Posted May 28, 2024

Federal Budget Summary 2024

On Tuesday 14 May 2024, Treasurer Jim Chalmers handed down the 2024-25 Federal Budget, his 3rd Budget. The major SME business tax-related measures announced in the Budget include the following.

BUSINESS MEASURES

Instant asset write-off for small businesses extended

The Government will extend the instant asset write-off concession for another 12 months. This will allow small businesses with turnovers capped at $10 million to immediately deduct the full cost of eligible depreciating assets costing less than $20,000 that are first used or installed ready for use for a taxable purpose between 1 July 2024 and 30 June 2025.

Depreciating assets that are first used or installed ready for use for a taxable purpose on or after 1 July 2023 will be subject to the $20,000 threshold. 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) can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year thereafter.

In terms of black letter law, the increased instant asset write-off concession ceased on 30 June 2023. However, the Government announced in the 2023-24 Federal Budget (ie last year’s) that it would be extended by one year, ie to finish on 30 June 2024. That measure was contained in a Bill which is currently before Parliament (ie it is not yet law). It passed the Senate with one amendment (which extended the coverage to businesses above $50m and increased the threshold from $20,000 to $30,000) which was subsequently voted down in the House. The Bill has now returned to the Senate for further consideration.

Changes to foreign resident CGT rules

The Government will amend the following areas of CGT as it applies to foreign residents, ie it will:

clarify and broaden the types of assets that foreign residents will be liable for;
amend 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 $20m in value to notify the ATO, prior to the transaction being executed.

Energy relief payments extended

The Government will provide $3.5 billion over 3 years from 2023-24 to extend and expand the Energy Bill Relief Fund to provide a $300 rebate to all Australian households and a $325 rebate to eligible small businesses on 2024-25 energy bills.

Future Made in Australia incentives

The Government will provide 2 tax-related incentives relating to its Future Made in Australia program: the Critical Minerals Production tax incentive and the Hydrogen Production tax incentive. There are no specific details in the Budget Papers as to how these incentives will be implemented.

BAS notification period extended

The Government will extend the time the ATO has to notify a taxpayer if it intends to retain a BAS 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 with time limits for non-BAS refunds.

More ATO funding; compliance programs extended

The Government will provide $187.0m over 4 years from 1 July 2024 to the ATO to strengthen its ability to detect, prevent and mitigate fraud against the tax and superannuation systems. Funding includes:

$78.7m for upgrades to information and communications technologies to enable the ATO to identify and block suspicious activity in real time;
$83.5m for a new compliance taskforce to recover lost revenue and intervene when attempts to obtain fraudulent refunds are made;
$24.8m to improve the ATO’s management and governance of its counter-fraud activities, including improving how the ATO assists individuals harmed by fraud.

In addition, the government will extend both the ATO Shadow Economy Compliance Program for 2 years from 1 July 2026 and the ATO Tax Avoidance Taskforce for 2 years, also from 1 July 2026. These measures are expected to increase receipts by $1.9 bn and $2.4bn respectively.

Funding for new Administration Review Tribunal

The Government will provide $1.0bn over 5 years from 2023-24 (with $210.8m per year ongoing from 2028-29 and an additional $194.2m from 2028-29 to 2035-36) to establish and support the sustainable operation of the new Administrative Review Tribunal (ART), replacing the AAT. Some of the funding will be used to clear court backlogs associated with high numbers of applications for judicial review of migration decisions.

PERSONAL MEASURES

Revised stage 3 tax cuts confirmed

In the 2024-25 Budget, the Government did not announce any further changes to the personal tax rates.

The Government’s revised Stage 3 tax changes (as announced on 25 January 2024 and enacted into law by the Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024) commence from 1 July 2024. The Treasurer said all 13.6 million taxpayers will receive a tax cut from 1 July 2024. The average annual tax cut is $1,888 (or $36 a week).

Resident rates and thresholds: from 2024-25 onwards

The tax rates and income thresholds from the 2024-25 for residents (as already legislated) are as follows.

Tax rates and income thresholds from 2024-25 Taxable income ($) Tax payable ($) 0 – 18,200 Nil 18,201 – 45,000 Nil + 16% of excess over 18,200 45,001 – 135,000 4,288 + 30% of excess over 45,000 135,001 – 190,000 31,288 + 37% of excess over 135,000 190,001+ 51,638 + 45% of excess over 190,000 The following table compares the rates for 2023-24 with the revised rates for 2024-25. Basically, the 19% tax rate has been reduced to 16%; the 32.5% tax rate has been reduced to 30%; the 37% tax rate threshold has been increased from $120,000 to $135,000; and the 45% tax rate threshold has been increased from $180,000 to $190,000.

Summary: Tax rates and income thresholds Rate 2023-24 2024-25 Nil $0 – $18,200 $0 – $18,200 16% N/A $18,201 – $45,000 19% $18,201 – $45,000 N/A 30% N/A $45,001 – $135,000 32.5% $45,001 – $120,000 N/A 37% $120,001 – $180,000 $135,000 – $190,000 45% $180,001+ $190,001+

Foreign residents

For 2024-25 and later income years, the tax rates for foreign residents are:

$0 – $135,000: 30%;
$135,001 – $190,000: 37%;
$190,001+: 45%.

Working holidaymakers

For 2024-25 and later income years, the rates of tax for working holiday makers are:

$0 – $45,000: 15%;
$45,001 – $135,000: 30%;
$135,001 – $190,000: 37%;
$190,001+: 45%.

Low income tax offset (unchanged)

No changes were made to the low income tax offset (LITO) in the 2024-25 Budget.

For completeness, and as a reminder, while the low and middle income tax offset (LMITO) ceased from 1 July 2022, low and middle income taxpayers remain entitled to the LITO. Taxable income (TI) Amount of offset $0 – $37,500 $700 $37,501 – $45,000 $700 – ([TI – $37,500] x 5%) $45,001 – $66,667 $325 – ([TI – $45,000] x 1.5%) $66,668+ Nil
The maximum amount of the LITO is $700. The LITO is withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000 and then at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667.

Medicare levy low-income thresholds for 2023-24 confirmed

The Medicare levy low-income thresholds for 2023-24 would normally have been announced in this 2024-25 Budget. However, the Government released the 2023-24 Medicare levy thresholds on 25 January 2024 when it announced the changes to the Stage 3 tax cuts (see above). The new thresholds to provide cost-of-living relief were enacted by the Treasury Laws Amendment (Cost of Living – Medicare Levy) Act 2024.

From the 2023-24 income year, the Medicare levy low-income threshold for singles has been increased to $26,000 for 2023-24 (up from $24,276 for 2022-23). For couples with no children, the family income threshold is $43,846 (up from $40,939 for 2022-23). The additional amount of threshold for each dependent child or student is $4,027 (up from $3,760).

For single seniors and pensioners eligible for the seniors and pensioners tax offset (SAPTO), the Medicare levy low-income threshold is $41,089 (up from $38,365). The family threshold for seniors and pensioners is $57,198 (up from $53,406), plus $4,027 for each dependent child or student (up from $3,760).

Personal income tax compliance program extended

The Government will extend the ATO Personal Income Tax Compliance Program for one year from 1 July 2027.

This extension will enable the ATO to continue to deliver a combination of proactive, preventative and corrective activities in key areas of non-compliance, including overclaiming of deductions, incorrect reporting of income and inappropriate tax agent influence. This will enable the ATO to continue its focus on emerging risks to the tax system, such as deductions relating to short-term rental properties.

This measure is estimated to increase receipts by $180.3 million and increase payments by $44.3 million over the 5 years from 2023-24.

HECS/HELP debts

There are no further details contained in the Budget paper dealing with the announced changes (ie indexation factor will be the lower of the CPI or the Wages Price Index (WPI) and the changes will be backdated to 2022-23) to the way that the indexation factor applied to HELP debts will be calculated.

However, the Budget papers did include additional funding of $239.7 million over 5 years from 2023-24 (and an additional $250.5 million from 2028-29 to 2034-35) to tertiary institutions to cover the impact of the changes. The Papers note that the measure is estimated to reduce outstanding loans by around $3.0 billion.

Energy relief payments extended

Fast-tracked passport applications

The Government will establish new fast-track processing of passports to commence on 1 July 2024. Fast-track passport applications will be processed in 5 business days for an additional fee of $100.

SUPER RELATED MEASURES

Paying super on government PPL confirmed

The Budget confirmed the proposal to pay superannuation on Government-funded paid parental leave (PPL) for births and adoptions on or after 1 July 2025. From that time, the super guarantee (SG) rate will be 12% (up from 11.5% for 2024-25). Therefore, eligible parents will receive an additional payment (12% of their PPL payments) as a contribution by the Government to their superannuation fund.

Payday super: funding to improve unpaid super in bankruptcy

While the Budget papers did not reveal any further details on the Government’s proposal to require all employers to pay their employees’ super guarantee (SG) at the same time as their salary and wages from 1 July 2026. It did reveal that the Government will provide $111.8m over 4 years from 2024-25 (and $12.4m per year ongoing) to progress its workplace relations agenda, including:

Payday super: $60m will be provided over 4 years from 2024-25 to increase the Productivity, Education and Training Fund to support practical activities by employer and worker representatives to boost workplace productivity and engage in tripartite cooperation. The Government said this will also support workplaces to implement policy changes, such as Payday Super.
Unpaid super in bankruptcy and liquidations: the Government intends to recalibrate the Fair Entitlements Guarantee Recovery Program to pursue unpaid superannuation entitlements owed by employers in liquidation or bankruptcy from 1 July 2024. This is expected to achieve efficiencies of $13m over 4 years from 2024-25 (and $29.9m over the medium term) through an expected increase in tax receipts of $63.1m over 4 years from 2024-25 (and $114.4m over the medium term), with $44.4 million over 4 years from 2024-25 (and $96.9m over the medium term) expected to be paid to superannuation funds.
Fair Work non-compliance by large corporates:- $27.5m over 4 years from 2024-25 (and $7m per year ongoing) will be provided to enable the Office of the Fair Work Ombudsman to continue targeting non-compliance with the Fair Work Act 2009 by large corporate employers.
Small business support for workplace law changes: $20.5m over 4 years from 2024-25 (and $5.1m per year ongoing) will be provided to boost funding for the Office of the Fair Work Ombudsman to support small business employers to comply with recent changes to workplace laws.
National labour hire regulation model: $2m in 2024-25 will be provided for the Victorian Government to establish a project office and progress a national labour hire regulation model through harmonisation of state and territory laws. Costs will be partially offset by $1.2m by not proceeding with the 2019-20 Federal Budget measure for a National Labour Hire Registration Scheme to protect vulnerable workers.

Super account balances above $3m: public sector schemes

The Budget papers did not reveal any further details on the Government’s proposal to apply an additional 15% tax on superannuation “earnings” (including unrealised capital gains) corresponding to the percentage of an individual’s super balance that exceeds $3m for an income year commencing from 1 July 2025: proposed Div 296 of the ITAA 1997 (the Bill is currently before the House of Representatives).

However, the Government said it would provide $9.2m over the forward estimates (and $1.1m per year ongoing) to the Commonwealth Superannuation Corporation and the Department of Finance to implement the measure for members of the Commonwealth defined benefit superannuation scheme.

Social security deeming rates frozen for a further 12 months

The Government announced that it will extend the freezing of the social security deeming rates at their current levels for a further 12 months until 30 June 2025 to help with cost-of-living pressures. While the deeming rates were frozen at 0.25% (below the threshold) and 2.25% (above the threshold), the applicable thresholds are still indexed. Since 1 July 2023, the threshold amount for financial investments is $60,400 (for single pensioners) and $100,200 (for pensioner couples).

Social security means test treatment: military invalidity payments

The Government will implement a social security means test treatment for the military invalidity payments affected by the Full Federal Court’s decision in FCT v Douglas (2020) 112 ATR 602; [2020] FCAFC 220. That case concerned the taxation of a lump sum payment paid to a former ADF member in arrears of invalidity benefits under the Defence Force Retirement and Death Benefits Act 1973 (DFRDB Act) and the taxation of invalidity pensions under the Military Superannuation and Benefits Act 1991 (MSB Act).

The Government said its proposed social security means test treatment will ensure that the Douglas decision does not affect income support payment rates for veterans who receive an invalidity payment from the MSB Scheme and the DFRDB Scheme, compared to the pre-Douglas arrangements.