Federal Budget 2024-25 Key Takeaways

Somewhat surprisingly, the 2024-25 Federal Budget contained very little in the way of substantive tax measures, instead focussing on spending initiatives. 

The Budget is forecast to be in a surplus of $9.3 billion for 2024-25, however with larger than expected deficits forecast for the following three years (totalling $73.4 billion per the December estimates).

The tax measures announced this year are largely related to compliance, including the implementation of a global minimum tax and domestic minimum tax for multinationals, significant new funding for ATO audit and compliance activities, and a tightening of the foreign resident CGT regime.  The one measure of benefit to small business is the extension of the $20,000 instant asset write-off threshold through to 30 June 2025.

Our five key tax and regulatory takeaways are:

1. Confirmation of previously legislated tax cuts (Stage 3 tax cuts)

• These are as previously announced and legislated with no further changes.
• The changes from 1 July 2024 are:
  • The 19% rate is reducing to 16%.  No change to thresholds and applies on taxable income 18,201 to 45,000.
  • The 32.5% rate is reducing to 30% and now applies on taxable income from 45,001 to 135,000 (up from 120,000).
  • The 37% rate is unchanged however now applies on taxable income from 135,001 (up from 120,000) to 190,000 (up from 180,000).

2. Small business instant asset write-off

• Small businesses with a turnover of up to $10 million can immediately deduct the full cost of a depreciable asset purchased for less than $20,000 and installed by 30 June 2025.
• This is assessed on a per asset basis and therefore groups of assets individually costing less than $20,000 can be immediately deducted under this measure. For example, a small business could immediately deduct 20 computers purchased for a total cost of $40,000.

3. Global minimum tax and domestic minimum tax

• Previously announced 15% global minimum tax and domestic minimum tax to be introduced (OECD/G20 Two-Pillar Solution).
• Applies to multinationals with annual global turnover of more than EUR 750 million.
• Core elements commencing for financial years beginning on or after 1 January 2024.

4. Additional ATO audit and compliance funding

• Funding to extend the ATO Personal Income Tax Compliance Program for one more year from 1 July 2027. This program is focused on underreported income, incorrect tax deduction and tax offset claims by individual taxpayers.
• ATO Counter Fraud Strategy. Funding of $187 million over four years from 1 July 2024 to the ATO to strengthen its ability to detect, prevent and mitigate fraud against the tax and superannuation systems.
• Funding to extend the Shadow Economy Compliance Program for a further two years from 1 July 2026 to target dishonest and criminal activities that operate outside the tax and regulatory systems.
• Funding to extend the ATO Tax Avoidance Taskforce for two years from 1 July 2026 to prevent, detect and address tax avoidance and ensure the largest and wealthiest taxpayers pay the right amount of tax in Australia.

5. Strengthen foreign resident CGT rules

• The government will clarify and expand the types of assets that give rise to taxable capital gains for foreign residents on or after 1 July 2025. Consultation will be undertaken on the details of this measure.
• The principal asset test relating to the disposal of indirect taxable Australian real property interests by foreign residents will be expanded from a point-in-time test to a 365 day test from 1 July 2025.
• Foreign residents will be required to notify the ATO prior to the execution of the transaction of the disposal of shares or other entity membership interests with a value of more than $20 million from 1 July 2025.

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