You will no doubt be aware that the third Federal Budget was delivered by Treasurer, Jim Chalmers, on 14 May 2024.
The Budget 2024-25 contained a lot of information.
Based on the current economic conditions, it has been labelled as a responsible Budget that supports the Government’s three-part economic strategy – Relief from cost of living pressures, repair to the budget position and reform to lay the foundations for future growth.
But, what does that really mean for business owners and everyday Australians?
Let’s take a look at some of the key points raised in the Budget and how they might impact you.
Tax Cuts
The Government has recognised that the cost of living continues to be a challenge for Australians. So, as the government previously announced and legislated they will be going ahead with the Stage 3 tax cuts for the 13.6 million taxpayers in Australia. They are due to come into effect on 1 July 2024 with the aim to significantly boost the take-home pay of modest to middle income Australians and make the tax system fairer.
Compared to previously discussed cuts, 11.5 million Australians (that’s 84% of taxpayers) are set to receive a bigger tax cut. But, no one misses out – all 13.6 million Australian taxpayers will be getting a tax cut under the new Budget, with the average amount being $1888 or $36 a week.
These tax cuts are being achieved by slightly moving the current tax rates and modifying the income thresholds. From 1 July this year, those modifications will be as follows:
This table of personal income tax rates helps to confirm the changes in tax from 1 July 2024:
HELP Debts
Another aspect previously announced and confirmed in this Budget was the capping of the indexation of HELP debts. The Higher Education Loan Program provides financial help for students to pay the costs associated with higher education, such as tuition fees and student contributions etc.
The Government is changing the way that these loans will be indexed. The change will see the HELP debt capped at either the CPI or Wage Price Index (whichever is lower) effective from 1 June 2023.
By changing the calculation, it brings the indexation rate from 7.1% to 3.2% in 2023 and from 4.7% to around 4% in 2024. This is music to the ears of more than 3 million Australians who have HELP debt as they will receive a credit against their HELP loan balance.
This table by Knowledge Shop shows an indication of the estimated credit individuals may receive. Obviously, the actual credit amount will vary depending on individual circumstances.
Superannuation
There will also be some upcoming changes on the Superannuation front. Ahead of the Budget announcement on 7 March 2024, Treasurer Jim Chalmers indicated that the Government will pay superannuation on Government Funded Paid Parental Leave for births and adoptions on or after 1 July 2025. This was confirmed and included in the 2024-25 Budget.
In an attempt to normalise parental leave as a workplace entitlement, it means eligible parents will receive an additional superannuation payment into their super fund based on the superannuation guarantee.
Some other superannuation updates are:
- Unpaid superannuation entitlements owed by employers in liquidation or bankruptcy can be pursued under the Fair Entitlements Guarantee Recovery Program from 1 July 2024.
- A chunk of funding has been assigned to support the implementation of practical activities by employers, such as policy changes like the introduction of payday superannuation.
- Proposed tax concession amendments are still in discussion, so individuals with superannuation balances above $3 million will have their super earnings taxed at 30% from 1 July 2025.
Instant Asset Write-Off
In their continued plight to ease pressure on business finances, the 2024-25 Budget announced an extension to the $20,000 instant asset write-off threshold by 12 months.
Not sure what this means?
Well, the 2023-24 Budget announced a temporary ability to use the small business capital allowance rules to accelerate the depreciation for certain SBE assets. In the 2024-25 Budget, the Government proposes to amend the tax law to allow SBEs to immediately deduct the full cost of eligible assets up to the value of $20,000 that are first used or installed between 1 July 2024 and 30 June 2025.
The $20,000 threshold will apply on a per asset basis and businesses are eligible for the instant write-off if they carry business in the current year and have an aggregated turnover of less than $10 million.
This write-off does not apply to assets valued over $20,000. They will continue to be placed into the small business depreciation pool and depreciated at 15% in the first income year and 30% in each subsequent income year.
What Does It All Mean?
Like any Budget announcement, the 2024-25 pre-election Budget is going to bring changes for both individuals and businesses alike. If you are unsure how this will impact your obligation as an employer or taxpayer, then don’t hesitate to reach out to the friendly team at Cadenze.
We are more than happy to answer any questions you might have or ensure you are meeting the necessary obligations associated with these Budget announcements.