On Tuesday, 14 May 2024, Treasurer Jim Chalmers handed down the 2024-25 Federal Budget, his 3rd Budget.

Below are the key tax measures announced:

PERSONAL TAXATION

Personal tax rates: Stage 3 (as revised) confirmed from 2024-2025

The Government’s revised Stage 3 tax changes commence from 1 July 2024. The new tax rates and income thresholds from 2024-25 for residents (as already legislated) are:

Taxable income ($)	Tax payable ($)
0 – 18,200	Nil
18,201 – 45,000	Nil + 16% of excess over 18,200
45,001 – 135,000	4,288 + 30% of excess over 45,000
135,001 – 190,000	31,288 + 37% of excess over 135,000
190,001+	51, 638 + 45% of excess over 190,000

BUSINESS TAXATION

$20K instant asset write-off for small business extended to 30 June 2025

The Government will extend the instant asset write-off concession for another 12 months.

This will allow small businesses with turnovers capped at $10 million to immediately deduct the full cost of eligible depreciating assets costing less than $20,000 that are first used or installed ready for use for a taxable purpose between 1 July 2024 and 30 June 2025.

The $20,000 threshold will apply on a per asset basis, so small businesses can instantly write off multiple assets.

SUPERANNUATION

Super account balances above $3m

The Budget did not reveal any further details on the Government’s proposal to apply an additional 15% tax on superannuation “earnings” (including unrealised capital gains) corresponding to the percentage of an individual’s super balance that exceeds $3m for an income year commencing from 1 July 2025: proposed Div 296 of the ITAA 1997.

Last Friday (10 May) the Senate handed down their report into their review of the proposed legislation. Disappointingly, the report recommended the Bill be passed without amendment. All signs are pointing towards Division 296 tax being implemented in its current form.

It may be time to consult with us to plan strategies.

OTHER MEASURES

Student Loans Indexation Reform

The proposed change to indexation is to apply the lower of the Consumer Price Index or the Wage Price Index, with effect from 1 June 2023.
After the passage of the relevant legislation, the revised indexation rates will be automatically applied by the Australian Taxation Office to student loans.
This means that it is likely that relevant students will receive an indexation credit that will reduce their outstanding loan. The indexation rate applied on 1 June 2023 was 7.1 per cent and under the proposal, this would be reduced to 3.2 per cent. The indexation rate to be applied on 1 June 2024 is projected to be 4.7 per cent and under the proposal, this would be reduced to a projected WPI figure of 4.0 per cent.

Strengthening the foreign resident capital gains tax regime

As part of the 2024–25 Budget, the Government announced it will strengthen the integrity of the foreign resident capital gains tax (CGT) regime to ensure foreign residents pay their fair share of tax in Australia and to provide greater certainty about the operation of the rules. This measure is not yet law.
The amendments will apply to CGT events starting on or after 1 July 2025. The amendments will:
• 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 executed.
This measure will ensure that Australia can tax foreign residents on direct and indirect sales of assets with a close economic connection to Australian land, more in line with the tax treatment that already applies to Australian residents. The new ATO notification process will improve oversight and compliance with the foreign resident CGT withholding rules, where a vendor self-assesses their sale is not taxable real property.
These reforms will also improve certainty for foreign investors by aligning Australia’s tax law for foreign resident capital gains more closely with OECD standards and international best practice.

A reminder re proposed changes to foreign resident capital gains withholding tax rate & threshold effective 1 January 2025

A reminder the Government announced changes to the Foreign Resident Capital Gains Withholding regime (FRCGW) in its Mid-Year Economic and Fiscal Outlook report released in December 2023.
Those amendments, which will apply from 1 January 2025, will increase the foreign resident capital gains withholding tax rate from 12.5% to 15% and reduce the withholding threshold from $750,000 to $0.

Important: Clients should not act solely on the basis of the material contained in this newsletter. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. Client Alert is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.