Federal Budget 2024-25: Key Changes Impacting Small Businesses

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The Federal Budget for 2024-25, unveiled by Treasurer Jim Chalmers on 14 May 2024, was unremarkable. The key measures had, in the main, been released prior to Budget Night. We’ve summarised below the items that we think will be of interest to you and your business.

Extended $20,000 Instant Asset Write-Off

The government has extended the $20,000 instant asset write-off until 30 June 2025 (extended from 30 June 2024). Under this measure, small businesses with an aggregated turnover of less than $10 million can immediately deduct the full cost of eligible assets costing less than $20,000.

This announcement supersedes the information contained in our April 2024 article titled Instant Asset Write off is Back.  Based on the Budget announcement, it appears that the government will not support the increased $30,000 threshold and $50 million aggregated turnover threshold anticipated in that article based upon Senate recommendations.

Personal Income Tax Cuts

Significant changes to personal income tax rates will take effect from 1 July 2024. These adjustments are aimed at providing tax and cost of living relief to individual taxpayers. The table below compares the new tax rates with those that applied in the previous year:

Taxable Income2023-24 Tax Rates2024-25 Tax Rates
$0 to $18,200NilNil
$18,201 to $45,00019%16%
$45,001 to $120,00032.5%30%
$120,001 to $135,00037%30%
$135,001 to $180,00037%37%
$180,001 to $190,00045%37%
$190,001 and over45%45%

As a tax planning measure, you might consider strategies such as deferring income to the next financial year to take advantage of the lower tax rates. For example, if you expect to receive a significant payment or realise a capital gain in June 2024, deferring it until July 2024 could mean it is taxed at a lower rate, resulting in potential tax savings.

To calculate the exact savings for your income level, use the government’s tax cuts calculator.

Energy Bill Relief for Small Businesses

Recognising the impact of rising energy costs, the government has introduced a $325 energy bill rebate for eligible small businesses. This rebate will be effective from 1 July 2024 to 30 June 2025 and will be applied automatically by energy providers through quarterly bill reductions.

This measure differs from previous temporary energy rebates by being specifically targeted at small businesses, acknowledging their unique operational challenges. For businesses in energy-intensive industries such as manufacturing, hospitality, and retail, this rebate offers direct financial relief, helping to mitigate operational costs.

HECS/HELP Debt Indexation Changes

The Budget paper does not provide any more details about the previously announced changes to how the indexation factor for HELP debts will be calculated. However, the Budget papers did allocate extra funding of $239.7 million over 5 years from 2023-24 (and an extra $250.5 million from 2028-29 to 2034-35) to tertiary institutions to cover the impact of the changes. The Papers say that the measure is expected to lower outstanding loans by around $3.0 billion.

The Ministers’ pre-Budget media release announced 2 proposed changes:

  1. Debts will be indexed by the lower of the CPI or the Wages Price Index (“WPI”).
  2. The change will be backdated to 2022-23.

As an example of the likely effect of these changes – the previously indexed amount at 1 June 2023 of 7.1% would go down to 3.2% and the difference refunded to the taxpayer.

There is more to play out here but please keep that in mind.

As always, if you are planning to pay off your HELP debt please do it before 1 June 2024 so the indexing for this year is based on a lower figure.

Abandonment of Deduction Denial for Intangibles

In a significant shift, the government has decided not to proceed with the previously proposed measure to deny deductions for payments relating to intangibles held in low- or no-tax jurisdictions. Initially intended to curb multinational tax avoidance, this proposal faced substantial pushback from the business community.

By abandoning this measure, businesses can continue to claim deductions for payments related to intangibles, maintaining the status quo. This decision alleviates concerns about increased compliance burdens and the potential negative impact on cash flow and strategic tax planning. It also ensures that businesses can continue to engage in global operations without the added complexity of tracking and reporting such payments under more stringent rules.

Strengthening ATO Compliance

The budget includes funding to enhance the Australian Taxation Office’s (ATO) compliance and enforcement capabilities. This initiative aims to ensure that businesses are meeting their tax obligations and to combat tax evasion more effectively.

Businesses should anticipate increased audits and reviews, making it crucial to maintain accurate and up-to-date records. Ensuring compliance with tax regulations is essential to avoid penalties and potential disruptions to operations. Consulting with your accountant to review your current practices and prepare for potential audits is highly recommended.

If you have any questions about how these changes might affect your business or personal finances, please reach out to your client manager.

Author: Darren O’Malley

*Correct as of 30 May 2024

Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.

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