The following examination of the 2024/25 Federal Budget is not a full analysis of all announcements within the Federal Budget.  Rather this Tips & Traps edition is limited to exploring those matters of relevance to our clients.  Please refer to the Budget paper we issued last Wednesday for all announcements.

Revised Stage 3 tax cuts
Further to their revised policy announced earlier in the year, the revised Stage 3 tax cuts will take effect from 1^st July 2024 with changes marked in yellow.

$300 energy rebate

All households will receive a $300 reduction in their electricity bills.  This will be passed on by electricity suppliers (who need to amend their systems) in the form of 4 quarterly $75 credits.  The $300 is not income tested.  Furthermore, as the grant is to be applied to every household – so those who own a holiday home will receive $600.

HELP indexation

As previously announced, with effect from 1^st June 2023, HELP debts will be indexed by the lower of CPI or Wage Price Index.

This will reduce last year’s indexation from 7.1% to 3.2% and reduce next month’s indexation from 4.7% to about 4%.

TIP     With both these indices running now at high levels, those soon to clear their remaining HELP debt should consider paying it out before 1^st June 2024.

Centrelink deeming

The current deeming rate will be frozen for another 12 months.

 BUSINESSES

$325 energy rebate

Similar to the household rebate, small businesses will receive $325 off the next year’s electricity bills.  A qualifying small business will be one that:-

• Has a turnover (gross income) of less than $10,000,000 (but it is unclear how an electricity company will know whether to apply the grant or not) and
• Have annual electrical consumption under 40 MWh.  It is unclear why small businesses with greater consumption (manufacturers and the like) won’t receive a benefit.

$20,000 asset write-off

The $20,000 asset write-off will be extended for another 12 months from 1^st July 2024 for small businesses with turnover under $10,000,000.

That said, the bill to extend the $20,000 write-off for this financial year ending 30^th June 2024 has yet to be passed.  As annoying as that is, it must also be said there are two proposed amendments – to increase that limit to $30,000 for this 2023/24 year and be extended to businesses with annual group turnover under $50,000,000.

TIP     The $20,000 is the ex GST amount.

TRAP           An asset costing more than $20,000 is subject to depreciation under the Simplified Tax System – 15% in the year of acquisition followed by 30% of the remaining balance in following years.

TIP     If you are thinking of buying a $40,000 asset you need for your business and the price is good, buy it before July – that way your business can claim 15% in this tax year (even though owned for a few weeks) and the 30% of the residual 85%.  So your business is able to claim $16,200 of depreciation in the first 54 weeks of ownership – but only $6,000 if bought in the first week of July.

TIP     The asset must be installed ready for use by 30^th June 2024.

TIP     There is no grouping of like items – your business could claim the cost of 30 lap-tops costing $1,500 each.

TRAP           The write-off threshold is set to return to $1,000 from 1^st July 2025 – but history has shown that both left and right wing governments love to extend it.

Retaining BAS refunds

The period in which the ATO can retain a BAS refund will be increased from 14 to 30 days.  As unwelcome as that sounds, the reality is that it gives the ATO a better opportunity to detect fraud (and therefore protect the public purse).

Building cyber resilience for small business

I remain sceptical about the millions spent within Canberra on committees and reviews staffed by bureaucrats without any real input sought from industry bodies and small businesses.  But it is pleasing to see 3 announcements in respect of cyber protection:-

• Cyber wardens to provide free on-line training.
• The introduction of a Small Business Cyber Resilience Service to both help small businesses build their cyber resilience and moreover provide support in response to a cyber incident.
• The introduction of an online Cyber Health Check so small businesses can self assess their situation and exposure.

TIP     Upcoming government support should not let you decide to deal with this later.  And in particular, seriously consider adding cyber insurance cover to your existing business policy(ies).

TIP     The best policy is not the cheapest; the best policy is the one that will cover you for what you need when you need it.

Unpaid super entitlements on liquidation

Currently employee’s pay and leave entitlements are protected under a federal scheme.  That scheme however doesn’t extend to unpaid superannuation.  From 1^st July 2024, directors of companies which have entered liquidation can be pursued for unpaid super.

ATO will cease chasing old tax debts

Out of the blue, the ATO started chasing old tax debts they had previously written off; debts that had long since been forgotten and did not show in either Tax Agent Portal or Taxpayer Portal.  Tax debts that had been “put on hold” before 1^st January 2017 can no longer have a tax refund offset against those debts.

RECENT CHANGES NOT ANNOUNCED OR
NOT SUBJECT TO ANNOUNCEMENTS WITHIN THE BUDGET

Increase in super contribution limits

On-going indexation will see contribution limits increase from 1^st July 2024:-

• Concessional (deductible) – will increase from $27,500 to $30,000.
• Non-concessional (non-deductible) – will increase from $110,000 to $120,000.

No increase in Transfer Balance Cap (TBC)

Indexation of the TBC (the maximum starting amount of any new super pensions) will not see an increase until 1^st July 2025.  However, at that time, the $1,900,000 threshold could well be indexed to $2,100,000.

TIP     Those considering starting a super pension will need to receive financial planning advice to determine whether it is best to start a pension now, after June 2025 or sometime in between.

Pay day super payments

Quarterly super payments will soon be a thing of the past.  From 1^st July 2026, super is to be paid to be paid on pay day.

TIP     All employers paying weekly should seriously switch to fortnightly pay runs.

Increase in SG % rate

From 1^st July 2024, the SG contribution rate will increase from 11.0% to 11.5%.

TIP     Employers using common accounting software programs such as Xero, QuickBooks Online and MYOB on line versions need not do anything – those software programs will update the required SG %.

$3,000,000 super balance tax

The bill to introduce Division 296 which taxes the unrealised gains assets for super interests in excess of $3,000,000 is being considered by a Senate Committee and appears to be following party lines.

It is novel, unprecedented and in my mind an alarming development to tax the rise in value of assets that haven’t been sold.

But of more concern is that the $3,000,000 threshold will not be indexed.  This means that my daughter who has only recently started work will almost certainly breach the $3,000,000 threshold in her working life just based of employer SG contributions alone.  And she is nowhere near what a tradie earns; most tradies will breach the unindexed threshold way before age 65.

Some odd Budget facts

Here are some numbers of interest within the Budget

• Net foreign liabilities as a % Gross Domestic Product          32.3%
• Australia’s population                                                         26.8 million
• Resources as a % of total exports                                        62.5%

CLOSING WORDS

There is comparatively less change to address as we enter the most important time of the year – pre year end tax planning.  We have a terrific and robust process to ensure you maximise your opportunities, have clarity of your future tax payments and attend to matters that require rectification.

This process will kick off at the end of the month.  We will be amending our pre year end tax planning checklist in response to the above budgetary matters and from what we learn at tax seminars in the weeks ahead.

Please ensure your accounting records are up to date so we can quickly and reliably predict your position and thereby enable us to identify opportunities and matters that require rectification.

We look forward to maximising your tax situation with you in the lead up to 30^th June.