In Canberra on May 14, 2024, Treasurer Jim Chalmers unveiled the Albanese Government’s third Federal Budget. This budget outlines the government’s financial plans for the fiscal year 2024-25 and beyond.
The Budget anticipates a surplus in the underlying cash balance for 2023-24, totaling $9.3 billion. This marks a significant positive turnaround of $10.4 billion from the mid-year forecast of 2023-24. Factors contributing to this improvement include higher commodity prices and increased personal income tax receipts.
Treasury forecasts indicate a moderation of inflation to below 3 percent per annum for the fiscal year 2024-25 and throughout the remainder of the forward estimates period.
Emphasising a balance between various priorities, including easing the cost of living and prudent economic management, the government presents this year’s budget as a responsible one. It aims to invest in a Future Made in Australia while addressing pressing needs.
Unlike previous years, tax-related measures are not the central focus of this budget. Apart from the already scheduled personal tax cuts, effective from July 1, 2024, and incorporated into this budget’s projections, the government utilises the tax system to encourage investments in specific sectors such as hydrogen production and critical minerals as part of its Future Made in Australia initiative.
Small businesses receive continued support through an extension of the instant asset write-off for depreciable assets. Furthermore, adjustments to tax regulations affecting multinational corporations have also been introduced.
Evalesco CEO, Jeff Thurecht, says “This budget has a little bit for (almost) everyone, but not a lot for anyone. Particularly if you exclude the already confirmed Stage 3 tax cuts. There is a balancing act between trying to reduce the cost of living but not stoking inflation. It looks like they’ve done OK with this, but the proof will be in the pudding. There’s very little which should cause our clients to need to change their strategies or plans at this stage.”
Small Business Support:
- Extension of $20,000 instant asset write-off for small businesses with aggregated turnover under $10 million.
- Eligible depreciating assets costing less than $20,000 can be instantly deducted if used or installed by June 30, 2025.
- Asset cost threshold reverts to $1,000 from July 1, 2025.
- Assets valued at $20,000 or more can be depreciated at 15% in the first income year and 30% each subsequent year.
Tax Relief for Individuals:
- This budget contains no new tax measures for individuals. However, with the previously announced (albeit watered down) Stage 3 tax cuts most individuals will see a reduction in their tax liability for next year. This will be a welcome relief given many have been pushed into higher tax brackets without any growth in real wages.
- The key focus of the budget for families and individuals continues to be providing cost-of-living relief without adding to inflationary pressures.
- The Government has confirmed the implementation of amended Stage 3 tax cuts from July 1, 2024, providing tax relief for all Australian individual taxpayers. These measures entail a reduction in lower marginal tax rates and thresholds, ensuring that individuals with taxable incomes of $135,000 or less won’t face marginal tax rates exceeding 30%. The top marginal tax rate of 45% will be applicable to taxable incomes above $190,000.
- Furthermore, adjustments to the Pay-As-You-Go (PAYG) withholding rates are anticipated to accommodate the revised tax rates for salary and wage payments made from July 1, 2024. For a detailed overview of these changes, please refer to the summary table below.
Superannuation Changes:
- Minimum superannuation guarantee (SG) entitlement increases from 11% to 11.5% from July 1, 2024.
Superannuation Payments for Paid Parental Leave:
- Superannuation will be added to the Paid Parental Leave (PPL) scheme from July 1, 2025.
- $1.1 billion allocated over four years to pay 12% superannuation on Commonwealth government-funded paid parental leave.
- Other measures include expanding the PPL scheme, increasing flexible paid leave by two weeks annually.
Aged Care Support Boost:
The increased funding and reforms in aged care signify potential benefits for individuals, particularly those receiving aged care services and their families. With enhancements to digital systems and regulatory capabilities, individuals can expect improved access to care and support services, reduced wait times, and better outcomes overall. The release of additional home care packages and workforce support programs also means greater flexibility and quality of care for individuals receiving aged care services.
Moreover, the deferral of the new Aged Care Act provides stakeholders with more time to prepare for any changes and ensures a smoother transition to the new regulatory framework. Overall, these measures aim to enhance the quality of life and well-being of individuals receiving aged care services and their families.
Key Initiatives Supported:
- Enhancing aged care digital systems for compliance and introducing the new Aged Care Act by July 1, 2025.
- Releasing 24,100 additional home care packages in 2024–25.
- Strengthening regulatory capabilities and workforce programs.
- Improving My Aged Care Contact Centre efficiency.
- Continuing specialized dementia care and extending workforce support programs.
- Implementing the new Aged Care Act and funding model adjustments.
- Extending funding to service providers in thin markets.
- Preparing for health system advancements through the Australian Dementia Network.
Pensioners
Centrelink Deeming Rates
- The Government has announced a freeze on social security deeming rates, maintaining them at their current levels for an additional 12 months until June 30, 2025. This measure aims to assist Age Pensioners and other income support recipients who rely on income from deemed financial investments, ensuring they can better manage the pressures of rising living costs.
Centrelink – Carer Payment
- Recipients of the Carer Payment may have greater flexibility to undertake part-time work without impacting their entitlements.
- From 20 March 2025, the existing 25 hour per week participation limit for Carer Payment recipients will be amended to 100 hours over a four-week period. The participation limit will no longer capture study, volunteering activities and travel time and will only apply to employment.
- If the participation limit (or the allowable temporary cessation of care days) is exceeded, payments will be suspended for up to six months rather than cancelled.
Freeze on cost of PBS medicines:
- The maximum Pharmaceutical Benefits Scheme (PBS) co-payment of $7.70 will be frozen for pensioners and Commonwealth concession cardholders until 31 December 2029. For all other Medicare card holders, the co-payment of $31.60 is frozen until 1 January 2026. The co-payment is the amount that must be contributed towards the cost of PBS subsidised medicines.
Evalesco Aged Care and Retirement advice specialist, Melody Edwards, welcomes the cost of living relief and continued investment in the Aged Care sector. She says “Given retirees won’t benefit from the stage 3 tax cuts it’s great to see measures such as the freeze on social security deeming rates and the pharmaceutical benefits scheme patient co-payment. These measures will keep more money in our clients pockets. We are increasingly helping more and more people with Aged Care advice and clearly see the need for a lot of improvement in this sector. Last nights announcements are a step in the right direction.”
Increase in Contribution Rates and Caps:
While not specifically addressed in this budget, several contribution rates and caps are set to increase from July 1, 2024. Here are the key changes:
- The Super Guarantee rate will elevate from 11% to 11.5%, aligning with previously announced legislation and marking the penultimate proposed increase.
- The standard concessional contribution cap, encompassing employer, salary sacrifice, and personal contributions eligible for personal tax deduction, will climb from $27,500 to $30,000 starting July 1, 2024.
- The non-concessional contribution (NCC) cap will also rise from $110,000 to $120,000 as of July 1, 2024. Consequently, the maximum non-concessional cap available under bring-forward provisions will increase from $330,000 to $360,000
Power Bill Relief
The government is offering energy bill relief to all households and around one million small businesses. Starting July 1, 2024, households will benefit from a $300 rebate applied to their electricity bills. Eligible small businesses will receive a $325 rebate distributed in quarterly installments throughout the year.
Contact your Financial Adviser to discuss any part of this year’s Federal Budget and how it may impact you.
Information in this article has been sourced from the Budget Speech 2024-25 and Federal Budget Supporting Documents.
It is important to note that the policies outlined in this publication are yet to be passed as legislation and therefore may be subject to change.
