growth of the Australian economy by investing in skills and training and the industries.
The money in this Budget will be targeted towards health and aged care sector, green and renewable energy, minerals and resources, and other social causes such as housing and education.
All 13.6 million individual taxpayers are expected to receive a tax cut from 1 July 2024.
There were only a few measures to support to small businesses.
The tax team at Prosperity bring you the main highlights from the Budget for businesses and individuals.
Personal Income Tax — Cost of Living Tax Cuts
Prior to the Budget, the Government announced the following changes to tax rates that apply to all Australians from 1 July 2024.
The new rates above that have already been legislated, will see, on average, taxpayers receiving a tax cut of $1,888 or $36 per week starting 1 July 2024.
Personal Income Tax — increasing the Medicare levy low-income thresholds
The Government has increased the Medicare levy-low-income thresholds for singles, families, and seniors and pensioners from 1 July 2023 to provide cost of living relief.
Small Business Support – $20,000 instant asset write-off
In this Budget, the Government proposed to further extend the instant asset write-off threshold of $20,000 until 30 June 2025, giving one additional year of accelerated depreciation to small businesses.
Small businesses with aggregated annual turnover of less than $10 million will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use by 30 June 2025. The $20,000 threshold will apply on a per asset basis, so small businesses can instantly write off multiple assets.
Assets valued at $20,000 or more (which cannot be immediately deducted) must be placed into a small business simplified depreciation pool and be depreciated at 15 per cent in the first income year and 30 per cent each income year thereafter.
Small Business Support – Relieving energy bill pressures
Energy cost relief – One off $325 in power bill rebate for small businesses and $300 for households.
Superannuation – Payment of Super Guarantee on Paid Parental Leave
The Government announced it will invest over $1bn over four years to fund the payment of superannuation on top of Commonwealth government-funded Paid Parental Leave (PPL) starting from 1 July 2025 as support to close the gender gap in superannuation balances. Superannuation will be paid at the rate of 12%.
Superannuation – Other
There were no other significant announcements to Superannuation in the Budget. In prior years, other changes to superannuation that were announced were changes seeking to raise additional tax revenue from the “top end of town”.
From a start date of 1 July 2025, the Government will introduce an additional 15% tax on superannuation earnings where the member balance exceeds $3 million. At this date of this publication, legislation regarding these measures is before Parliament and has not passed.
The other major change to commence 1 July 2026 will require employers having to pay their employees superannuation guarantee amount at the same time as they make their salary payments, instead of the current quarterly cycle. The Government will hopefully finalise the details of the proposed legislation as this measure is not yet introduced into Parliament.
Although not a new announcement, the superannuation guarantee rate is also set to increase from the current 11% to 11.5% from 1 July 2024 and increase again to 12% from 1 July 2025.
Property Sector
Prior to the Budget, the Government has introduced tax breaks for build-to-rent investment with a lowering of withholding tax for eligible fund payments from Managed Investment Trusts (MIT) to foreign tax residents attributable to build-to-rent properties.
The measure will reduce MIT tax from 30% to 15% from 1 July 2024. Capital works deductions will also increase from 2.5% to 4% for build-to-rent constructions commencing after 16 May 2023.
Legislation is yet to be introduced into parliament.
State governments are also offering incentives for build-to-rent properties, primarily, a 50% reduction in land tax is being offered.
Strengthening Tax Compliance
The following tax compliance measures were announced in the Budget:
- For CGT events that arise from 1 July 2025, the Government will strengthen foreign resident capital gains tax (CGT) regime to ensure foreign residents notify the ATO prior to execution of the transaction involving the sale of share interests and sale of other membership interests in Australian land where the sale price exceeds A$20 million.
Announced in December 2023, the foreign resident capital gains tax withholding tax rate will increase from 12.5% to 15% and reduce the withholding threshold from $750,000 to $0. The rules will apply to real property disposals with contracts entered into from 1 January 2025. - The Government will allocate further funding to ATO to strengthen tax compliance resources involving personal income tax.
- The Government will also provide further funding involving to counter fraud in the tax and superannuation systems. The Government will strengthen the ATO’s ability to combat fraud by extending the time the ATO has to notify a taxpayer if the ATO intends to retain a business activity statement refund for further investigation. The ATO’s mandatory notification period for BAS refund retention will be increased from 14 days to 30 days to align time limits for non-BAS refunds.
Medical and Health Sectors
The following medical and health measures were announced in the Budget:
- Healthcare – over $2.2bn in support for Aged Care sector, including $1.2 billion over five years from 2023–24 for sustainment of, and essential enhancements to, critical aged care digital systems so they remain legislatively compliant and contemporary and can support the introduction of the new Aged Care Act from 1 July 2025.
- Medical research – The Government has committed an additional $1.4 billion over 13 years from 2024–25 through the Medical Research Future Fund (MRFF) to continue to invest in life-saving medical research in Australia, plus other funding for women’s health and cancer research.
Other Tax and Related Announcements
Other announcements made in the Budget include:
- Student loan indexation reform - Prior to the Budget, the Government announced measures capping the Higher Education Loan Program (HELP) indexation rate to the lower of the Consumer Price Index or the Wage Price Index, with effect backdated to 1 June 2023. These measures will apply to all HELP, VET Student Loan, Australian Apprenticeship Support Loan and other student loan accounts that existed on 1 June 2023. Anyone who has already paid off their debt will receive a tax credit.
Other amendments to existing measures announced in the Budget were:
- The ATO will be given a discretion to not use a taxpayers refund to offset old tax debts where the ATO has placed that old tax debt on hold prior to 1 January 2017. The ATO discretion will apply to individuals, small business and not-for-profits.
To view our extensive Federal Budget overview, click here.
To view our Tax & Superannuation Federal Budget Report, click here
We are available to discuss your specific circumstances with you and to assist with any decisions you might be considering. Don’t hesitate to get in touch with your Prosperity Adviser today or give us a call on 1800 855 844.
