2024 Federal Budget recap
Introduction
As widely expected, the Federal Government’s Budget for 2024-25 focused on tax cuts, cost-of- living measures to ease the pressure on Australian households, and investment in critical industries. Treasurer Jim Chalmers described it as a “responsible budget” that tried to balance cost-of-living assistance in a slowing economy without reigniting inflation. Here are a few highlights, and an explanation of what these changes could mean for you.
Stage 3 tax cuts
Stage 3 tax cuts, which take effect on 1 July 2024, will put more money in the pockets of working Australians by ensuring that everyone will get a tax cut.
The table below compares the amount of tax payable in 2023/24 to the amount payable under the new tax rates from 2024/25. The last column shows the amount of tax saved.
Note, these amounts do not include Medicare levy.
The largest tax saving of $4,529 applies to clients who have taxable income of $190,000 or more. However middle-income earners also receive a substantial tax saving. For example, clients with taxable income of $100,000 will save $2,179 per year.
Temporary extension of the Instant Asset Write Off
The Government has announced an additional temporary 12-month extension of the $20,000 instant asset write-off. Small businesses with aggregated annual turnover of less than $10 million will be able to immediately deduct the full cost of eligible assets costing less than $20,000, first used or installed ready for use between 1 July 2024 and 30 June 2025.
This measure is similar to the extension as announced in the 2023-24 Federal Budget, which temporarily increased the threshold to $20,000 for the year ending 30 June 2024.
Energy price relief for 10 million households
Energy bill relief will be extended to every Australian household, with $300 automatically credited to their electricity bills next financial year at a cost of $3.5 billion. In the previous Budget, lower- income households were able to apply for a $500 energy bill credit. About a million eligible small businesses will also be in line for a $325 energy bill credit.
Other key small business measures
The Government has committed $10.8 million over two years from 2024-25 to extend the Small Business Debt Helpline and the NewAccess for Small Business Owners program. This funding will provide small businesses with further support including confidential financial counselling and mental health support.
The Government has provided $2.6 million for the Australian Small Business and Family Enterprise Ombudsman to support unrepresented small businesses in navigating business-to-business disputes through alternative dispute resolution.
Social security deeming rate freeze extended
The current freeze on deeming rates, which are used to determine the amount of income a person is deemed to earn from their financial investments, will be extended for another year.
This will ensure income support recipients, such as age pension recipients, will not see a reduction to their payments due to an increase in the deeming rates over the next year. It also means there will be no negative impact for Commonwealth Seniors Health Card holders and means-tested aged care recipients.
Rental assistance maximum lifted by 10%
Commonwealth Rent Assistance maximum rates will be increased by 10% from September 2024, with the government providing $1.9 billion over five years from 2023–24 (and $0.5 billion per year ongoing from 2028–29) to fund the measure. It is expected to help address rental affordability in the housing market.
$3 billion to forgive student debt
About 3 million Australians with student loans are set to receive an average $1,200 reduction in their HELP or HECS debt, at a cost of more than $3 billion. The reduction aims to offset steep increases in student debt last year when student loans were indexed to inflation at the rate of 7.1% but wages growth remained low. For many, that meant their debt increased faster than their ability to pay it. HELP/HECS debt will now be indexed either to wages growth or to inflation, whichever is lower, and that change will be backdated to June 1 last year.
Super to apply to paid parental leave
From July 2025, 12% super will be introduced on government-funded paid parental leave at a cost of $1.1 billion over five years. Previously super was not paid on paid parental leave. This change is particularly expected to benefit women, who generally retire with less super than men often due to taking time out of their careers to raise children.
Future Made in Australia
A Future Made in Australia (FMIA) is the consolidation of numerous already announced measures, as well as some new and enhanced initiatives, under one banner. The goal of the $22.7 billion program is to compete with the US Inflation Reduction Act and similar international initiatives in a bid to incentivise advanced manufacturing and clean energy projects within Australia.
Recap of measures:
Production Tax Credits (new) - Production tax credits from 2028 financial year for hydrogen and critical minerals production in Australia.
FMIA Fund (new) - A $1.7 billion FMIA innovation fund over 10 years from 2024-2025 to support priority sectors including renewable hydrogen, green metals, low carbon liquid fuels and clean energy technology manufacturing such as batteries.
National Reconstruction Fund - $5 billion towards the fund, which has broad power to provide financial accommodations including debt, equity and guarantees for projects aligned to the Government’s seven priority areas - resources, transport, medical science, Defence capability, renewables and low emission technologies, agriculture, forestry and fisheries and enabling capabilities.
Industry Growth Program - to provide financial accommodations including debt, equity and guarantees for projects aligned to the Government’s seven priority areas - resources, transport, medical science, Defence capability, renewables and low emission technologies, agriculture, forestry and fisheries and enabling capabilities.
Hydrogren Headstart - The Government announced an additional round of the Hydrogen Headstart program, which has extended the funding by $1.3 billion.
Solar Sunshot - In March 2024, the Government committed up to $1 billion in funding for the Solar Sunshot program to build Australia’s solar photovoltaic (PV) manufacturing capabilities.
Quantum computing - The Federal and Queensland Governments announced in April that they would each be investing $470 million through share purchases, grants and loans to PsiQuantum to relocate its regional headquarters to Brisbane in an attempt to build the world’s first commercially useful quantum computer.
Resourcing Australia’s Prosperity - Announced last week, the Government will invest $566.1 million over ten years from 2024-25 to deliver data, maps and other tools for use by the resources industry to assist with new discoveries and commit to the full mapping of Australia.
As always, reach out to your Adviser at Luka Group to discuss how these changes affect you and your business.