Last night, Federal treasurer, Jim Chalmers, handed down his third budget. This budget builds on the previously announced stage 3 tax cuts and has a strong focus on easing cost of living pressures.

Here are a few main measures from the budget:

PERSONAL INCOME TAX – COST OF LIVING TAX CUTS

The Government has legislated permanent tax cuts for all 13.6 million Australian taxpayers from 1 July 2024.

Under the Government’s tax cuts from 2024–25:

• the 19 per cent tax rate will be reduced to 16 per cent.
• 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.

PERSONAL INCOME TAX – COST OF LIVING – INCREASING THE MEDICARE LEVY LOW INCOME THRESHOLDS

The Government has increased the Medicare levy low income thresholds for singles, families, and seniors and pensioners from 1 July 2023 to provide cost of living relief.

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 SUPPORT – $20,000 INSTANT ASSET WRITE OFF

The Government will continue to improve cash flow and reduce compliance costs for small businesses by extending the $20,000 instant asset write off by 12 months until 30 June 2025.

Small businesses, with an aggregated annual turnover of less than $10 million, will continue to 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 (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.

AUSTRALIAN UNIVERSITIES ACCORD – TERTIARY EDUCATION SYSTEM REFORMS

The Government will provide $1.1 billion over five years from 2023–24 (and an additional $2.7 billion from 2028–29 to 2034–35) for the first stage of reforms to Australia’s tertiary education system in response to the Australian Universities Accord Final Report. These reforms will support a target of 80 per cent of the working age population holding a tertiary qualification by 2050. Funding includes:

• $239.7 million over five years from 2023–24 (and an additional $250.5 million from 2028–29 to 2034–35) to limit the indexation of the Higher Education Loan Program (and other student loans) debt to the lower of either the Consumer Price Index or the Wage Price Index, effective from 1 June 2023, subject to the passage of legislation. This applies retrospectively and is estimated to reduce outstanding loans by around $3.0 billion.

STRENGTHENING TAX COMPLIANCE – AUSTRALIAN TAXATION OFFICE COUNTER FRAUD STRATEGY

The Government will provide $187.0 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.
• $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.

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.
This will have effect from the start of the first financial year after Royal Assent of the enabling legislation.

COMMONWEALTH GOVERNMENT FUNDED PAID PARENTAL LEAVE – ENHANCEMENT

The Government will provide $1.1 billion over five years from 2023–24 (and $0.6 billion per year ongoing) to strengthen Australia’s government funded Paid Parental Leave (PPL) scheme and improve women’s retirement outcomes. Funding includes:

• $1.1 billion 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. Eligible parents will receive an additional payment based on the Superannuation Guarantee (12 per cent of their PPL payments), as a contribution to their superannuation fund

FREEZE SOCIAL SECURITY DEEMING RATES

The Government will freeze social security deeming rates at their current levels for a further 12 months until 30 June 2025, to support Age Pensioners and other income support recipients who rely on income from deemed financial investments, as well as their payment, to manage cost of living pressures.

ENERGY BILL RELIEF FUND – EXTENSION AND EXPANSION

The Government will provide $3.5 billion over three years from 2023–24 to extend and expand the Energy Bill Relief Fund to provide a $300 rebate to all Australian households and a $325 rebate to eligible small businesses in 2024–25 bills to provide cost of living relief.

SECURING CHEAPER MEDICINES - SAFEGUARDING HEALTH OUTCOMES

The Government will provide $480.2 million over five years from 2023–24 to reduce patient costs and improve access to medicines. Funding includes:

$318.0 million over five years from 2023–24 (and an additional $166.4 million in 2028–29) as part of the Eighth Community Pharmacy Agreement for a one-year freeze on the maximum Pharmaceutical Benefits Scheme (PBS) patient co-payment for everyone with a Medicare card and a five-year freeze for pensioners and other concession cardholders.

This change means that no pensioner or concession card holder will pay more than $7.70 (plus any applicable manufacturer premiums) for up to five years, even as the aged pension and social security payments rise in line with inflation.

MENTAL HEALTH

The Government will provide $888.1 million over 8 years from 2024–25 (and $139.8 million per year ongoing) to respond to the Better Access evaluation and to strengthen Australia’s mental health and suicide prevention system. Funding includes:

• $588.5 million over eight years from 2024–25 (and $113.4 million per year ongoing) to establish a national low intensity digital mental health service that is free of charge and free of need for referral.

ENHANCING FIRST NATIONS JUSTICE POLICY OUTCOMES

The Government will provide $43.1 million over four years from 2024–25 (and $3.6 million per year ongoing) to improve justice outcomes for First Nations individuals and families. Funding includes:

• $20.2 million over four years from 2024–25 (and $3.6 million per year ongoing) to the Federal Court of Australia and the National Native Title Tribunal to preserve culturally and historically significant native title records and address the backlog of native title claims and post determination disputes.

FUTURE MADE IN AUSTRALIA – PROMOTING SUSTAINABLE FINANCE MARKETS

The Government will provide $17.3 million over four years from 2024–25 (and $3.1 million per year ongoing) to promote the development of sustainable finance markets in Australia. Funding includes:

• $10.0 million over four years from 2024–25 (and $1.9 million per year ongoing) for additional resourcing for the Australian Securities and Investments Commission (ASIC) to investigate and take enforcement action against market participants engaging in greenwashing and other sustainability related financial misconduct.
• $1.6 million over two years from 2024–25 for ASIC and the Treasury to consult on the design of a labelling regime to regulate the use of sustainability labels on retail investment products.

AND FINALLY….

FAST TRACK PASSPORT – ESTABLISHMENT

The Government will establish new fast track processing of passports to commence on 1 July 2024. Fast track passport applications will be processed in five business days for an additional fee of $100.

To find out more about any of the measures outlined above and how they might impact you, please contact your client relationship or trust manager directly. If you're not already a client of Equity Trustees Contact Us

This article was written by Chris Holloway, Senior Manager of our Taxation Services team.