The 2024 Federal Budget, brought down on 14 May 2024. With an election likely later this year, or early 2025, this could be the last Budget for the Albanese Labor government.
For the second year in a row, the Federal Government is on track to deliver a budget surplus. Helped by a stronger than expected labour market and higher than expected commodity prices, the surplus is expected to be $9.3 billion.
This Budget Summary is not designed to cover all aspects of the Federal Budget. It is solely focused on the key financial planning areas which relate to our clients – superannuation, taxation and social security.
Key proposals of relevance include:
- Deeming Rates remain at existing levels
- Small business instant asset write-off continues
- Energy bill payment for all Australian households ($300) and small businesses ($325)
It is important to note that at this time these proposed measures are not yet law and could change through implementation.
Superannuation & Pensions
There were few new announcements on superannuation
Paid Parental Leave
Superannuation Guarantee (SG) contributions will be paid to all recipients of taxpayer-funded Paid Parental Leave from 1 July 2025. The rate will be 12%, which from 1 July 2025, will be the same SG rate which employers pay.
Superannuation Caps and Thresholds
Whilst not mentioned in this Budget, the following is a reminder of the superannuation caps and thresholds which are likely to increase on 1 July 2024.
| Contribution Caps and Thresholds | ||
| Effective tax-free threshold | 2023/24 | 2024/25 |
| Concessional contributions cap | $ 27,500 | $ 30,000 |
| Non-concessional contributions cap | $110,000 | $120,000 |
| Non-concessional 3 year bring forward | $330,000 | $360,000 |
| Superannuation Guarantee (SG) Rate | ||
| Effective tax-free threshold | 2023/24 | 2024/25 |
| SG percentage | 11% | 11.5% |
| Maximum SG contribution base per quarter | $62,270 | $65,070 |
| Maximum SG contribution bade per annum | $249,080 | $260,280 |
Concessional and non-concessional contributions are explained in detail here – https://perthfinancialplanning.com.au/superannuation-contributions
Increased Tax on Super Balances over $3 million
Whilst not mentioned in this Budget, people should be aware of this. First announced on 28 February 2023, the government has since introduced the bill into parliament, but it is not yet legislated.
Proposed to commence from 1 July 2025, superannuation balances over $3 million will be taxed an additional 15% on the earnings of the total superannuation balance in excess of $3 million. My concern with this legislation is that it is not indexed, so the current $3 million threshold is fixed. Over the years ahead, because of inflation, this new tax will be come to be regarded as a tax on the young, rather than a tax on the rich.
Taxation
Revised stage 3 income tax changes to still proceed
With legislation already having received Royal Assent, the legislated stage 3 personal income tax cuts. This means that from 1 July 2024, the personal income tax rates will be:
| Tax Rates | |||
| Current Financial Year (2023/24) | From 1 July 2024 | ||
| Income | Tax rate | Income | Tax rate |
| Up to $18,200 | Nil | Up to $18,200 | Nil |
| $18,201 – $45,000 | 19% | $18,201 to $45,000 | 16% |
| $45,001 to $120,000 | 32.5% | $45,001 to $135,000 | 30% |
| $120,001 to $180,000 | 37% | $135,001 to $190,000 | 37% |
| Above $180,001 | 45% | Above $190,000 | 45% |
The tax cuts equate into the following:
| Reduction in Personal Income Tax (excluding Medicare Levy and any tax offsets) | |||
| Income | 2023/24 Tax | 2024/25 Tax | Difference in Tax |
| $ 50,000 | $ 6,717 | $ 5,788 | $ 929 |
| $100,000 | $22,967 | $20,788 | $2,179 |
| $150,000 | $40,567 | $36,838 | $3,729 |
| $200,000 | $60,667 | $56,138 | $4,529 |
www.taxccuts.gov.au has an online calculator where you can quickly calculate the value of tax cuts to a specific income.
If you are eligible for the Low Income Tax Offset (LITO) and/or eligible for the Seniors and Pensioners Tax Offset (SAPTO) the tax free amount you can earn is:
| Tax Free Rates with LITO and/or SAPTO | ||
| Effective tax-free threshold | 2023/24 | 2024/25 |
| Not eligible for LITO or SAPTO | $18,200 | $18,200 |
| Eligible for LITO only | $21,885 | $22,575 |
| Eligible for LITO and SAPTO (single) | $33,089 | $34,656 |
| Eligible for LITO and SAPTO (couple) | $29,784 | $31,006 |
Small Business
Small business instant asset write-off
From 1 July 2023 to 30 June 2025, the $20,000 instant asset write-off has been extended for a further 12 months to 30 June 2025.
Businesses with an annual turnover below $10 million can immediately deduct the cost of eligible assets, which cost less than $20,000, and are first used/installed between these dates.
The threshold applies on a per asset basis, so eligible businesses can claim a full tax deduction for multiple assets.
Assets in excess of $20,000 can continue to be depreciated at 15% in the first year and 30% thereafter.
Electricity bill relief
Eligible small businesses will receive a $325 rebate to reduce the cost of their electricity bills. The Government says the rebates will automatically be applied to electricity bills and will be rolled out in quarterly instalments.
Social Security & Welfare
Freezing of Deeming Rates extended
Deeming rates is the rate Centrelink use to calculate earnings on financial investments and these earnings impact the income test used to calculate payments such as the Aged Pension.
Social security deeming rates will continue to be frozen until 30 June 2025. The deeming rate thresholds continue to be indexed.
| Deeming Income Rates for Financial Assets | ||
| Deemed earnings | Single | Couple (combined) |
| 0.25% | First $60,400 | First $100,200 |
| 2.25% | Above $60,400 | Above $100,200 |
Obviously, with current cash rates, Aged Pension recipients are likely earning in excess of the deeming rates, so this is a win for recipients. For example, if deeming rates had increased to 4% and 6%, a single Age Pensioner homeowner with $300,000 in financial investments would have seen a reduction in their Age Pension of $5,625 per annum if assessed only under the income test.
Electricity Bill Relief
From 1 July 2024 to 30 June 2025, electricity bill relief of up to $300 will be provided to all Australian households.
HELP debt indexation changes
From 1 June 2023, Higher Education Loan Program (HELP) debt will be indexed at the lower of the Consumer Price Index (CPI) and the Wage Price Index (WPI).
Currently, HELP debt is indexed to CPI and the change will be backdated to 1 June 2023, thereby reducing the previous 7.1% to 3.2%.
All HELP, VET Student Loans, Australian Apprenticeship Support Loan and other student support loan accounts that were indexed on 1 June 2023.
Compulsory repayment of student HELP debt begins when repayment income exceeds $51,550 (2023/24). Repayments start at 1% of repayment income and reach 10% of repayment income when it exceeds $151,200 (2023/24).
PBS co-payment frozen
The indexation of the Pharmaceutical Benefits Scheme (PBS) concessional co-payment will be frozen from 1 January 2025 until 31 December 2029 for pensioners and other Commonwealth concession card holders. This means the co-payment remains at $7.70.
Indexation of the co-payment for all other Medicare card holders is frozen until 1 January 2026. The co-payment is indexed to inflation.
Increased Commonwealth Rents Assistance
From 20 September 2024, the maximum Commonwealth Rent Assistance will increase by 10%. Rent assistance will also index on 20 September 2024, as part of the twice annual review of rates.
Material contained in this publication is an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This information may contain material provided by third parties derived from sources believed to be accurate at its issue date.
