Tax Bulletin – 2024/25 Federal Budget
Personal Income Tax – Cost of Living Tax Cuts
ATO’s Compliance Funding Measures
Government to Extend Both Shadow Economy Compliance Program and Tax Avoidance Taskforce
Small Business – Extension of $20,000 Instant Asset Write Off
Capital Gains Tax (CGT) Changes for Foreign Residents
Superannuation on Paid Parental Leave
Overview
Last night the Federal Treasurer handed down his third Budget on behalf of the Albanese Labor Government.
It seems a distant memory when we eagerly awaited the clock striking 7:30pm Eastern Standard Time for the Treasurer of the day to rise and surprise us with new tax measures and reforms aimed at encouraging certain behaviours and discouraging others.
Yet again, this Budget failed to deliver any meaningful tax reform, so much so that most of the tax measures announced, had already been announced (some on multiple occasions) or were merely extensions of a previously announced measure. The oft called Temporary Measure!
Whilst the key platforms of the Budget are understandably aimed at softening inflation, there are some, specifically targeted tax measures to highlight for you.
Personal Income Tax – Cost of Living Tax Cuts
The Government announced no further changes to the Government’s revised Stage 3 tax changes commencing from 1 July 2024.
The Government has legislated permanent tax cuts for all 13.6 million Australian taxpayers from 1 July 2024. The tax cuts provide cost-of-living relief, return bracket creep, support women and boost labour supply. The average benefit is $1,888 a year (that is $36 a week).
Source: Budget Papers No2, pages 12-13.
Tax rates for resident taxpayers for the 2024-25 year of income or a later year of income
| Taxable Income ($) | Tax Payable ($) |
| 0 – $18,200 | Nil |
| 18,201 – $45,000 | Nil plus 16% of excess over $18,200 |
| $45,001 – $135,000 | $4,288 plus 30% of excess over $45,000 |
| $135,001 – $190,000 | $31,288 plus 37% of excess over $135,000 |
| $190,001 + | $51,638 plus 45% of excess over $190,000 |
Tax rates for non-resident taxpayers for the 2024-25 year of income or a later year of income
| Taxable Income ($) | Tax Payable ($) |
| 0 – $135,000 | 30% |
| $135,001 – $190,000 | 37% |
| $190,001 + | 45% |
Tax rates for working holiday makers for the 2024-25 year of income or a later year of income
| Taxable Income ($) | Tax Payable ($) |
| 0 – $45,000 | 15% |
| $45,001 – $135,000 | 30% |
| $135,001 – $190,000 | 37% |
| $190,000 + | 45% |
Source: Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024
Comment
The Stage 3 tax cut amendments that were announced earlier this year have been a hot topic. Not wanting to enter the debate of the impact these tax cuts will have on inflation; these changes bring good news to all tax payers regardless of your income level.
ATO’s Compliance Funding Measures
ATO’s Personal Tax Compliance Program Extended
The Government is extending this ATO Program which deals with overclaiming of work-related deductions, incorrect reporting of income and inappropriate tax agent influence. The claiming of deductions for short term rental properties is specifically mentioned as an area of focus for the ATO.
The Budget Papers state that from an additional injection of $44.3 million to the ATO, expected receipts are in excess of $180m.
Source: Budget Papers No 2, page 15
ATO to Counter Fraud Strategy
Tax Fraud is at the forefront of the Government’s concerns as it is acutely aware of the impact of fraud has upon both the taxpayer and the Revenue.
There are two strategies in particular the Government has noted in its fight against tax fraud.
The ATO to receive an injection of funds:
The Government will provide $187 million over four years from 1 July 2024 to the ATO to strengthen its ability to detect, prevent and mitigate fraud against the tax and superannuation systems. Funding includes:
- $78.7 million for upgrades to information and communications technologies to enable the ATO to identify and block suspicious activity in real time
- $83.5 million for a new compliance taskforce to recover lost revenue and intervene when attempts to obtain fraudulent refunds are made
- $24.8 million to improve the ATO’s management and governance of its counter‑fraud activities, including improving how the ATO assists individuals harmed by fraud.
The Government will also provide $0.4 million over four years from 1 July 2024 to the Department of Finance to undertake a Gateway Review process over the life of the proposal to ensure independent assurance, oversight and delivery of the measure.
Source: Budget Papers No 2, pages 15-16
Comment
It is hardly surprising that the ATO has received additional funding to combat tax fraud. Given the digital landscape, the potential for online fraud in general, one questions whether $187 million over the forward estimates is adequate to achieve the Government’s aims? Time will tell.
Government to extend Notification Time to Retain BAS Refunds
Further, the Government will strengthen the ATO’s ability to combat fraud by extending the time the ATO has to notify a taxpayer if it intends to retain a business activity statement (BAS) refund
for further investigation. The ATO’s mandatory notification period for BAS refund retention will be increased from 14 days to 30 days to align with time limits for non‑BAS refunds.
The extended period will strengthen the ATO’s ability to combat fraud during peak fraud events like the one that triggered Operation Protego. Legitimate refunds will be largely unaffected. Any legitimate refunds retained for over 14 days would result in the ATO paying interest to the taxpayer (as is currently the case). The ATO will publish BAS processing times online.
This will have effect from the start of the first financial year after Royal Assent of the enabling legislation.
Source: Budget Papers No 2, page 16
Comment
Extending time as mentioned above should assist the ATO in their fight against fraud. GIC will continue to be paid on amounts otherwise retained, under these circumstances but taxpayers will need to be aware of any adverse impact to their cashflow.
Government to Extend Both Shadow Economy Compliance Program and Tax Avoidance Taskforce
The Government will extend the ATO Shadow Economy Compliance Program for two years from 1 July 2026.
This extension of the Shadow Economy Compliance Program will enable the ATO to continue to reduce shadow economy activity, thereby protecting revenue and preventing non‑compliant businesses from undercutting competition.
This measure is estimated to increase receipts by $1.9 billion and increase payments by $610.2 million over the 5 years from 2023–24. This includes an increase in GST payments to the states and territories of $429.6 million.
The Government will extend the ATO Tax Avoidance Taskforce for two years from 1 July 2026.
Extending the Taskforce ensures the ATO continues to be well‑resourced to pursue key tax avoidance risks, with a focus on multinationals, large public and private businesses, and high‑wealth individuals.
This measure is estimated to increase receipts by $2.4 billion and increase payments by $1.2 billion over the 5 years from 2023–24.
Source: Budget Papers No2, pages 16-17
Comment
The Government is extending both of these initiatives with the hope of either protecting and or/increasing revenue. The practical impact of extending the Tax Avoidance Taskforce will mean programs such as the Top 500 Private Groups Performance Program will be extended for 2 years from 1 July 2026. The extension solidifies the point we make to many of our clients, it’s not a matter of ‘if’ they will receive an ATO review, it’s a matter of ‘when’.
Small Business – Extension of $20,000 Instant Asset Write Off
The small business entities (SBEs) $20,000 instant asset write-off (IAWO) will be extended by 12 months from 1 July 2024 until 30 June 2025. The Government announced that SBEs with an aggregated turnover of less than $10 million will be able to continue to immediately deduct the full cost of eligible depreciating assets costing less than $20,000 that are first used, or installed ready for use, by 30 June 2025.
SBEs can choose to use the small business capital allowance rules in Subdivision 328-D of the ITAA 1997 with the rules allowing:
- accelerated depreciation for SBE assets costing less than the prescribed threshold;
- a taxpayer to effectively treat these assets as if they were a single asset using the one pool rate of 30 per cent (15 per cent in the income year in which the asset is acquired).
Essentially, the asset threshold applies on a per asset basis so SBEs can instantly write off 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% in the first income year, and 30% in each income year thereafter.
Comment
It would be prudent for this measure to be made “permanent” rather than for the current extensions to be made in Federal Budget each year to give businesses and their advisors certainty. This is the 7th time this has been amended.
Importantly, we are some six weeks out from the end of the 2023-2024 financial year and the 2023-2024 Federal Budget announcement to implement a “temporary $20,000 instant asset write-off threshold for 2023–24” is not yet law. Senate amendments on 27 March 2024 proposing to increase the threshold from $20,000 to $30,000 and expanding the measure to apply to medium entities is still currently before the House of Representatives.
Capital Gains Tax (CGT) Changes for Foreign Residents
The Government announced that it intended to strengthen the foreign resident capital gains tax (CGT) regime to ensure foreign residents pay their fair share of tax in Australia. The measures are intended to ensure that Australia can tax foreign residents on direct and indirect sales of assets with a close economic connection to Australian land.
The proposed measures will apply to CGT events commencing on or after 1 July 2025 and are aimed at providing greater certainty about the operation of the rules by:
- Clarifying and broadening the types of assets on which foreign residents are subject to CGT;
- Amending the principal asset test to a 365-day testing period; and
- Requiring foreign residents disposing of membership interests exceeding $20 million in value to notify the ATO prior to the transaction being executed.
A new ATO notification process is expected to enhance oversight and compliance with the foreign resident CGT withholding rules, particularly where vendors have self-assessed that their sale is not taxable real property. The proposed reforms will bring Australia’s tax law for capital gains made by foreign residents in line with OECD standards and international best practice. The Government will consult on the implementation details of this measure.
Comment
The Budget was silent on the previously proposed new individual tax residency rules that had been proposed by the Board of Taxation in 2019 and was the subject of a Treasury consultation paper released in July 2023.
Is it possible that the announced changes to CGT rules for foreign residents will be more practical and easier for the ATO to oversee than the previously proposed changes to individual tax residency? It remains to be seen whether the proposed individual tax residency rules will continue to become legislated or whether these CGT changes for foreign residents are sufficient to close the ATO’s estimated tax gap of foreign residents paying their fair share of tax in Australia.
Superannuation on Paid Parental Leave
The Government has announced that it will pay superannuation on Commonwealth government-funded Paid Parental Leave for births and adoptions on or after 1 July 2025.
Eligible parents will receive an additional payment based on the Superannuation Guarantee (12% of their Paid Parental Leave payments), as a contribution to their superannuation fund.
This measure builds on the October 2022–23 Budget measure titled Boosting Parental Leave to Enhance Economic Security, Support and Flexibility for Australia’s Families and 2023–24 MYEFO measure titled Paid Parental Leave Scheme – expansion and is consistent with the Government’s proposed objective of superannuation to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.
This measure will help normalise parental leave as a workplace entitlement, like annual and sick leave, and reduce the impact of parental leave on retirement incomes.
The Budget measure is a $1.1 billion promise over four years from 2024–25 (and $0.6 billion per year ongoing) to pay superannuation on Commonwealth government-funded PPL for births and adoptions on or after 1 July 2025.
$10.0 million over two years from 2024–25 to provide additional support for small business employers in administering Paid Parental Leave.
$1.4 million over two years from 2023–24 to update communication products and documents for potential Paid Parental Leave recipients.
This measure is expected to increase tax receipts by $155.0 million over two years from 2026–27.
Source: Budget Papers No 2, pages 166-167.
Comment
This measure has come after many requests from numerous bodies for the Government to take steps towards closing the gap in retirement savings between men and women. This is one step closer in working towards this.
Other Measures
Commissioner Discretion to NOT apply refunds to offset old Tax Debt
The Government announced their intention to provide the Commissioner of Taxation with a discretion to not use a taxpayer’s refund to offset old tax debts by amending current legislation.
The discretion will apply to individuals, small businesses and not-for-profits where the Commissioner had put that old tax debt on hold prior to 1 January 2017. The proposed amendment is consistent with the Commissioner’s current administrative approach as the Commissioner currently does not have a legislative power to put these debts on hold.
Intangibles held in low or no tax jurisdictions
The Government announced it will not proceed with denying deductions for payments relating to intangibles held in low or no-tax jurisdictions measure that was announced as part of the October Federal Budget 2022–23. The integrity measure will now be addressed through the Global Minimum Tax and Domestic Minimum Tax (part of Pillar Two) being implemented by the Government.
Tax Incentives – Future Made In Australia – Making Australia a Renewable Energy Superpower
The Government announced it will provide an estimated $19.7 billion over 10 years from 2024–25 to accelerate investment in Future Made in Australia priority industries. As part of the funding proposed to be introduced, from 2027–28 to 2040–41 the tax incentives include:
- Critical Minerals Production Tax Incentive to support downstream refining and processing of Australia’s 31 critical minerals; and
- Hydrogen Production Tax Incentive to producers of renewable hydrogen to support the growth of a competitive hydrogen industry and Australia’s decarbonisation.
Details of these programs will be subject to consultation, together with proposals to provide further incentives to support the efficient production of green metals and low-carbon liquid fuels.
