2024-25 Federal Budget Summary

Please note, the below measures have not been legislated and advice should be sought before relying on the contents of this article.

Federal Budget 24-25 – SME Business Owners

Tax Incentives and Deductions 

The instant asset write-off for depreciating assets has been extended for another year until June 30, 2025. The write-off threshold is $20,000 and applies on a per asset basis, providing significant tax relief and encouraging investment in business growth and productivity. Additionally, there is a Bill currently before parliament to increase the threshold to $30,000 for the 2023-24 income year and to extend access to entities with an aggregated turnover threshold of $50 million. 

Support for Green Technologies 

The budget introduces tax incentives to promote investment in green technologies. These measures are part of the government’s broader strategy to achieve net-zero emissions. Specific measures include the critical minerals production tax incentive and hydrogen production tax incentive available from 2027–28 to 2040–41. 

Cost-of-Living Relief Measures 

To help small businesses manage rising energy costs, the budget includes a $325 rebate for around one million small businesses to help alleviate energy costs starting July 2024. 

Additional cost-of-living relief measures are anticipated, though they will be targeted and conservative. These measures aim to enhance consumer spending power, indirectly benefiting SME business owners by boosting demand for goods and services. 

Infrastructure and Economic Investments

Significant investments in infrastructure, health, and education are highlighted in the budget, with $10 billion allocated for infrastructure projects. These investments are designed to stimulate economic growth and provide new opportunities for SMEs involved in these sectors.  

Additional Compliance Focus of the ATO

The ATO will be given additional time within which to notify a taxpayer if it intends to retain a business activity statement (BAS) refund for further investigation. The current required notification period of 14 days will be extended to 30 days. 

Federal Budget 24-25 – Individuals & Households

Stage 3 Tax Cuts

The revised Stage 3 tax cuts aim to provide relief for lower and middle-income earners while balancing benefits for higher-income earners. 

• Tax cuts now favour lower and middle-income earners, reducing the bottom tax rate from 19% to 16%, providing a tax cut of up to $804 a year for all tax-filers. 
• The original Stage 3 tax plan sought to flatten the tax system, abolishing a tax bracket and pushing out the top tax bracket. The revised plan retains the tax bracket that would have been abolished but adjusts tax rates: 
  • Incomes between $45,000 and $135,000 will be taxed at a 30% rate. 
  • Incomes between $135,000 and $190,000 will be taxed at a 37% rate. 
  • Incomes above $190,000 will continue to be taxed at 45%, rather than the $200,000 threshold initially planned. 

Superannuation Reforms

There were no major reforms to superannuation. However, several important updates are on the horizon. 

• The concessional contribution cap will increase from $27,500 to $30,000 on 1 July 2024, and the non-concessional contributions cap will rise from $110,000 to $120,000. 

• Employees will also benefit as the Super Guarantee Charge will move from 11% up to 11.5% on 1 July 2024, with a further increase to 12% planned for 1 July 2025. 

• From 1 July 2025, superannuation will be paid on government-funded paid parental leave (PPL) for parents of babies born or adopted on or after this date. Eligible parents will receive an additional contribution to their superannuation fund, equivalent to 12% of their PPL payments). 

Medicare Levy Changes 

The Medicare levy low-income thresholds will increase by 7.1%, meaning more individuals will either remain exempt from paying the levy or pay less.  

• For single Australians, the threshold will rise from $24,276 to $26,000 

• For families, the threshold will increase from $40,939 to $43,846 

• For single seniors and pensioners, the threshold has been increased from $38,365 to $41 089. 

• The family threshold for seniors and pensioners has been increased from $ 53,406 to $57,198. 

• The family income thresholds will now increase by $ 4,027 for each dependent child, up from $ 3,760. 

These changes have been enacted by the Treasury Laws Amendment (Cost of Living—Medicare Levy) Act 2024 . 

Aged Pensions & Commonwealth Seniors Healthcare Card

Pensioners may see positive impacts from the two-year freeze on social security deeming rates. These rates, which represent the government’s assumed return on a retiree’s investments, play a crucial role in determining eligibility for the pension and the amount accessible to retirees. This freeze offers potential financial relief for those of pension age.  

Federal Budget 24-25 from an Investment Perspective

Overall, the budget is unlikely to have significant implications for financial markets as most new spending initiatives and tax cuts were anticipated in the lead-up to budget night.

The budget forecasts inflation to slow to 3.5% at the end of FY24, and 2.75% by the end of FY25. This is lower than the RBA’s forecast of 3.8% in FY24 and 3.2% in FY25. The difference is primarily due to the extension of the electricity rebate, which is expected to reduce inflation by 0.5 percentage points.  

Short-term initiatives, such as tax cuts, energy rebates, and an increase in rental assistance, may support a sustained turnaround in consumer spending, likely gravitating towards non-discretionary items like food and essential services. It is also likely that a portion of the tax cuts will be saved. 

Despite the broadening of Stage 3 tax cuts, they are unlikely to significantly impact inflation. The RBA’s primary goal is to balance the labour market. While progress has been made, more work is needed, making immediate interest rate cuts unlikely. 

Investment-wise, key areas to watch for future opportunities based on the budget’s focus include: 

• Hydrogen and critical minerals – as part of the governments Future Made in Australia agenda, several incentives were announced for “future facing” resources. Commodities set to benefit include nickel and lithium, which in turn is likely to benefit listed companies such as BHP, Wesfarmers, Pilbara Minerals and Mineral Resources. 

• Social housing – Significant funding will go towards social housing, with $6.2 billion in payments via the states for investment in social and affordable housing. Additionally, approximately $3 billion will be allocated to states for housing infrastructure. 

• Defence – The government is investing an additional $50.3 billion over ten years to implement the 2024 National Defence Strategy. 

Conclusion

The 2024-25 Australian Federal Budget presents a balanced approach to economic recovery, cost-of-living relief, and strategic investments in future industries. Individuals and SME business owners can expect a mix of tax benefits, compliance requirements, and new opportunities arising from the government’s commitment to a sustainable and resilient economy.