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2024-25 Federal Budget analysis

2024-25 Federal Budget

What you need to know for tax compliance and planning

The Federal Budget is frequently a key landmark in the tax compliance, tax planning and superannuation landscapes. Federal Treasurer, the Hon. Dr Jim Chalmers, announced the 2024-25 Federal Budget on Tuesday, 14 May, which offered little by way of change when it comes to Australia’s taxation and superannuation settings. To help you understand what has changed, and how it’s important to you for tax planning, we’ve pulled out the key information and discussed the implications below.

Instant asset write-off: A small business boon for tax planning

Notably, the Budget did extend the $20,000 instant asset write-off threshold for Small Business Entity (SBE) taxpayers until 30 June 2025. Prior to this Budget announcement, the threshold was due to revert back to $1,000 as of 1 July 2024, so this gives small businesses another 12 months to take advantage.

To qualify the instant asset write-off for depreciating assets, the tax paying entity needs to be an SBE which has elected to avail itself to the SBE depreciation rules. Broadly, a taxpayer is considered an SBE if it carries on a business and its aggregated turnover (which includes the turnover of certain related parties) is less than $10 million.

This extension is significant for tax planning, allowing SBE taxpayers time to manage tax liabilities more effectively.

Energy bill relief – Individuals and small businesses

The Federal Government has announced that all Australian households will be entitled to a $300 rebate on the cost of energy for the 2024-25 year. At this point, it’s presumed that “all Australian households” will be a measure that is not asset or income tested.

Eligible small businesses will be entitled to a $325 rebate. At the time of writing, it’s not yet known what the eligibility criteria for “small businesses” will be to access this rebate.

One billion reasons: Government audit programs given more resources for ensuring tax compliance

Tax compliance finds itself in the spotlight once more, and this budget has issued a stern reminder to taxpayers, individuals and businesses alike, of the importance of accurately reporting taxation obligations in a timely manner.

Over the next four years, the Government proposes to funnel an extra $1 billion into providing more resources for audit activities. This sounds like a large figure, but it’s anticipated that extra revenue from these additional audit activities will more than recoup the extra expenditure.

If you’re concerned about complexity in tax compliance, sound tax advice from experienced tax accountants can help to ensure there are no surprises should you be audited. At LDB we’d always recommend seeking professional tax advice about anything you’re not certain about.

The government’s audit programs will be rolled out under the banner of “Strengthening Tax Compliance” and will cover:

  • Extended the personal income tax compliance program
  • Expanding the ATO’s counter fraud strategy
  • Expanding the ATO’s shadow economy audit program

What is the “shadow economy”? It’s a term for those businesses that deal predominantly with cash, with a tendency to deliberately understate their income – effectively tax evasion.

Stage 3 tax cuts and tax planning

While not a new announcement on Budget Night, many people take this time to consider their tax planning and compliance needs, and look for tax advice before the end of the financial year. So, while the budget didn’t change anything about Stage 3 tax cuts, it’s important to remember that the cuts previously legislated by the Coalition government have been repealed by the Albanese Government. The alternative Stage 3 tax cuts, legislated for the financial year ending 30 June 2025, are crucial for tax planning.

Here’s reminder of the revised individual resident tax rates for 2025 (excluding Medicare levy):

Taxable income

Tax on this income

0 – $18,00 Nil
$18,201 – $45,000 16 cents for each $1 over $18,200
$45,001 – $135,000 $4,288 plus 30 cents for each $1 over $45,000
$135,001 – $190,000 $31,288 plus 37 cents for each $1 over $135,000
Over $190,000 $51,638 plus 45 cents for each $1 over $190,000

Superannuation: steady as she goes

Notable by their absence, were any significant changes to superannuation. While no changes means no reform, on the plus side, this provides stability for taxpayers and financial advisors focusing on long-term retirement planning, and means there are no changes to tax compliance criteria to cause confusion.

Expanding the foreign resident capital gains tax regime

Perhaps a sleeper issue for the 2024-25 Budget, is the proposal to expand the foreign resident Capital Gains Tax (CGT) regime, which aims to ensure foreign residents contribute sufficiently to tax in Australia.

Amendments will apply to CGT events commencing on or after 1 July 2025 to:

  • clarify and broaden the types of assets that foreign residents are subject to CGT on;
  • 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 $20 million in value to notify the ATO, prior to the transaction being executed

This measure will ensure that Australia can tax foreign residents on direct and indirect sales of assets with a close economic connection to Australian land, more in line with the tax treatment that already applies to Australian residents.

As a broad proposition, foreign residents only pay CGT on the disposal of an asset that is either a direct interest or an indirect interest in “taxable Australian property”. The new ATO notification process will improve oversight and compliance with the foreign resident CGT withholding rules, where a vendor self assesses if their property sale is not taxable.

There is so far insufficient detail as to exactly what additional transactions for foreign residents will be captured by these proposed measures. Draft legislation is eagerly awaited in relation to this matter.

Staying informed, tax compliant and managing wealth effectively

Following the 2024-2025 Federal Budget announcement, LDB is here to guide you through any of the changes, and help you understand any implications for your own situation for the end of the financial year, and into the 2025 tax year. Our expert and approachable team can help you navigate the intricacies of tax and superannuation, so you can stay compliant with any changes in legislation while maximising tax efficiency.

Our Taxation Specialists are ready to provide you with the insights and guidance necessary for effective tax strategy implementation and to help you maximise your tax savings.

Call us (03) 9875 2900 today, and let LDB help you manage wealth and tax burdens more effectively.

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