Federal Budget Update 2024

Last night Treasurer Jim Charmers announced his third Federal Budget.   The Federal Budget is a plan for how things will be spent and focus on what the Federal Government see’s as priorities as well as being a great transparency in our democratic system.

Labor’s third Budget has focused on cost of living pressures with the current inflationary backdrop this has been delivered in the forms of continued energy relief along with the already legislated Stage 3 Tax Cuts and the already announced indexation changes on the HECS/HELP repayments and Superannuation being paid as part of Paid Parental Leave.

The stage 3 (version 2) tax cuts for 2024 are unchanged and the well discussed changes to Superannuation which were announced in March this year, with the Government plans to reduce the tax concessions available to individuals with a total superannuation balance exceeding $3 million, from 1 July 2025.

For small business, there was the extension of the $20,000 instant asset write off to 30 June 2025, along with energy bill relief ($325 to eligible small businesses).   As well as notification that from 1 July 2026 Pay Day Super legislation will require business to pay staff on the same day as their payday.

Although there has been an Aged Care Taskforce Report (completed in December 2023) there are a few noted changes with extra funding but the long term viability has not been considered with focus still on increasing access to home care, improving the quality and regulation of aged care services and addressing workforce issues.

As always before any of these announcements can be implemented, they will require passage through parliament.  It is likely the super changes will have support from all sides of politics but we will update you as these change.

We have prepared a summary of the key measures for Individuals, Superannuation, Social Security and for Companies below:

• No Changes to the Stage 3 (version 2) Tax Cuts which have already been legislated to start from the 2024-25 income year and will change Marginal Rates As Follows:

• Reducing Indexation of Student Debt (HECS/HELP) – In response to the Australian Universities Accord, the Government will cap the HELP/HECS indexation rate to the lower of the Consumer Price Index (CPI) or the Wage Price Index (WPI) with effect from 1 June 2023.  The Government will backdate this relief to all HELP / HECS, VET Student Loan and Australian Apprenticeship Support Loan and other student loan support accounts that existed on 1 June 2023.  The WPI would have only been 3.2% rather than the 7.1% CPI which was applied.

• Increasing the Medicare levy low-income thresholds – The Medicare levy low-income thresholds for singles, families, seniors and pensioners will increase from 1 July 2024. The increase in thresholds provides cost-of-living relief by taking account of recent CPI outcomes so that low-income individuals continue to be exempt from paying the Medicare levy.  The threshold for singles will be increased from $24,276 to $26,000. The family threshold will be increased from $40,939 to $43,846. For single seniors and pensioners, the threshold will be increased from $38,365 to $41,089. The family threshold for seniors and pensioners will be increased from $53,406 to $57,198. For each dependent child or student, the family income thresholds will increase by a further $4,027 instead of the previous amount of $3,760.

• Co Payment for Pharmaceutical Beneftis Scheme (PBS) – patient co-payments will freeze for 1 year which will apply to everyone with a medicare card and for pensioners and other concessional card holders they will pay no more than $7.70 plus any manufacturer premiums (for up to 5 years).

• Foreign Resident Capital Gains Tax Regime – From 1 July 2025 (and subject to further consultation) the Government has announced it intends to strengthen the foreign resident capital gains tax (CGT) to ensure foreign residents pay “their fair share” of tax in Australia.  The amendments will apply to CGT events commencing on or after 1 July 2025 to:
  • Claify and broaden the type of assetas that foreign residents are subject to CGT on;
  • Amend the point in time princpals asset test to a 365 day period; and
  • Require foreign residents disposing of shre and other membership interests exceediung $20 Million in value to noitfy the ATO prior to the transaction being executed.

• Indexation of Super Contributions – Based on indexation which is in place Super contribution threholds will increase from 1 July 2024.  This is not a budget measure but part of already in place legislation.  The Concessional Cap (the tax advantaged ones like employer and salary sacrifice and notional defined benefit contributions) will increase to $30,000 from $27,500.   While the Non-Concessional Cap (the tax free contributions) will increase to $120,000 from $110,000.  This will have impact on any bring forward arrangements which may have lower thresholds in place.

• No Changes or further announcements on Targeted Super Concessions  – As announced in March 2023, the Government will reduce the tax concessions available to individuals with a total superannuation balance exceeding $3 million, from 1 July 2025.

  Individuals with a total superannuation balance of less than $3 million will not be affected.  It will bring the headline tax rate to 30 per cent, up from 15 per cent, for earnings corresponding to the proportion of an individual’s total superannuation balance that is greater than $3 million. Earnings relating to assets below the $3 million threshold will continue to be taxed at 15 per cent, or zero per cent if held in a retirement pension account.  Interests in defined benefit schemes will be appropriately valued and will have earnings taxed under this measure in a similar way to other interests. This will ensure commensurate treatment.  The measure will not place a limit on the amount of money an individual can hold in superannuation. The current contribution rules continue to apply.

• Securing Australians’ Superannuation Package (from last Budget)– increasing the payment frequency of the Superannuation Guarantee (SG) and investing in SG compliance From 1 July 2026, employers will be required to pay their employees’ SG entitlements on the same day that they pay salary and wages.  Currently, employers are only required to pay their employees’ SG on a quarterly basis. By increasing the payment frequency of superannuation to align with the payment of salary and wages, this measure will both ensure employees have greater visibility over whether their entitlements have been paid, and better enable the ATO to recover unpaid superannuation. Increased frequency of payment will also support better retirement outcomes. Changes to the design of the SG charge will also be necessary to align with increased payment frequency. The Government will consult with relevant stakeholders on the design of these changes, with the final design to be considered as part of the 2024–25 Budget.

• Legacy Comply Income Streams Commutation (being rolled back to accumulation) – in the 2021/22 Budget (former Liberal Government) there was a proposed 2 year window to commute and rollback the capital of complying income stream without impact on the Centrelink assessment.  there have been no further announcements in this space.  This measure has not been legislated.

• Deeming Rates from 1 July 2024 – there will be a continued freeze on social security deeming rates at their current levels for a further 12 months.  The deeming rates have been frozen at 0.25% and 2.25% to help pensioners “keep more in their pockets” during the cost of living increases caused by COVID.  The current rate freeze was due to ens on 30 June 2024.

• Extension to Increase to Working Age Payments – The Government will increase extend eligibility for the existing higheer rate of JobSeeker Payment to single recipients with a partial capacity to work between zero and 14 hours per week.

• Increased Flexibility for Carer Payment Recipients – From 20 March 2025, the Government has announced flexibility to undertake Study, volunteering and work activities.  Currently the existing 25 hour participation limit for Carer Payment recipients will be amended to 100 hours over four weeks.  Participation will no longer capture study, volunteering activities and travel time and will only apply to employment.  Also announced is that recipients who exceed the limit will have their payment suspended for up to six months rather than cancelled.

• Increased Support for Commonwealth Rent Assistance Recipients – The Government will increase the maximum rates of the Commonwealth Rent Assistance (CRA) allowances by 15 per cent to help address rental affordability challenges for CRA recipients.

• Improving Aged Care Support, home care, and funding model – The Government will defer the commencement of the new Aged Care Act to 1 July 2025. It will provide funding over 5 years from 2023-24 to deliver a range of key reforms and to continue to implement recommendations fro the Royal Commission. These include:

• • the release of 24,100 additional home care packages in 2024-25 (although from client experiences there is a massive wait time still in the sector sadly);
  • changes to increase the capability of the Aged Care Quality and Safety Commission from 1 July 2025;
  • additional funding to attract and retain aged care worker and improve outcomes for people receiving care services;
  • investment to reduce wait time for the My Aged Care Contact Team.