Federal Budget Announcements & Changes

Treasurer Jim Chalmers handed down the Federal Budget for the 2024-25 financial year with a $9.3bn surplus and a focus on addressing inflation and cost of living pressures stemming from ongoing global uncertainty.

Government spending focused heavily on delivering a Future Made in Australia plan, a new energy bill relief payment and building more homes.

We cover the main changes for our clients below, including some key changes for our clients to consider as the 2023-24 financial year comes to an end.

Small business depreciation — instant asset write-off threshold of $20,000 extended to 2024–25

Last years budget extended ability of businesses with aggregate turnover of less than $10 million to immediately deduct the full cost of eligible depreciating assets costing less than $20,000 until 30 June 2024.

In pleasing news, it was announced that the instant asset write-off has now been extended provided eligible depreciating assets are installed ready for use by 30 June 2025.

Assets valued at $20,000 or more can continue to be place into the small business simplified depreciation pool, depreciating at 15% for the first year and 30% each year thereafter.

Additionally, the provisions that prevent small businesses from re-entering the simplified depreciation regime for 5 years will continue to be suspended until 30 June 2025, allowing small businesses to opt-in or out of simplified depreciation to give some control over how much depreciation is claimed.

It is worth noting that there is currently a Bill containing amendments proposing increased value limits (from $20,000 to $30,000) and an increase to the turnover threshold (from $10 million to $50 million).

It is uncertain if these amendments will pass through the Parliament, however it is expected that the amounts proposed in the budget will go through.

Small business energy incentive

Previously announced and yet to be passed by Parliament is the small business energy incentive.

This incentive is an additional 20% deduction on spending that supports electrification and more efficient use of energy.

Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024.

The measure will help small businesses make investments like:

• electrifying their heating and cooling systems
• upgrading to more efficient fridges and induction cooktops
• installing batteries and heat pumps.

Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business.

Stage 3 Tax Cuts 2024-25

Already announced and legislated the Stage 3 tax cuts for individuals that come into effect from 1 July 2024.

The Stage 3 tax cuts reduce the 19% tax rate to 16%, the 32.5% tax rate to 30%, lift the threshold for the 37% tax rate from $120,000 to $135,000 and lift the threshold for the 45% tax rate from $180,000 to $190,000.

These changes will increase net wages paid each pay cycle by reducing PAYG withhold payments, impacting activity statement lodgements for employers.

Individuals will receive some form of tax cut if earning above $18,200, with those on higher taxable incomes benefiting from more of the tax bracket changes.

HELP Indexation Changes

The Government is aiming to change the indexation of accumulated student contribution debt and will backdate the new system to 2023.

The Government estimates about $3 billion in indexation debt will be cancelled, helping about 3 million Australians.

The change will cap the HELP indexation rate to be the lower of either the Consumer Price Index (CPI) or the Wages Price Index (WPI), backdated to June 1 last year (current system is only based on CPI).

The new indexation arrangement will be backdated to all HELP, VET Student Loan, Australian Apprenticeship Support and other student support loan accounts.

People with higher education debts were hit hard by recent high inflation, with a jump in last year’s CPI indexation rate of 7.1 per cent.

The 2023 indexation rate based on the Wage Price Index would have been 3.2 per cent.

Someone with an average HELP debt of $26,500 will have about $1,200 wiped from their outstanding HELP loans this year.

To discuss how these changes may impact you and your business, contact your Johnsons MME advisor directly or via, contactus@jmme.com.au.