The Federal Budget was handed down by the Hon. Dr Jim Chalmers, MP, on 14.5.2024.
Key areas of focus for the Albanese Government include:
We acknowledge that the primary sources for the analysis below include the Treasury Budget Overview and the Treasury Minister’s media releases.
As announced in January, changes in the stage 3 tax cuts will deliver tax cuts for all 13.6 million Australian taxpayers from 1.07.2024. This aims to ease cost-of-living pressures for middle Australia, return bracket creep, support women and boost labour supply.
From 1 July this year, the Government will:
Thresholds in 2023–24 ($)Rates in 2023–24 (%)0 – 18,200Tax-free18,201 – 45,0001945,001 – 120,00032.5120,001 – 180,00037Over 180,00045Thresholds in 2024–25 ($)Rates in 2024–25 (%)0 – 18,200Tax-free18,201 – 45,0001645,001 – 135,00030135,001 – 190,00037Over 190,00045
The following table shows the tax savings that taxpayers will receive after the revisions to the Stage 3 tax cuts are implemented.
Taxable incomeTax liability FY24Tax liability FY25Tax reduction$100,000$22,967$20,788$2,179$150,000$40,567$36,838$3,729$200,000$60,667$56,138$4,529
The government has increased the Medicare levy surcharge low-income thresholds, effective from 1 July 2023, to reflect the increase in inflation. Individuals will see the impact of these changes when they lodge their 2024 income tax returns.
These legislative changes and revisions to the Stage 3 tax cuts received Royal Assent on 5 March 2024.
The $20,000 instant asset write-off has been extended.
Despite the delay in passing legislation for last year’s 12-month extension to the instant asset write-off, 2024 has extended the scheme for another year.
This proposed measure will allow Australian businesses with less than $10 million in annual turnover to claim an immediate tax deduction for asset purchases up to $20,000 in the year ending 30 June 2025.
The government also confirmed that the $20,000 asset threshold will continue to apply on a per-asset basis, allowing small businesses to write off multiple assets instantly.
Further, 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 per cent in the first income year and 30 per cent each income year after that.
In addition, the Government confirmed that 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.
It was first mentioned in MYEFO, and the proposed energy bill relief for small businesses extends the existing Energy Bill Relief Fund.
Eligible small businesses will receive $325 to help pay their energy bills.
Around one million businesses on small customer electricity plans benefit from this.
The government plans to amend the tax law to give the Commissioner of Taxation discretion not to use a taxpayer’s refund to offset old tax debts in cases where those tax debts were put on hold before January 1, 2017.
This follows complaints regarding a letter campaign in 2023 in which the ATO told small business owners that it may seek to recover ‘on hold’ historical tax debts.
The federal budget also included measures to help increase the number of Australian apprentices and tradies.
This includes funding to provide 20,000 new fee-free TAFE, VET, and pre-apprentice courses related to the housing sector and $1.8 million to help fast-track the assessment of potential migrants who may have relevant construction-related qualifications.
The federal government has also pledged to expand its ‘new energy’ apprenticeship scheme to encourage greater uptake.
Small and medium businesses may benefit from a $67.5 million funding package to help fight digital scams. The ATO will receive $23.3 million to continue operating the nation’s e-invoicing network.
Electronic invoices can mitigate against the many cyber risks involved with SMEs sending and receiving invoices over email. The ATO has encouraged SMEs to adopt the practice in recent years.
The government plans to develop mandatory “Scams Code Framework” industry codes.
Regulators will spend $37.3 million over the coming four years and $8.6 million annually to develop and enforce these codes.
The regulators that play a role include the Australian Competition and Consumer Commission (ACCC), the Australian Securities and Investments Commission (ASIC), and the Australian Communication and Media Authority (ACMA).
The telecommunications, banking, and digital platforms will initially be targeted, focusing on scams involving social media, paid search engine advertising and direct messaging. The ACCC aims to improve public awareness of scams and will receive $6.3 million in the 2024-25 financial year to help the public identify, avoid and report scams.
Social Security deeming rates for financial investments will remain at current levels until 30 June 2025. This will benefit approximately 876,000 income support recipients, including 450,000 age pensioners.
These budget measures included previously announced changes, including payday super and paid parental leave. The $3 million super cap and changes to non-arm’s length expenditure did not rate a mention.
The Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023, which contains the Division 296 tax measures dealing with superannuation balances over $3 million, is still before the House of Representatives. The proposed method to calculate earnings and its effect of taxing unrealised capital gains have been controversial. However, a recent Senate committee report has recommended it be passed unchanged.
The Government made no further announcement about Division 296 tax in last night’s budget.
Limited announcements were made in this 2024-25 Budget relating to the Government’s proposed payday super, following consultation by the Treasury in late 2023. Under the proposals, employers must pay their employees’ superannuation guarantee entitlements on the same day they pay salary and wages. Subject to the passage of legislation (to be introduced), this change will apply from 1 July 2026.
Moreover, the Treasurer announced that parents accessing the government-funded paid parental leave scheme will receive $1.1 billion in superannuation and their payments from 1.7.2025. Under this proposal, super will be paid 12 per cent of the paid parental leave rate for an estimated 180,000 families annually.
From 1.7.2024, the government will enhance the Fair Entitlements Guarantee Recovery Program to pursue unpaid superannuation entitlements employers owe in liquidation or bankruptcy. This will increase Government revenue over the forward estimates.
All employees will benefit from an already-legislated minimum superannuation guarantee (SG) entitlement increase. Specifically, the minimum SG rate will increase from 11% to 11.5% from 1 July 2024.
Although not announced in the Budget, the following key superannuation threshold changes take effect from 1.7.2024.
Key Superannuation threshold changesPrevious thresholdKey thresholdConcessional contribution$27,500
$30,000Non-concessional contribution$110,000$120,000Non-concessional contributions bring forward$330,000$360,000General superannuation guarantee rate11%11.50%
The ATO has been given $187 million in new funding to tackle tax and superannuation fraud. This includes tools to block suspicious activity in real-time and a task force to recover lost revenue and take action when scammers attempt to claim false refunds. The ATO’s capacity to manage “peak fraud events” like the massive GST fraud scam that led to Operation Protego has also been strengthened.
The two-billion-dollar scam involved thousands of individuals attempting to claim false GST refunds, largely driven by social media, including TikTok.
If the ATO intends to retain a business activity statement (BAS) refund for further investigation, it has to notify the taxpayer within 14 days. The government will extend this mandatory notification period to 30 days, in line with mandatory notification periods for non-BAS refunds.
The federal government maintains most legitimate refunds will not be affected by the change, but the extra time will allow the ATO to better combat large-scale fraud events.
Legitimate BAS refunds that are retained for longer than 14 days will continue to attract interest, payable to the taxpayer, and the ATO will be required to publish BAS processing times online. This change will come into effect from the start of the first financial year after the relevant legislation receives Royal Assent.
The above tax cuts return bracket creep and lower average tax rates for all taxpayers.
The Government maintains that the changes provide taxpayers with greater protection against bracket creep, particularly low—to middle-income taxpayers and support the progressivity of the tax system.
The tax cuts designed to encourage greater participation in the workforce are expected to increase labour supply by 930,000 hours per week, equivalent to around 25,000 full-time jobs. Women and individuals drive this increase in the low‑to middle-income range, particularly those earning between $25,000 and $75,000.
All 6.5 million women taxpayers will receive a tax cut in 2024–25, with an average benefit of around $1,650. This will increase the financial return from work and support participation.
CASE STUDY
Frances is a full-time barista earning $50,000 per year. Frances’ tax cut in 2024–25 will be $929.
Jeremy and Sarah work full-time, earning $75,292 and $60,000 annually. They have two children, aged two and three, who attend a long daycare centre three days a week.
Under the Government’s changes, they will receive a combined tax cut of $2,740 and an additional $2,430 in Childcare Subsidy. They will also receive $300 in energy bill relief in 2024–25. Their net benefit from these changes is $5,470, equivalent to a 5.5 per cent increase in their disposable income.
The Government has increased the Medicare levy low-income thresholds for 2023–24, ensuring more than one million low-income taxpayers continue to be exempt from the Medicare levy or pay a reduced levy rate. For a single individual taxpayer, this increases to $26,000 (increased from $24,276)
$300 energy rebates for every household.
The Government provides $3.5 billion in energy bill relief for all Australian households and around one million small businesses.
From 1 July 2024, more than 10 million households will receive a total rebate of $300, and eligible small businesses will receive $325 on their electricity bills throughout the year.
This is estimated to directly reduce headline inflation by around 1/2 of a percentage point in 2024–25 and is not expected to add to broader inflationary pressures.
CASE STUDY
Merryn lives alone and works full-time on the national minimum wage ($45,906). Under the Government’s changes, Merryn will receive a tax cut of $827 and $300 in energy bill relief in 2024–25. Her net benefit from these changes is $1,127, equivalent to a 2.8 per cent increase in her disposable income.
Boosting Commonwealth Rent Assistance.
The government has provided $1.9 billion over five years to increase the maximum rates of Commonwealth Rent Assistance by 10 per cent.
This builds on the 15 per cent increase in September 2023 and will take maximum rates over 40 per cent higher than in May 2022 – a combined result of indexation and the actions of this Government.
CASE STUDY
Gillian is the sole parent of a nine-year-old child, pays $400 in rent a week and is not in the labour force. Under the Government’s changes, Gillian is now eligible for Parenting Payment Single instead of JobSeeker Payment and will receive an additional $5,677 in income support. She will also benefit from an additional $1,215 in Commonwealth Rent Assistance and $300 in energy bill relief in 2024–25. Her net benefit from these changes is $7,193, equivalent to a 19.6 per cent increase in her disposable income.
The Government will cut $3 billion in student debt for more than 3 million Australians.
This will relieve everyone with the Higher Education Loan Program (HELP) and other student loan debt. In response to the Australian Universities Accord, the Government will cap the HELP indexation rate to be the lower of either the Consumer Price Index or the Wage Price Index.
The Government will backdate this relief to all HELP, vocational education and training (VET) Student Loans, Australian Apprenticeship Support Loans and other student support loan accounts that existed on 1 June 2023.
CASE STUDY
Changing the calculation of HELP indexation applied from 1 June 2023 means that the indexation rate is reduced from 7.1 per cent to 3.2 per cent in 2023 and from 4.7 per cent to around 4 per cent in 2024.
Julian had an average outstanding HELP loan of $26,500 in 2023. Following the Government’s changes in calculation, he will receive a credit to his HELP account of $1,190 across the 2023 and 2024 years, subject to the passage of legislation. Over the life of his loan, Julian’s debt would be reduced by around $1,600.
The Budget builds more homes for Australians, with more social and affordable housing, more infrastructure and removal of red tape, better transport for more accessible cities and suburbs and increased housing for students:
The Federal Government aims to achieve this by:
The new multinational penalty will be supported by reforms to strengthen transparency about the use of subsidiaries and stop multinationals from claiming excessive debt deductions to reduce or wipe out tax in Australia, which has passed Parliament.
This budget initiative will invest in a Future Made in Australia plan to bring new jobs and opportunities to communities in every part of our country.
Making our future here in Australia is about maximising our nation’s potential and ensuring everyone shares in the benefits. This aims to maximise the economic and industrial benefits of the international move to net zero and secure Australia’s place in a changing global economic and strategic landscape.
The 2024-25 Budget will invest $22.7 billion over a decade to help Australia succeed and remain an indispensable part of the global economy as the world undergoes the biggest transformation since the Industrial Revolution.
This plan will help Australia build a stronger, more diversified and more resilient economy powered by clean energy, create more secure, well-paid jobs and encourage and facilitate the private sector investment required to take advantage of this opportunity.
It will invest in innovation and technology that will help ensure we remain globally competitive and recognise the vital role of regional Australia in our national prosperity.
The Future Made in Australia plan is about attracting and enabling investment, making Australia a renewable energy superpower, value-adding to our resources and strengthening economic security, backing Australian ideas and investing in the people, communities and services that will drive our national success.
These policies complement the Government’s broader growth agenda, including competition reforms, investments in infrastructure, housing, human capital and the defence industry, and support for small businesses.
A new National Interest Framework, established under a Future Made in Australia Act, will guide the Future Made in Australia agenda and better align economic incentives with national interests.
Under the Framework, priority industries will be identified under two streams. The ‘net zero transformation’ stream will identify sectors that can significantly contribute to achieving net zero, where Australia has grounds to build enduring sources of comparative advantage. The ‘economic security and resilience’ stream will identify sectors that are critical to our resilience, vulnerable to supply disruptions and require support to unlock sufficient private investment.
This Framework will guide Government decision-making on significant public investments, particularly those used to incentivise private investment at scale. Further details are outlined in the National Interest Framework supporting paper available on the Treasury website.
The Government will also apply the Community Benefit Principles to significant investments in priority industries. These investments will focus on boosting investment in local communities, supply chains, and skills, promoting diverse workforces, and securing jobs.
Borg & Salce Accountants