2024-2025 Australian Federal Budget Summary
Treasurer Jim Chalmers unveiled the 2024-25 Australian Federal Budget on Tuesday, May 14th, 2024, featuring updates to economic forecasts. Below, we’ve outlined key budget details for our clients’ convenience. The Government has confirmed updated personal tax cuts, effective from July 2024, reducing some tax rates and increasing income thresholds. Alongside this, small businesses will benefit from a temporary increase in the instant asset write-off threshold for the 2025 income year, aiming to stimulate investment.
Stage three personal tax cuts
The Government has confirmed the revised stage three personal tax cuts that were announced prior to the Federal Budget being handed down and which have already been enacted into law. Refer to the Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024. The following tables outline the marginal income tax rates and thresholds that apply for resident and foreign resident individuals under the revised stage three personal tax cuts from 1 July 2024 (i.e., from the 2025 income year). The tax rates and thresholds that apply for the 2024 income year are included for comparative purposes.
- 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 threshold above which the 37 per cent tax rate applies from $120,000 to $135,000
- increase the threshold above which the 45 per cent tax rate applies from $180,000 to $190,000
Energy Rebates
Starting 1 July 2024, the Government will provide $3.5 billion in energy bill relief, offering $300 rebates to over 10 million Australian households and $325 to around one million small businesses. This measure is expected to reduce headline inflation by about 0.5% in 2024-25 without adding to broader inflationary pressures. The Energy Bill Relief Plan has successfully moderated electricity price increases, which rose only 2% through the year to March, compared to a potential 14.9% increase without the relief. Additionally, wholesale electricity prices in the National Electricity Market fell 8% in the first quarter of 2024 due to the rollout of more renewable energy, supporting the Government’s 82% renewable energy target.
Temporary increase to the instant asset write-off
Under current law, the small business instant asset write-off threshold is (less than) $1,000 for the 2025 income year. However, the Government has announced that it will temporarily set the instant asset write-off threshold for small business entities at (less than) $20,000 for the 2025 income year. Small businesses with an aggregated annual turnover of less than $10 million will generally be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use by 30 June 2025. The asset threshold applies on a ‘per asset’ basis, so small businesses can instantly write off multiple assets. Assets valued at $20,000 or more (i.e., which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year thereafter. 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. From 1 July 2025, the instant asset write-off threshold will revert back to (less than) $1,000.
Student Debt relief
The Government will cut $3 billion in student debt for over 3 million Australians, providing relief for those with Higher Education Loan Program (HELP) and other student loans. To protect the integrity of the student loan system, the Government will cap the HELP indexation rate at the lower of the Consumer Price Index (CPI) or the Wage Price Index (WPI) and backdate this relief to all existing student loan accounts as of 1 June 2023. This measure will benefit all Australians with HELP debt, addressing last year’s spike and preventing future debt growth from outpacing wages.