2024-25 Federal Budget Wrap-Up

What Does the Federal Budget Mean for Businesses?

While Chalmers did mention ‘small business’ numerous times, most of the announcements relate to extending existing measures, such as the instant asset write-off schemes.

Small business $20,000 instant asset write-off

Small businesses, with an aggregated turnover of less than $10 million, will continue to be able to immediately deduct the full cost of eligible assets costing less than $20,000 until 30 June 2025. Notably the Bill introducing the measure for the 2024 income year is still before Parliament less than 2 months out from 30 June!

This measure will apply on an asset-by-asset basis, allowing businesses to apply the measure to 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 per cent in the first income year and 30 per cent each income year thereafter.

The instant asset write-off threshold is then expected to reduce to $1,000 (being the default) from 1 July 2025 unless extended further.

Small business energy rebate

The Government will provide a $325 energy rebate to eligible small businesses on 2024–25 energy bills to provide cost of living relief. The Government has remained silent on what constitutes an “eligible small business" for the purposes of this measure, but we’ll be sure to let clients know when it becomes clear.

Tax Avoidance Taskforce

The Government will extend the ATO Tax Avoidance Taskforce through to 30 June 2028 allowing the ATO to focus on multinationals, large public and private businesses and high-wealth individuals.

Migration Law Changes in the 2024-25 Federal Budget

As part of its Migration Strategy, the 2024-25 federal budget brings significant updates to Australia's Migration Program. Below are the key takeaways for the next financial year:

• The overall permanent Migration Program has been set at 185,000 places, with a significant focus on skills, allotting 132,200 places to the Skill stream, reflecting the country's workforce needs.
• In response to labour shortages and the value of retaining skilled workers, there's a beneficial change in the Temporary Skill Shortage (subclass 482) visa. The work experience requirement will be reduced from two years to one year starting from 23 November 2024, a move welcomed by both employers and visa holders.
• For temporary visa holders experiencing domestic violence, the budget includes a pledge of $16.5 million over five years to ensure they have access to legal support, underscoring a commitment to provide aid to vulnerable populations within the migration system.
• The Global Talent visa will give way to a new National Innovation visa, aimed at drawing exceptionally skilled migrants in sectors that are pivotal for the country's innovation and technological advancement.
• A new mobility pathway will be introduced for 3,000 Indian graduates and professionals in early careers to reside and work in Australia for up to two years, focusing on youth and skills in high-demand areas.
• With the aim to streamline processes and tackle case backlogs, the budget sets aside $1 billion over five years to establish the Administrative Review Tribunal, which will take over from the existing Administrative Appeals Tribunal (AAT).
• Reflective of the broader Migration Strategy there will be a notable decrease in the net overseas migration numbers; with a forecasted reduction to 395,000 in 2023-24 and a further decline to 260,000 in 2024-25, indicating a more selective approach to migration flows based on national interest and labour market demands.

Reach out to our Global Mobility and Migration Law team for assistance with any of the above changes.

What does the Federal Budget mean for Individuals and Families?

Medicare levy low-income thresholds increased

The Government will increase the Medicare levy low-income thresholds for singles, families, and seniors and pensioners from 1 July 2023.

• The threshold for singles will be increased from $24,276 to $26,000.
• The family threshold will be increased from $40,939 to $43,846.
• For single seniors and pensioners, the threshold will be increased from $38,365 to $41,089.
• The family threshold for seniors and pensioners will be increased from $53,406 to $57,198.
• For each dependent child or student, the family income thresholds will increase by a further $4,027 instead of the previous amount of $3,760.

Household energy rebate

The Government will provide a $300 rebate to all Australia households on 2024–25 energy bills to provide cost of living relief.

Personal Income Tax Compliance Program

The Government will extend the ATO Personal Income Tax Compliance Program through to 30 June 2028. The ATO will continue to focus on proactive, preventative and corrective activities in key areas of non-compliance, including:

• overclaiming of deductions, including deductions relating to short-term rental properties;
• incorrect reporting of income; and
• inappropriate tax agent influence.

Extension and Expansion of Tax Measures

Revised Stage 3 Tax Cuts

The Federal Budget reaffirms the implementation of the Stage 3 tax cuts from 1 July 2024. These include decreasing the 19% marginal tax rate to 16%, reducing the 32.5% rate to 30%, and adjusting the income thresholds for the 37% and 45% tax brackets to better reflect current incomes.

Principal Asset Test Revision

The Government is set to broaden the principal asset test from a singular assessment to a more comprehensive 365-day testing period, effective from 1 July 2025. This aims to refine the analysis of foreign resident transactions involving indirect interests in Australian real property.

Foreign Resident Capital Gains Tax (CGT)

The Government will make the following amendments which will impact foreign residents in relation to CGT events commencing on or after 1 July 2025:

• 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. The new ATO notification process will improve oversight and compliance with the foreign resident CGT withholding rules, where a vendor self-assesses their sale is not taxable real property.

Pre-Transaction Notification by Foreign Residents

Foreign residents will be mandated to notify the ATO before executing transactions above $20 million from 1 July 2025. This measure is anticipated to enhance compliance with our CGT regulations.

Royalties Deduction Reforms

The Budget steps back from an earlier proposal to deny deductions for royalty payments to low-taxed foreign associates, instead aligning with the incoming 15% Global Minimum Tax. Additionally, a new penalty for Significant Global Entities found to have mischaracterised royalty payments comes into action from 1 July 2026.

If you need assistance with any of the more complex or international tax matters referred to above, reach out to our tax advisory team .

What does the Federal Budget mean for Investing and the Economic Outlook?

The infusion of rebates, via the Energy Bill Relief Fund, into household and small business budgets may boost consumer spending and, as a result, could potentially drive up the demand for retail stocks and consumer goods, thereby positively impacting those sectors in the stock market.

Get in Touch to Discuss the Impacts of the Federal Budget Updates on Your Business and Finances

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