Federal Budget 2024 Implications

Sydney, May 17: On Tuesday, Treasurer Jim Chalmers presented the Federal Budget for the upcoming fiscal year, announcing a key feature that had been anticipated—personal tax cuts.
Mark Chapman, Director of Tax Communication at H&R Block, provides an analysis of these new measures.
Starting July 1, approximately 13.6 million taxpayers will benefit from these cuts, which will be implemented immediately, replacing the previously planned Stage 3 tax cuts instituted by the previous government.
This revision aims to boost the disposable income of particularly low and middle-income earners, helping to ease the burden of rising living costs.
Under the previous framework set by the Liberal/National coalition, the tax relief was skewed towards higher earners, providing no relief for those making $40,000 and just $875 for those at $80,000.
The revised cuts under the current administration now ensure that individuals earning $40,000 will receive a $654 cut, and those at $80,000 will see $1,679 more in their pockets.
This adjustment is crucial for addressing the cost of living pressures affecting those on lower and middle incomes, allowing for easier management of expenses such as mortgages, groceries, and fuel.
Taxpayers need not take any specific actions to benefit from these cuts; employers will adjust the tax withheld from payrolls automatically, which means increases in take-home pay should be noticeable from the start of July.

Personal Tax Rates Adjustment

Key adjustments include:

Reducing the 19 per cent tax bracket to 16 per cent, saving $804 for individuals with taxable incomes at $45,000.
Lowering the 32.5 per cent rate to 30 per cent for those earning between $45,000 and $135,000.
Keeping the 37 per cent rate but raising the income threshold to $135,000.
Maintaining the 45 per cent rate, with its threshold now starting at $190,000.

Tax Brackets and Rates for 2024-25

No tax on incomes up to $18,200.
16 per cent on incomes from $18,201 to $45,000.
30 per cent on incomes from $45,001 to $135,000.
37 per cent on incomes from $135,001 to $190,000.
45 per cent on incomes over $190,000.
For Non-Residents
30 per cent tax on incomes up to $135,000.
37 per cent tax on incomes from $135,001 to $190,000.
45 per cent tax on incomes above $190,001.

Working Holiday Makers

15 per cent tax on incomes up to $45,000.
30 per cent tax on incomes from $45,001 to $135,000.
37 per cent tax on incomes from $135,001 to $190,000.
45 per cent tax on incomes above $190,001.
Low Income Tax Offset
The low income tax offset remains unchanged, with a maximum of $700, phasing out between $37,500 and $66,667.

Medicare Levy Adjustments

Thresholds for the Medicare levy for low-income earners have been increased to reflect inflation, providing additional relief.

Student Loans

Significant changes include the reform of HECS and HELP debt indexation, with adjustments now tied to the lower of CPI or WPI, retroactively reducing last year’s indexation.

Small Business

The instant asset write-off has been extended, allowing immediate deductions for eligible assets costing less than $20,000, first used or installed by June 30, 2025.

Tax Compliance

Funding has been boosted for ATO compliance programs to enhance real-time fraud detection and extend the notification period for holding BAS refunds for investigation.

ATO’s Enhanced Discretion

New legislation will provide the ATO with greater discretion to manage old tax debts, preventing automatic offsets against refunds for debts previously put on hold.

This budget reflects a significant shift towards supporting lower and middle-income earners, providing substantial tax relief and measures to bolster small businesses and adjust compliance frameworks to ensure fairness and efficiency in the tax system.