There were few tax surprises in the Federal Budget this year, with most initiatives being announced in the weeks and days before Budget night.
The most interesting new announcements are yet another 12-month extension of the instant asset write-off for small businesses and the energy rebates for individuals and small businesses.
Outside of initiatives for the green energy industry, branded as the Future Made in Australia package, there were disappointingly no new productivity initiatives to assist businesses generally and nothing for the backbone of our economy and communities, small to medium-sized businesses.
The key tax changes you should be aware of, are outlined in this Alert.
Individuals
Power bill relief for households
From 1 July 2024, all households will see a $300 credit automatically applied to their electricity bills. Only those with an electricity account will receive the rebate. If you rent and your landlord’s name is on the electricity account, they will benefit, not you, unless they choose to pass on the benefit. If you are a landlord and have multiple electricity accounts, you may receive multiple rebates.
Personal income tax rates
As previously announced, the Government’s Stage 3 tax cuts will take effect from 1 July 2024. The following are the new personal tax rates and thresholds which will apply:
| 2024-25 onwards | |
| Taxable Income ($) | Tax Payable ($) |
| 0 – 18,200 | Nil |
| 18,201 – 45,000 | Nil + 16% of excess over 18,200 |
| 45,001 – 135,000 | 4,288 + 30% of excess over 45,000 |
| 135,001 – 190,000 | 31,288 + 37% of excess over 135,000 |
| 190,001+ | 51,638 + 45% of excess over 190,000 |
Medicare
From 1 July 2023, the Government has increased the Medicare levy low‑income thresholds for singles, families, seniors and pensioners. This is to provide cost‑of‑living relief. The increase to the thresholds ensures that those on low-income continue to be exempt from paying the Medicare levy or pay a reduced levy rate.
Business Incentives
Small business new power bill relief
Under the new power bill relief, from 1 July 2024, the Government will deliver rebates of $325 to around one million small businesses across the country.
Small business instant asset write-off
The Government has extended the $20,000 instant asset write-off to small businesses to 30 June 2025 to help improve cash flow and reduce compliance costs.
Small businesses with an aggregated annual turnover of less than $10 million can immediately deduct eligible depreciating assets costing less than $20,000, which 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 (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15 per cent in the first income year and 30 per cent 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.
International Tax
Foreign resident capital gains tax regime
The Government has introduced changes to the foreign resident capital gains tax (‘CGT’) rules to ensure foreign residents pay their fair share of tax in Australia. Currently, foreign residents are only subject to CGT when they dispose of assets which are Taxable Australian Property (broadly, real property situated in Australia).
The amendments will apply to CGT events commencing on or after 1 July 2025 to:
- Clarify and broaden the types of assets that foreign residents are subject to CGT.
- Amend the point‑in‑time principal asset test that applies to indirect interests in Australian real property to a 365‑day testing period.
- Require foreign residents disposing of shares and other membership interests exceeding $20 million in value to notify the ATO before execution of the transaction. This will ensure oversight and compliance with the foreign resident CGT withholding rules, where a vendor self-assesses that their sale is not taxable real property.
These measures will ensure that Australia can tax foreign residents on direct and indirect sales of assets with a close economic connection to Australian land, more in line with the tax treatment that already applies to Australian residents.
Payments relating to intangibles held in low- or no-tax jurisdictions.
Anti-avoidance measures were proposed to apply from 1 July 2023 to deny tax deductions to Australian Significant Global Entities (SGEs) in respect of payments for intangible assets to related party offshore group entities in low tax jurisdictions. SGEs are broadly taxpayers who are part of a group with more than $1 billion in global turnover annually. This anti-avoidance measure will now be discontinued, as the integrity issues will now be addressed through the Global Minimum Tax and Domestic Minimum Tax measures currently being implemented by the Government.
The Government will also introduce a new provision from 1 July 2026 that applies a penalty to SGEs that are found to have mischaracterised or undervalued royalty payments, to which royalty withholding tax would otherwise apply. All multinationals must keep this in mind when it comes to considering the nature of their intangible-related payments, as it is clear that the Government is paying close attention to this area.
Funding Support for the Australian Tax Office
In the absence of new taxes to fund projected deficits in future years, the focus for the Government remains on collecting every dollar of tax that should be paid with new funding for the ATO to:
- Extend the personal income-tax compliance program to 30 June 2028. The ATO will use the extension to continue delivering a combination of proactive, preventative and corrective activities in key areas of non-compliance.
- To bolster its ability to detect, prevent and mitigate fraud against tax and superannuation systems. This funding will upgrade information and communication technologies, establish a new compliance taskforce and improve the ATO’s management and governance systems.
- Extend the Shadow Economy Compliance Program for another two years to 30 June 2028 to enable the ATO to continue targeting shadow economy activity, to protect revenue and prevent non-compliant businesses from undercutting competition.
- Extend the Tax Avoidance Taskforce for another two years to 30 June 2028 to ensure the ATO continues to be well-resourced to pursue key tax avoidance risks, focusing on multinationals, large public and private businesses, and high-wealth individuals.
Innovation Incentives
The Budget outlined a clear commitment to fostering an innovative, globally competitive, and sustainable nation, through its Future Made in Australia package but only if you fall within their favoured and hand-picked industries.
The Government will establish a National Interest Framework to identify priority industries for investment. These industries will be in two streams:
- the net zero transformation stream, consisting of industries that can make a significant contribution to achieving net zero and in which Australia has the means to build an enduring competitive advantage; and
- the economic security and resilience stream, which will comprise of sectors that are critical to Australia’s resilience, and which are vulnerable to supply disruptions.
At the moment, only five industries have been identified by the Government as falling within the National Interest Framework – renewable hydrogen, critical minerals processing, green metals, low carbon liquid fuels, and clean energy manufacturing (including solar and battery supply chains).
New measures under the Future Made in Australia package include:
- Critical minerals production tax incentive to support downstream refining and processing of Australia’s 31 listed critical minerals to improve supply chain resilience.
- Hydrogen production tax incentive for producers of renewable hydrogen to support the growth of a competitive hydrogen industry and Australia’s decarbonisation.
Disappointingly only big businesses rather than small and medium-sized businesses will directly benefit from these incentives.
If you would like to learn more about the 2024-25 Federal Budget, please contact Calibre Business Advisory on (02) 9261 2177. Our dedicated team of business advisors will be more than happy to assist.