What the 2024-25 Federal Budget means for you

The 2024-25 Federal Budget has been delivered. The dominant themes were the cost of living and the “Future Made in Australia” initiative.

From a pure financial planning and wealth perspective, the budget was limited and included no surprises.

As is always the case, Budget measures need to pass through the legislative process before they become law and may change during that process.

The items of most relevance for our self-funded retirees, professional families and successful business owners include:

Self-Funded Retirees

The Government proposes to increase the Medicare levy low-income thresholds to account for recent inflation. A number of clients will also welcome the announcement of new energy rebates ($300 for all households and $325 for small businesses over 2024-25), a freezing of the social security deeming rates for a further 12 months, enhancements to the social security carers payment and additional aged care funding arrangements.

Beyond this, it was more about what was not announced. There was no mention about the Government’s planned intentions to reduce the tax concessions available to individuals with a total superannuation balance (TSB) above $3 million.  This proposal, as first announced just prior to last year’s budget, is proposed to commence from 1 July 2025. Whilst this measure is yet to be legislated, and it is possible the final measures could differ to those currently announced, there may be merit in taking action to limit the potential future impact of these changes. As a client of ITL Financial Planning, we will automatically consider this proposal (and all the proposals).

Furthermore, the Government confirmed already legislated tax cuts for all Australians from July 2024. You can read more about this and other announcements under the “professional families” heading.

Professional Families

The Government has confirmed already legislated tax cuts for all Australians from 1 July 2024. Under the Government’s tax cuts from 2024-25; the 19% tax rate will reduce to 16%, the 32.5% to 30% and income thresholds in the higher income thresholds will increase. On average, taxpayers will receive a tax cut of $1,888 or $36 per week, in 2024-25.

Some clients may also welcome the proposed enhancement to the Government-funded Paid Parent Leave (PPL) scheme. From 1 July 2025, eligible parents will receive Super Guarantee paid on their PPL payment.

Beyond this, it was more about what was not announced. Indexation of superannuation contribution thresholds will still take effect from July 2024. This means another increase of 0.5% in the Super Guarantee rate to 11.5%. In addition, the concessional cap will increase to $30,000 next financial year meaning the non-concessional cap increases to $120,000 and the three year bring-forward amount increases to $360,000.

Many of the proposed changes outlined under “self-funded retirees” and “successful business owners” will also impact professional families.

Furthermore, you may wish to share with your children and/or grandchildren that the Government plans to cap indexation of the Higher Education Loan Program (HELP) and other student loan debts so growth in debt does not outpace wages growth. The change in indexation will be retrospectively applied from 1 June 2023.

Successful Business Owners

The Government will extend the $20,000 instant asset write-off by a further 12 months until 30 June 2025 and the ability to place assets valued over the threshold into the small business simplified depreciation pool.

Many of the proposed changes outlined under “self-funded retirees” and “professional families” will also impact successful business owners in the future.

Concluding thoughts

Overall, the proposals are limited for self-funded retirees, professional families and successful businesses. However as indicated earlier, most will require the passage of relevant legislation through Parliament and may change during that process.

This information has been prepared and issued by ITL Financial Planning and is current as at 15 May 2024. Material contained in this publication is an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. The information in this document regarding taxation and legislative change is based on policy announcements which are yet to be passed as legislation and may be subject to future change.  This information contains material provided directly by third parties (mainly BT, a part of Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian Credit Licence 233714 (Westpac)). It is given in good faith and has been derived from sources believed to be accurate at its issue date. It should not be considered a comprehensive statement on any matter nor relied upon as such. ITL Financial Planning does not accept responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. This information does not consider your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. The tax position described is a general statement and is for guidance only. It has not been prepared by a registered tax agent. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ, and you should seek independent professional tax advice. It is important to note that the policies outlined in this publication are yet to be passed as legislation and therefore may be subject to change or further refinement.

Written by Shereen Churchill (Financial Adviser)