On Tuesday 14 May 2024, Treasurer Jim Chalmers handed down the 2024-25 Federal Budget, his 3rd Budget. The major personal tax-related measures announced in the Budget include the following.
Revised stage 3 tax cuts confirmed
In the 2024-25 Budget, the Government did not announce any further changes to the personal tax rates.
The Government’s revised Stage 3 tax changes (as announced on 25 January 2024 and enacted into law by the Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024) commence from 1 July 2024. The Treasurer said all 13.6 million taxpayers will receive a tax cut from 1 July 2024. The average annual tax cut is $1,888 (or $36 a week).
Resident rates and thresholds: from 2024-25 onwards
The tax rates and income thresholds from the 2024-25 for residents (as already legislated) are as follows.
Tax rates and income thresholds from 2024-25 Taxable income ($) Tax payable ($) 0 – 18,200 Nil 18,201 – 45,000 Nil + 16% of excess over 18,200 45,001 – 135,000 4,288 + 30% of excess over 45,000 135,001 – 190,000 31,288 + 37% of excess over 135,000 190,001+ 51,638 + 45% of excess over 190,000 The following table compares the rates for 2023-24 with the revised rates for 2024-25. Basically, the 19% tax rate has been reduced to 16%; the 32.5% tax rate has been reduced to 30%; the 37% tax rate threshold has been increased from $120,000 to $135,000; and the 45% tax rate threshold has been increased from $180,000 to $190,000.
Summary: Tax rates and income thresholds Rate 2023-24 2024-25 Nil $0 – $18,200 $0 – $18,200 16% N/A $18,201 – $45,000 19% $18,201 – $45,000 N/A 30% N/A $45,001 – $135,000 32.5% $45,001 – $120,000 N/A 37% $120,001 – $180,000 $135,000 – $190,000 45% $180,001+ $190,001+
Foreign residents
For 2024-25 and later income years, the tax rates for foreign residents are:
Working holidaymakers
For 2024-25 and later income years, the rates of tax for working holiday makers are:
Low income tax offset (unchanged)
No changes were made to the low income tax offset (LITO) in the 2024-25 Budget.
For completeness, and as a reminder, while the low and middle income tax offset (LMITO) ceased from 1 July 2022, low and middle income taxpayers remain entitled to the LITO. Taxable income (TI) Amount of offset $0 – $37,500 $700 $37,501 – $45,000 $700 – ([TI – $37,500] x 5%) $45,001 – $66,667 $325 – ([TI – $45,000] x 1.5%) $66,668+ Nil
The maximum amount of the LITO is $700. The LITO is withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000 and then at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667.
Medicare levy low-income thresholds for 2023-24 confirmed
The Medicare levy low-income thresholds for 2023-24 would normally have been announced in this 2024-25 Budget. However, the Government released the 2023-24 Medicare levy thresholds on 25 January 2024 when it announced the changes to the Stage 3 tax cuts (see above). The new thresholds to provide cost-of-living relief were enacted by the Treasury Laws Amendment (Cost of Living – Medicare Levy) Act 2024.
From the 2023-24 income year, the Medicare levy low-income threshold for singles has been increased to $26,000 for 2023-24 (up from $24,276 for 2022-23). For couples with no children, the family income threshold is $43,846 (up from $40,939 for 2022-23). The additional amount of threshold for each dependent child or student is $4,027 (up from $3,760).
For single seniors and pensioners eligible for the seniors and pensioners tax offset (SAPTO), the Medicare levy low-income threshold is $41,089 (up from $38,365). The family threshold for seniors and pensioners is $57,198 (up from $53,406), plus $4,027 for each dependent child or student (up from $3,760).
Personal income tax compliance program extended
The Government will extend the ATO Personal Income Tax Compliance Program for one year from 1 July 2027.
This extension will enable the ATO to continue to deliver a combination of proactive, preventative and corrective activities in key areas of non-compliance, including overclaiming of deductions, incorrect reporting of income and inappropriate tax agent influence. This will enable the ATO to continue its focus on emerging risks to the tax system, such as deductions relating to short-term rental properties.
This measure is estimated to increase receipts by $180.3 million and increase payments by $44.3 million over the 5 years from 2023-24.
HECS/HELP debts
There are no further details contained in the Budget paper dealing with the announced changes (ie indexation factor will be the lower of the CPI or the Wages Price Index (WPI) and the changes will be backdated to 2022-23) to the way that the indexation factor applied to HELP debts will be calculated.
However, the Budget papers did include additional funding of $239.7 million over 5 years from 2023-24 (and an additional $250.5 million from 2028-29 to 2034-35) to tertiary institutions to cover the impact of the changes. The Papers note that the measure is estimated to reduce outstanding loans by around $3.0 billion.
Energy relief payments extended
The Government will provide $3.5 billion over 3 years from 2023-24 to extend and expand the Energy Bill Relief Fund to provide a $300 rebate to all Australian households and a $325 rebate to eligible small businesses on 2024-25 energy bills.
Fast-tracked passport applications
The Government will establish new fast-track processing of passports to commence on 1 July 2024. Fast-track passport applications will be processed in 5 business days for an additional fee of $100.
