On Tuesday, 14th May, 2024, the Treasurer, Jim Chalmers, released the Government’s 2024-2025 Budget. The Budget looks to help with the easing cost of living pressures with measures including tax cuts and energy bill relief, strengthening Medicare, making available cheaper medicines and increased aged care funding.
Please note;
- Any proposed measures are not yet law, and may change upon implementation
- The summary below has been provided in conjunction with Challenger
- The summary below is general advice. Please seek financial advice regarding your personal situation before taking any actions.
- Please contact our office on 1300 014 368 or via email info@fpbydesign.com.au to discuss any aspects of below on your personal situation
- Likewise, if you would like a print friendly copy of below, please contact our office.
Tax
Tax cuts for every Australian taxpayer
The Government restated its already legislated tax cuts for 13.6 million Australian taxpayers from 1 July 2024. From 1 July this year, the Government will:
- Reduce the 19% tax rate to 16%
- Reduce the 5% tax rate to 30%
- Increase the income threshold above which the 37% tax rate applies from $120,000 to $135,000.
- Increase the income threshold above which the 45% tax rate applies from $180,000 to $190,000.
| Financial year 2023-24 | Financial year 2024-25 | ||
| Taxable income | Tax rate | Taxable income | Tax rate |
| $0 to $18,200 | Nil | $0 to $18,200 | Nil |
| $18,201 – $45,000 | 19% | $18,201 – $45,000 | 16% |
| $45,001 – $120,000 | 32.5% | $45,001 – $135,000 | 30% |
| $120,001 – $180,000 | 37% | $135,001 – $190,000 | 37% |
| $180,001 and over | 45% | $190,001 and over | 45% |
The stage 3 personal income tax changes could provide a reduction in personal income tax for some.
The following table outlines the reduction in personal income tax, excluding Medicare Levy and tax offsets, for example incomes.
| Income | Personal income tax in 2023-24 | Personal income tax in 2024-25 | 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 |
The Government’s taxcuts.gov.au website provides a useful calculator to calculate the value of tax cuts for clients with different levels of taxable income.
For those eligible for the Low Income Tax Offset (LITO) and/or the Seniors and Pensioners Tax Offset (SAPTO) the new tax rates and thresholds (in combination with these offsets) increase the effective tax-free threshold (shown in the table below).
| Effective tax-free threshold | 2023-24 | 2024-25 |
| Client not eligible for LITO/SAPTO | $18,200 | $18,200 |
| Client eligible for LITO | $21,885 | $22,575 |
| Client eligible for LITO and SAPTO (single) | $33,089 | $34,656 |
| Client eligible for LITO and SAPTO (couple each) | $29,784 | $31,006 |
Increase in the Medicare Levy exemption thresholds
The income limits when the Medicare Levy applies for singles, families and seniors will be increased effective for the 2023-24 financial year. The thresholds are:
| 2022-23 | 2023-24 | |
| Single | $24,276 | $26,000 |
| Single eligible for SAPTO | $38,365 | $41,089 |
| Family | $40,939 | $43,846 |
| Couple eligible for SAPTO | $53,406 | $57,198 |
| Additional threshold for each dependent child | $3,760 | $4,027 |
Social Security
Extending freezing of deeming rates until 30 June 2025
The freezing of deeming rates has been effective since 1 July 2022 and was intended to be applicable for two years until 30 June 2024. Current historical low deeming rates will continue to be frozen until 30 June 2025. The deeming thresholds will continue to be indexed on 1 July each year. The current deeming rates and thresholds are as follows:
| Threshold | Lower deeming rate | Upper deeming rate | |
| Single | $60,400 | 0.25% | 2.25% |
| Couple | $100,200 | 0.25% | 2.25% |
It is anticipated that freezing the deeming rates for another year will benefit approximately 876,000 income support recipients, including 450,000 Age Pension recipients.
Higher funding for Services Australia / Department of Veterans’ Affairs
As many of you may be aware, dealing with Services Australia and Department of Veteran Affairs has been challenging in the recent past due to either calls not being answered, extended wait times or issues associated with paperwork not being processed in a timely manner.
It’s hoped that more funding might alleviate some of the bottlenecks with the Government committing to provide:
- $1.8 billion over three years from 2023-24 for additional frontline staff to help stabilise Services Australia claims backlogs and service standards, to continue emergency response capability and improve the cyber security environment.
- $630.3 million over four years from 2024-25 to improve
- $194.4 million over four years from 2024–25 (and $20.6 million per year ongoing) to provide additional resourcing to meet increased service delivery pressures including claims processing and modernise the digital capability of the Department of Veterans’ Affairs.
The Government also indicated that future staffing needs for Services Australia will be evaluated alongside ongoing improvements to myGov service delivery.
Carer Payment – increased flexibility
Currently, if the carer ceases to provide care for more than 25 hours per week (including travel time and meal breaks) to participate in training, education, employment of voluntary work, eligibility for Carer Payment is reviewed to ensure that the carer is providing the required amount of care.
From 20 March 2025, in endeavouring to provide carers greater flexibility and choice to structure their work commitments around their caring role, the existing 25 hour per week participation limit will be amended to 100 hours over four weeks.
The participation limit will no longer apply to study, volunteering activities and inclusion of travel time in the proposed 100-hours requirement, and will only apply to employment.
Carer Payment recipients exceeding the participation limit or their allowable temporary cessation of care days will have their payments suspended for up to six months, rather than cancelled.
Recipients will also be able to use single temporary cessation of care days where they exceed the participation limit, rather than the current seven day minimum.
JobSeeker Payment – higher rate for single recipients with reduced work capacity
Currently, the JobSeeker Payment (JSP) rates are:
| Situation | Maximum fortnightly payment rate |
| Single, no children | $762.70 |
| Single, with a dependent child or children | $816.90 |
| Single, 55 or older, after 9 continuous months on an income support payment | $816.90 |
| Partnered | $698.30 |
| Single principal carers granted an exemption from mutual obligation requirements in certain situations | $987.70 |
From 20 September 2024, single recipients with a partial capacity to work up to 14 hours per week will also be eligible for the higher rate of $816.90 (indexed) and the higher rate of Energy Supplement, currently $9.50 per fortnight.
Rent Assistance – increasing the maximum rates by 10 per cent
In the Budget 2023-24, the maximum rates of Rent Assistance (RA) were increased by 15 per cent. The current maximum rates of RA are:
| Situation | Maximum fortnightly payment rate |
| Single | $188.20 |
| Single, sharer | $125.47 |
| Couple, combined | $177.20 |
| Member of a couple, separated due to illness | $188.20 |
| Member of a couple temporarily separated | $177.20 |
From 20 September 2024, the maximum rates will be increased by an additional 10 per cent. Regular indexation will also be applied on top of the increase.
Aged Care
Additional Home Care Packages
The Government will provide an additional 24,100 Home Care Packages in 2024-25 to reduce wait times in the National Priority System (NPS) to an average of 6 months.
There were 51,044 people in the NPS who were waiting on a Home Care Package (HCP) at their approved level as at
31 December 2023. Of these people, 11,822 were in an interim lower level HCP while they wait for a HCP at their approved level.
A person’s place in the NPS is solely based upon the date of approval and priority for care. The estimated wait times for a person with medium priority entering the NPS on 31/03/2024 by HCP level are as follows;
| Home Care Package Level | Wait Time |
| Level 1 | Less than 1 month |
| Level 2 | 3 – 6 months |
| Level 3 | 9 – 12 months |
| Level 4 | 6 – 9 months |
Other Budget measures
Energy Bill Relief
As a relief measure for all Australian families and eligible small businesses to help with the rise in energy costs, the Government has proposed an energy bill rebate of $300 for each household and $325 for eligible small businesses. The relief will apply from 1 July 2024 until 30 June 2025.
There is no additional requirement in order to claim this benefit. The energy provider will deliver the rebate to eligible households and businesses through a quarterly reduction in their energy bills.
Introducing superannuation payments on Paid Parental Leave benefit
To reduce the impact on superannuation savings whilst on parental leave, the Government has proposed to pay superannuation contributions on the existing government-funded Paid Parental Leave to eligible parents of children born or adopted on or after 1 July 2025. The contribution will be based on the Superannuation Guarantee (SG) rate of 12% (in line with the gradual increment of SG rate to 12% on 1 July 2025).
The payment will be taxed at the current superannuation tax rate of 15%. Payments made under this measure will count towards an individual’s concessional contributions cap.
From 1 July 2024 Paid Parental Leave is paid for a maximum period of 22 weeks and the rate is based on the national minimum wage (currently $882.75 per 5 day week). Legislation has been introduced to increase the maximum period to 24 weeks and 26 weeks from 1 July 2025 and 1 July 2026 respectively and received Royal Assent on 20 March 2024.
Small business support – $20,000 instant asset write-off
The Government has announced they will extend the $20,000 instant asset write-off by 12 months until 30 June 2025.
Small businesses with aggregated turnover of less than $10 million will 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 between 1/7/2023 – 30/06/2025.
The $20,000 threshold will apply on a per asset basis so that eligible small businesses can claim a full tax deduction for 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% in the first income year and 30% each income year after that.
Freezing Pharmaceutical Benefit Scheme co-payments
The maximum Pharmaceutical Benefits Scheme (PBS) co-payment will be frozen for five years for concession cardholders and one year for Medicare cardholders.
The PBS co-payment is the amount patients pay towards the cost of Government-subsidised medicine. The co-payment amounts are adjusted on 1 January each year in line with movements in the Consumer Price Index.
Concession cards include the Pensioner Concession Card, Commonwealth Seniors Health Card, Health Care Card and DVA White, Gold or Orange Cards. The maximum PBS co-payment for Commonwealth concession cardholders is currently $7.70. This will not be indexed between 1 January 2025 and 31 December 2029 (inclusive), with indexation resuming on 1 January 2030.
The maximum PBS co-payment for Medicare cardholders is currently $31.60. This will not be indexed between 1 January 2025 and 31 December 2025 (inclusive), with indexation resuming on 1 January 2026.
Strengthening the foreign resident capital gains tax regime
The Government has announced they will make a number of amendments to the foreign resident capital gains regime. The amendments will apply to CGT events commencing on or after 1 July 2025 to:
- clarify and broaden the types of assets that foreign residents are subject to CGT on
- amend the point-in-time principal asset test to a 365-day testing period
- require foreign residents disposing of shares and other membership interests exceeding $20 million in value to notify the ATO, prior to the transaction being
These amendments are in addition to the increase in the foreign resident capital gains withholding tax rate from 12.5% to 15% and reduction to the withholding threshold from $750,000 to $0 for real property disposals from 1/1/2025.
The Government will consult on the implementation details of the new amendments.
Legislative update
The Government has a number of measures both legislated and unlegislated in train. A number of superannuation caps and thresholds are also due to increase on 1 July 2024. While not addressed in the Budget, the following notes the changes in thresholds.
Superannuation rates and thresholds
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| Contributions caps and thresholds | 2023-24 | 2024-25 |
| Concessional contributions (CC) cap | $27,500 | $30,000 |
| Non-concessional contribution (NCC) cap | $110,000 | $120,000 |
| General NCC cap three-year bring forward | $330,000 | $360,000 |
| CGT cap amount | $1,705,000 | $1,780,000 |
| Co-contribution lower threshold | $43,445 | $45,400 |
| Co-contribution higher threshold | $58,445 | $60,400 |
Â
| NCC bring forward 2024/2025 Total Super Balance 30 June 2024 | Â
NCC cap for 2024-25 |
Â
Maximum bring-forward period |
| Less than $1.66m | $360,000 | 3 years |
| $1.66m to less than $1.78m | $240,000 | 2 years |
| $1.78m to less than 1.9m | $120,000 | No bring forward. General NCC cap applies. |
| $1.9m + | Nil | N/A |
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| Superannuation Guarantee Charge | 2023-24 | 2024-25 |
| SG Charge percentage | 11% | 11.5% |
| Maximum SG contribution base per quarter | $62,270 | $65,070 |
| Maximum SG contribution base (annualised) | $249,080 | $260,280 |
Preservation age increasing to 60 for everyone from 1 July 2024
Starting from 1 July 2015, depending on a person’s date of birth, preservation age has been gradually increasing from age 55 to 60. From 1 July 2024, preservation age will be age 60 for everyone.
The increase in the preservation age will impact a number of strategies:
- Retirement condition of release
From 1 July 2024, a member can meet the retirement condition of release through two definitions:
- Has reached age 60 and ceases employment on or after turning Only the balance as at termination date can be unrestricted non-preserved.
- Has reached age 60 and does not intend to work more than 10 hours per The entire balance can be unrestricted non-preserved.
- Commencement of Transition to Retirement Income Streams
With preservation age increasing to 60, this means that that Transition to Retirement Income Streams can only be commenced once the individual has reached at least age 60.
- Low-rate cap for super lump sum withdrawals is a redundant concept
Since 1 July 2015, where a person was over preservation age and less than age 60, they got the benefit of the lifetime low- rate cap which assisted with reducing tax on super lump sums. As the low-rate cap only applied to those who were over preservation age and less than 60, from 1 July 2024, with preservation age being 60, low rate cap for super lump sum withdrawals is a redundant concept. This is because super benefits from taxed-funds are tax-free if the withdrawal is made once the individual is 60 or over and up to 22% applies if the person is under preservation age.
Division 296 tax – reducing tax concessions on super balances over $3 million
Initially announced on 28 February 2023, the Government has since introduced the amending bill into parliament on 30 November 2023 but is not yet legislated.
Proposed to commence on 1 July 2025, the changes will reduce the tax concessions on superannuation balances over $3 million by levying a 15% tax on the proportion of earnings on an individual’s total super balance (TSB) of more than $3 million.
Tax liability = 15% x earnings x proportion of earnings above $3 million. Where:
- Earnings = (TSB on 30 June of current financial year + withdrawals – net contributions) less TSB on 30 June of previous financial year.
- Proportion of earnings = (TSB on 30 June of current financial year – $3 million) / TSB on 30 June of current financial
The amending bill provided details on what is counted as withdrawals and net contributions. Withdrawals includes lump sum withdrawals, super contribution splits to a spouse and amounts released under First Home Super Saver scheme. Net contributions includes non-concessional contributions or 85% of concessional contributions, spouse contribution splitting amounts received, insurance proceeds and transfers from a foreign super fund.
Importantly, the amending bill also made changes to the definition of TSB which will apply beyond Division 296 to other purposes such as determining an individual’s non-concessional contribution cap as well as the ability to utilise catch-up concessional contributions.
The new TSB definition is broadly the sum of each super interest’s total super balance value and it is:
- The account balance for accumulation phase super interests and account-based
- The maximum commutation value for innovative super incomes (excluding deferred income streams).
- The family law value or a scheme specific amount for defined benefit pensions.
