BUDGET 2024-25 OVERVIEW 

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:

• easing cost-of-living pressures.
• building more homes for Australians.
• investing in a Future Made in Australia.
• strengthening Medicare and the care economy.
• broadening opportunity and advancing equality.

We acknowledge that the primary sources for the analysis below include the Treasury Budget Overview and the Treasury Minister’s media releases.

INDIVIDUAL

Tax cuts confirmed

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:

• reduce the 19 per cent tax rate to 16 per cent.
• reduce the 32.5 per cent tax rate to 30 per cent.
• increase the income threshold above the 37 per cent tax rate from $120,000 to $135,000.
• Increase the income threshold above the 45 per cent tax rate, which applies from $180,000 to $190,000.

 

Thresholds in 2023–24 ($)	Rates in 2023–24 (%)
0 – 18,200	Tax-free
18,201 – 45,000	19
45,001 – 120,000	32.5
120,001 – 180,000	37
Over 180,000	45
Thresholds in 2024–25 ($)	Rates in 2024–25 (%)
0 – 18,200	Tax-free
18,201 – 45,000	16
45,001 – 135,000	30
135,001 – 190,000	37
Over 190,000	45

 

The following table shows the tax savings that taxpayers will receive after the revisions to the Stage 3 tax cuts are implemented.

Taxable income	Tax liability FY24	Tax liability FY25	Tax 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

 

Medicare levy and surcharge changes

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.

SMALL BUSINESS

Asset write-off

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.

Energy bill relief

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.

Legislation to change how ‘on hold’ tax debts are treated:

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.

Apprentices and tradies

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.

E-invoicing gets funding in scam-fighting measures

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.

Freezing social security deeming rates

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.

CHANGES TO SUPERANNUATION

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.

About Division 296 tax

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.

Payday super plus paid parental leave

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.

Super recovery program

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.

Changes to superannuation guarantee entitlements

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.

Thresholds Changes

Although not announced in the Budget, the following key superannuation threshold changes take effect from 1.7.2024.

Key Superannuation threshold changes	Previous threshold	Key threshold
Concessional contribution	$27,500	$30,000
Non-concessional contribution	$110,000	$120,000
Non-concessional contributions bring forward	$330,000	$360,000
General superannuation guarantee rate	11%	11.50%

 

GST and superannuation fraud

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.  

EASING COST OF LIVING PRESSURES

Returning bracket creep

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.

Boosting labour supply with more benefits for women

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. 

Increasing the Medicare levy low-income thresholds

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)

New power bill relief

$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. 

Support for renters

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.

Debt relief for students

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.

More homes for Australians

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:

• $1 billion to get homes built sooner, with funding for states including to provide roads, services and parks, essential for additional housing supply.
• A new five-year National Agreement on Social Housing and Homelessness for states and territories to deliver crisis support and social housing.
• $1 billion is directed to support women and children experiencing domestic violence, as well as youth.
• Training more tradies and construction workers to build more homes by boosting construction skills with fee-free TAFE places.
• Expanding the Affordable Housing Bond Aggregator program.
• Bolstering community housing providers to support the first tranche of homes delivered under the Housing Australia Future Fund and National Housing Accord.
• Delivering funding for new and existing infrastructure projects.

Enhancing multinational tax and foreign resident tax integrity

The Federal Government aims to achieve this by:

• Strengthening the foreign resident capital gains tax rules to ensure foreign residents pay their fair share of tax in Australia and bring our rules into line with international best practices, which will improve the Budget by $592 million over the forward estimates; and
• Introducing a new penalty for multinationals that attempt to avoid Australian royalty withholding tax by understating royalty payments or seeking to disguise them as something else to ensure they pay their fair share of tax.

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.

 

INVESTING IN A FUTURE MADE IN AUSTRALIA

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.

Attracting and enabling investment

• Creating a new ‘front door’ for investors with major, transformational investment proposals to make it simpler to invest in Australia and attract more global and domestic capital, complementing the functions of the Net Zero Economy Authority;
• $168.1 million to better prioritise approval decisions for renewable energy projects of national significance and support faster decisions on the environment, cultural heritage and planning approvals, including $20.7 million to improve engagement with communities involved in the energy transition and $15.7 million to deliver a stronger, more streamlined, and more transparent approach to foreign investment;
• $17.3 million to implement a comprehensive agenda to mobilise private investment in sustainable activities; and
• $1.3 million to develop and release best practice guidance for disclosing net zero transition plans.

Making Australia a renewable energy superpower

• $3.2 billion over the next decade through the Australian Renewable Energy Agency to support the commercialisation of technologies that are critical to net zero, including through a new $1.7 billion Future Made in Australia Innovation Fund for the deployment of innovative technologies and facilities linked to priority sectors, including green metals, batteries and low carbon liquid fuels.
• Implementing a Hydrogen Production Tax Incentive to provide a $2 incentive per kilogram of renewable hydrogen produced between 2027-28 to 2039-40, for up to ten years per project, at an estimated cost to the Budget of $6.7 billion over the medium term.
• Over the next decade, $1.3 billion in the Hydrogen Headstart program will provide additional support to early-movers investing in the industry’s development.
• We need $17.1 million to implement our National Hydrogen Strategy, which will help Australia become a global leader in hydrogen by 2030.
• Fast-tracking the initial phase of the Guarantee of Origin Scheme to measure and certify emissions intensity across the supply chain of key products, providing an additional $32.3 million to support the expansion of the program to green metals and low-carbon liquid fuels, and consulting on additional incentives to support production in these industries.
• $15.4 million in foundational activities to support the development of green metals production.
• $27.7 million to better integrate consumer energy resources (like rooftop solar and household batteries) into the grid.
• $63.8 million to reduce emissions in the agriculture and land sectors.
• $48 million to deliver other reforms to the Australian Carbon Credit Unit Scheme; and
• Unlocking $65 billion of renewable energy capacity through the Capacity Investment Scheme’s continued rollout.

Value-adding to our resources and strengthening economic security

• Implementing a Critical Minerals Production Tax Incentive to provide a production incentive valued at ten per cent of relevant processing and refining costs for Australia’s 31 critical minerals, for critical minerals processed and refined between 2027-28 to 2039-40, for up to ten years per project, at an estimated cost to the Budget of $7 billion over the medium term.
• $10.2 million to work with states and territories to develop pre-feasibility studies of common-use infrastructure, which promotes a competitive and productive critical mineral sector.
• $1.5 billion to strengthen battery and solar panel supply chains via the Solar Sunshot Program and Battery Breakthrough Initiative.
• $165.7 million to support businesses scaling up and delivering the Sovereign Defence Industrial Priorities.
• $14.3 million to work with trade partners to strengthen our global competitiveness and support benchmarks for trade in high-quality critical minerals.

Innovation, digital and science capabilities

• $466.4 million to build quantum computing capabilities in partnership with the Queensland Government and PsiQuantum;
• $566.1 million in open science by supporting Geoscience Australia to map Australia’s endowments of critical minerals and national groundwater systems and
• Undertaking a strategic examination of Australia’s research and development system to grow R&D and build a more resilient and dynamic economy. 

Investing in people and places

• $91 million to accelerate the development of the clean energy workforce by upgrading training facilities, supporting teachers and trainers, and expanding access to the New Energy Apprenticeship Program.
• $55.6 million in the Building Women’s Careers program to expand support for women training in clean energy and other key industries.
• $38.2 million to support science, technology, engineering, and maths diversity.
• $64.8 million to attract and retain the skilled industrial workforce needed to support defence industrial priorities.
• $209.3 million into the Net Zero Economy Authority will catalyse private and public investment, major project development, employment transition, skills, and community development.
• $178.6 million in additional employment and skills support for regions in transition, including the Energy Industry Jobs Plan and place-based Regional Workforce Transition Plans.

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.