In the 2024-25 Federal Budget, the Government did not announce any further changes to the personal tax rates.
The Government’s revised Stage 3 tax changes (as announced on 25 January 2024 and enacted into law by the Treasury Laws Amendment (Cost of Living ax Cuts) Act 2024) commence from 1 July 2024. The treasurer said all 13.6 million taxpayers will receive a tax cut from 1 July 2024. The average annual tax cut is $1,888 ( or $36 a week).
The tax rates and income thresholds from the 2024-25 for residents (as already legislated) are:
This means, when compared to 2023-24, that for 2024-25 the 19% tax rate has been reduced to 16%; the 32.5% tax rate has been reduced to 30%; the 37% tax rate threshold has been increased from $120,000 to $135,000; and the 45% tax rate threshold has been increased from $180,000 to $190,000.
No changes were made to the low income tax offset (LITO) in the 2024-25 Budget.
For completeness, and as a reminder, while the low and middle income tax offset (LMITO) ceased from 1 July 2022, low and middle income taxpayers remain entitled to the LITO.
The maximum amount of the LITO is $700. The LITO is withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000 and then at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667.
The Medicare levy low-income thresholds for 2023-24 would normally have been announced in this 2024-25 Budget. However, the Government released the 2023-24 Medicare levy thresholds on 25 January 2024 when it announced changes to the Stage 3 tax cuts. The new thresholds to provide cost-of-living relief were enacted by the Treasury Laws Amendment (Cost of Living – Medicare Levy) Act 2024.
From the 2023-24 income year, the Medicare levy low-income threshold for singles has been increased to $26,000 for 2023-24 (Up from $24,276 for 2022-23). For couples with no children, the income threshold us $43,846 (up from $40,939 for 2022-23). The additional amount of threshold for each dependent child or student is $4,027 (up from $3,760).
For single seniors and pensioners eligible for the seniors and pensioners tax offset (SAPTO), the Medicare levy low-income threshold is $41,089 (up from $38,365). The family threshold for seniors and pensioners is $57,198 (up from $53,406), plus $4,027 for each dependent child or student (up from $3,760).
There are no further details contained in the Budget papers on the announced changes to the way that the indexation factor applied to HELP debts will be calculated.
Here is an outline of the recently proposed changes:
A student who receive a HELP loan under any of the student loan schemes has an “accumulated HELP debt” with the ATO. The loan is subject to yearly indexation, but is otherwise interest-free.
Loans that are covered by the system include the following:
HELP, VSL, SSL and AASL debts are repaid through the tax system (voluntary repayments can be made at any time).
The amount to be repaid each year is a percentage of the taxpayer’s HELP repayment income ( and is notified on the income tax assessment for the year). The percentage increases as the HELP repayment income increases. The “HELP repayment income” is effectively the sum of taxable income, reportable fringe benefits total, net exempt foreign employment income, reportable superannuation contributions and total net investment losses.
Indexation is applied to any HECS/HELP debt that’s older than months, once a year on 1 June. The CPI number is currently used to index debts and it was % on recently announced that debts will increase by 1 June 2024. In addition, inflation pushed the indexation rate for 2022-23 debts to 7.1%, the highest since 1990. This generated much negativity and the Prime Minister subsequently announced that “there’d be help on HECS” as part of the Budget.
Indexation Changes
The Government has flagged two proposed changes (which require legislative amendments to the Higher Education Support Act 2003).
First, the indexation factor will be the lower of the CPI or the Wage Price Index (WPI). The quarterly WPI measures change in the price of wages and salaries in the Australian labour market over time. In a similar way to the CPI, it follows changes in the hourly rate paid to a fixed group (or “basket”) of jobs.
Second, the change will be backdated to 2022-23, meaning the new system will apply to the 2022-23, 2023-24 and following years (noting again that the factor is applied to debts on 1 June, not 1 July).
The proposal has a number of possible ramifications (which can only be confirmed when the legislation is introduced into Parliament).
As the WPI was lower than the CPI in 2022-23, the indexation that was applied on 1 June 2023 will be retrospectively cut from 7.1% to 3.2%. This means that students with an outstanding debt will have it reduced with effect from 1 June 2023. Those students who have subsequently paid off their debt based on the 7.1% rate presumably will be eligible for some sort of refund.
The March quarter WPI data is needed to calculate the 1 June 2024 indexation. This is not available until 15 May. The CPI rate is 4.7%, so the WPI rate has to be less for it to be applied to debts in place of the CPI rate.
The Government will provide $3.5 billion over 3 years from 2023-24 to extend and expand the Energy Bill Relief Fund and provide a $300 rebate to all Australian households and a $325 rebate to eligible small businesses on 2024-25 bills.
The Government will extend the instant asset write-off concession for small businesses for another 12 months.
This will allow small businesses with turnovers capped at $10 million to immediately deduct the full cost of eligible depreciating assets costing less than $20,000 that are first used or installed ready for use for a taxable purpose between 1 July 2024 and 30 June 2025.
Small business entities that use the simplified depreciation rules in Subdiv 328-D if the Income Tax Assessment Act 1997 are entitled to an outright deduction for the “taxable purpose proportion” of the “adjustable value” of a depreciating asset if:
The deduction is available in the income year in which the taxpayer first uses the asset, or first installs it ready for use, for a taxable purpose. The deduction is known as the “instant asset write-off”.
A depreciating asset is a low cost asset if its cost as at the end of the income year in which the taxpayer starts to use it, or installs it ready for use, for a taxable purpose is less than the relevant threshold.
Changes Proposed
The increased threshold applies to the cost of eligible depreciating assets, eligible amounts included in the second element of the cost of a depreciating asset, and general small business pools. Depreciating assets that are first used or installed ready for use for a taxable purpose on or after 1 July 2023 will be subject to the $20,000 threshold.
The $20,000 threshold will apply on a per-asset basis, so small businesses 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% each income year thereafter.
The Budget confirmed the proposal to pay superannuation on Government-funded paid parental leave (PPL) for births and adoptions on or after 1 July 2025. From that time, the super guarantee (SG) rate will be 12% (up from 11.5% for 2024–2025). Therefore, eligible parents will receive an additional payment (12% of their PPL payments) as a contribution by the Government to their superannuation fund.
As previously announced by the Treasurer on 7 March 2024, this measure seeks to build on the Government’s work to “modernise” PPL and expand the payment to a full six months by 2026.
The Paid Parental Leave Amendment (More Support for Working Families) Act 2024, which received assent on 20 March 2024, expanded the Paid Parental Leave Act 2010 to give families an additional six weeks of PPL. Effective from 1 July 2024, families will have access to an extra two weeks of leave (for 22 weeks total). This will increase to 24 weeks from July 2025 and 26 weeks from July 2026. At the time, the Treasurer said this builds on changes which commenced in July 2023 to give more families access to the payment, including through a “more generous” $350,000 family income test.
The Government will provide $1.1 billion over four years from 2024–2025 (and $0.6 billion per year ongoing) to pay the 12% superannuation on the government-funded PPL scheme from 1 July 2025. The Government will also spend $10 million over two years from 2024–2025 to provide additional support for small business employers in administering PPL. Another $1.4 million will be provided over two years from 2023–2024 to update communication products and documents for potential PPL recipients.
The Budget papers did not reveal any further details on the Government’s proposal to require all employers to pay their employees’ super guarantee (SG) at the same time as their salary and wages from 1 July 2026. However, the Government said it will provide
$111.8 million over four years from 2024-25 (and $12.4 million per year ongoing) to progress its workplace relations agenda.
The information contained on this website and in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. Taxation, legal and other matters referred to on this website and in this article are of a general nature only and are based on our interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.
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