Federal Budget Tax Impact 2024/25

Individual Tax Rates - Stage Three Tax Cuts

One of the headline features of the budget was the implementation of the previously announced amended stage 3 tax cuts, which will deliver tax relief to all Australian individual taxpayers by reducing marginal tax rates and adjusting income tax thresholds.

All Australian taxpayers who earn above the tax-free threshold ($18,200) will receive the already legislated tax cuts from 1 July 2024, with low- and middle-income taxpayers expected to realise the greatest tax saving.

Under the government’s tax cuts from 2024-25:

• The 19 percent tax rate will be reduced to 16 percent.
• The 32.5 per cent tax rate will be reduced to 30 per cent.
• The income threshold above which the 37 per cent tax rate applies will be increased from $120,000 to $135,000.
• The income threshold above which the 45 per cent tax rate applies will be increased from $180,000 to $190,000.

For many Australians, this means a decrease in the amount of tax paid on their income, allowing for more disposable income to support household budgets and stimulate consumer spending.

Increase in Medicare Levy Low-Income Threshold

The Medicare Levy is a 2% tax all individuals pay when lodging their personal income tax (unless exempt or under the low-income threshold).

The government has announced they are increasing the Medicare levy low-income thresholds for singles, families, and seniors and pensioners from 1 July 2023 to provide cost-of-living relief.

The increase to the thresholds ensures that low-income individuals continue to be exempt from paying the Medicare or pay a reduced levy rate.

• The threshold for singles has been increased from $24,276 to $26,000.
• The family threshold has been increased 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.

Small Business Instant Asset Write-Off

The government announced that small businesses (with an aggregated turnover of < $10 million) will be eligible for the $20,000 instant asset write-off for an additional year.

This will enable small businesses to immediately deduct eligible depreciating assets costing less than $20,000 that are first used or installed ready for use by 30 June 2025. From 1 July 2025, the asset cost threshold will revert to $1,000.

The existing small business accelerated depreciation rules will continue to apply for assets costing more than $20,000.

At the time of writing this, the proposed increase has not yet been legislated and the Senate has proposed the threshold is increased to $30,000 under the amended bill. We will update this once the bill passes parliament.

HELP Debts - Changes to Student Loans

A measure announced ahead of the Budget was reform to assist those who have student debts under the Higher Education Loan Program (HELP).

The reform includes changes to the calculation of HELP debts, amending the way HELP loans are indexed each year such that the lower of the Consumer Price Index (CPI) or the Wages Price Index will be used to apply indexation to HELP loans, effective 1 June 2023. In the past, HELP loans were indexed solely by reference to CPI.

The ATO will automatically adjust any outstanding HELP loan balance that was indexed on 1 June 2023, and/or will be indexed on 1 June 2024, and apply any resulting credit to the individual’s HELP account.

If you would like assistance with the Federal Budget items that relate to you, our team at BLG Business Advisers can always help. We are Wollongong Accountants who service all around Australia, so please talk with us for further advice tailored to your needs.

We wish you and your business every success!

*This information is relevant at the time of publishing and is subject to change*