The Budget is aimed at trying to lower inflation in the near term but supporting Government.

Priorities include formally launching a “Future Made in Australia” (FMIA) over the medium term. In regard to the former, there is another round of cost-of-living subsidies designed to reduce measured inflation. In terms of the latter, it further cements bigger government and sees bigger deficits for the medium term.

Tax

Tax relief is on the horizon for Australian taxpayers as the government reaffirms its commitment to tax cuts, benefiting 13.6 million individuals starting from July 1, 2024. Here’s what to expect:

• The 19% tax rate will drop to 16%.
• The 32.5% tax rate will decrease to 30%.
• The income threshold for the 37% tax rate will rise from $120,000 to $135,000.
• The income threshold for the 45% tax rate will increase from $180,000 to $190,000.

These adjustments are compared to the existing rates and thresholds outlined in the table below:

These changes in personal income tax, excluding Medicare Levy and tax offsets, can lead to significant reductions in tax burdens for clients, as illustrated in the following table:

For those eligible for the Low Income Tax Offset (LITO) and/or the Seniors and Pensioners Tax Offset (SAPTO), the new tax rates and thresholds, when combined with these offsets, expand the effective tax-free threshold, as detailed in the table below:

Social Security

Extending the Freeze on Deeming Rates until June 30, 2025

The ongoing freeze on deeming rates, initially implemented since July 1, 2022, with an intended duration of two years until June 30, 2024, will persist until June 30, 2025. This extension ensures that the current historically low deeming rates remain unchanged.

Deeming thresholds will continue to be adjusted annually on July 1st. The current rates and thresholds are as follows:

This extension is expected to provide continued relief for approximately 876,000 income support recipients, including 450,000 Age Pension recipients.

Carer Payment – Enhanced Flexibility

Presently, if a carer discontinues providing care for more than 25 hours per week (inclusive of travel and meal breaks) to engage in training, education, employment, or voluntary work, their eligibility for Carer Payment undergoes review to ensure compliance with the required care provision.

Commencing March 20, 2025, in a bid to offer carers greater flexibility and autonomy in structuring their work commitments around their caregiving responsibilities, the existing 25-hour per week participation threshold will be modified to 100 hours spread over four weeks. This adjustment eliminates the participation limit for study and volunteering activities, incorporating travel time within the proposed 100-hour requirement, and applies it solely to employment.

Carer Payment recipients who surpass the participation limit or their permissible temporary cessation of care days will experience a suspension of payments for a maximum duration of six months, as opposed to outright cancellation. Additionally, recipients will have the option to utilize single temporary cessation of care days in instances where they exceed the participation limit, instead of the current minimum requirement of seven consecutive days.

Aged Care Additional Home Care Packages

In the effort to alleviate wait times within the National Priority System (NPS), the Government will allocate an extra 24,100 Home Care Packages for the fiscal year 2024-25, aiming to reduce average wait times to six months.

As of December 31, 2023, there were 51,044 individuals within the NPS awaiting a Home Care Package (HCP) at their approved level. Among them, 11,822 were temporarily placed in a lower level HCP while awaiting approval for their preferred level.

An individual’s position in the NPS is determined solely by the date of approval and their priority for care. Estimated wait times for individuals with medium priority entering the NPS on March 31, 2024, according to HCP level, are outlined as follows:

Energy Bill Relief

In response to the escalating energy expenses faced by Australian families and qualifying small enterprises, the Government has introduced a relief initiative. This proposal entails an energy bill rebate, amounting to $300 for households and $325 for eligible small businesses. The relief period spans from July 1, 2024, to June 30, 2025.

Claiming this benefit entails no supplementary requirements. Eligible households and businesses will receive the rebate directly from their energy provider, reflected as a quarterly reduction in their energy bills.

Small Business Support – $20,000 Immediate Asset Write-Off

The Government has declared an extension of the $20,000 instant asset write-off for an additional 12 months, effective until June 30, 2025. Small businesses with aggregated turnover below $10 million will have the opportunity to instantly deduct the entire cost of eligible assets valued at less than $20,000. These assets must be first utilized or installed and ready for use between July 1, 2023, and June 30, 2025. Notably, the $20,000 threshold applies on a per asset basis, allowing eligible small businesses to claim full tax deductions for multiple assets.

Assets valued at $20,000 or more, which do not qualify for immediate deduction, can still be included in the small business simplified depreciation pool. They will be depreciated at a rate of 15% in the initial income year and 30% annually thereafter.

Conclusion

In conclusion, the upcoming tax cuts, extended social security measures, enhanced flexibility for carers, additional support for aged care, energy bill relief, and small business assistance represent significant steps toward easing financial burdens and fostering economic resilience across Australia. As these initiatives take effect, they offer hope and tangible support to individuals, families, carers, retirees, small businesses, and communities nationwide.

Source: Challenger Life Company