The Treasurer is promising that inflation will decline by 0.75% as a direct result of the 2024-25 Federal Budget initiatives including energy relief for all households, a boost to Commonwealth Rent Assistance, and the freezing of the maximum co-payment on the Pharmaceutical Benefits Scheme.

This is a pre-election budget for the people with everyone getting a little something to ease cost of living pressures. Like the Price is Right gameshow, it will all come down to the price paid at the checkout. If the consumer price index (CPI) returns to target by the end of 2024 off the back of the Budget initiatives as the Government anticipates, the Reserve Bank of Australia (RBA) may be inclined to reduce interest rates. However, at this stage, the RBA is not expecting inflation to return to the target range of 2-3% until the second half of 2025, and to the midpoint in 2026.
The 2023-24 surplus has increased to $9.3bn but is expected to decline to a deficit of $28.3bn in 2024-25, driven primarily by the Stage 3 tax cuts.

For business, the Government is picking winners through targeted public investment with its Future Made in Australia Framework that they are betting will pave the way for private investment in net zero transformation and the strengthening of Australia’s domestic economic resilience.

For small and medium business, there is a little but not a lot - an extension of the $20k instant asset write-off until 30 June 2025 and a $325 rebate to eligible businesses towards 2024-25 energy bills.
For foreign residents, the capital gains tax (CGT) regime will be amended to broaden the type of assets subject to CGT and introduce a modified 365-day principal asset testing period. 
Those with large superannuation balances will be disappointed that the 30% tax on super earnings on balances above $3 million remains in place, this is set to commence from 1 July 2025.

• Previously announced Stage 3 tax cuts
• $300 energy bill relief for all Australian households and $325 for eligible small businesses - applied as an automatic quarterly credit.
• Student HELP debts will be cut by changing the way indexation is calculated. From 1 June 2023, it will be the lower of the CPI or the Wage Price Index (WPI), reducing the debt accumulated by more than 3 million Australians when the CPI spiked to 7.1%.
• Increase to the Commonwealth rent assistance maximum rates by 10% from 20 September 2024.
• One year freeze on the maximum Pharmaceutical Benefits Scheme (PBS) patient co-payment for Medicare card holders and a five-year freeze for pensioners and other concession cardholders.
• Extension of the $20k instant asset write-off until 30 June 2025.
  
• For foreign residents, the capital gains tax (CGT) regime will be amended to broaden the type of assets subject to CGT and introduce a modified 365-day principal asset testing period.
  

Victorian Treasurer Tim Pallas has handed down the 2024-25 Victorian State Budget. While a strong focus was once again placed on combatting inflation and workforce shortages, unlike the 2023/24 which sought to generate revenue through new tax measures, this year’s budget contains minimal tax reform and seeks to control spending through the deferment of major infrastructure and healthcare projects. 

The Government did announce increases to the waste and fire services levies and the introduction of a standalone tax exemption for land used to provide social and emergency housing.

This year's Budget acts as a 'report card' on the performance of the tax measures introduced in the 2023-2024 Budget which centred around stemming Government debt and generating revenue through the introduction of several new business-focussed taxes and levies.

Victorian landowners faced harsh increases to land tax in 2024, although absentee owners took the largest hit, from the rate increases introduced in last year’s Andrews Government’s 2023-2024 State Budget. With no new increases in property taxes, Victorian landowners will welcome the absence of any further unfavourable tax reform. Property owners, though, still have the pending changes from the last budget to contend with, and the Victorian Government has increased the fire services property levy and waste levy, payable by households.

Many residential landowners are already bracing for the Victorian Government’s extension of the Vacant Residential Land Tax, which will apply to “vacant” land in all of Victoria from 1 January 2025. Taxpayers wishing to rely on the holiday home exemption were pleased that the government committed to extending it to include properties held in companies or trusts as of 28 November 2023 (albeit not yet legislated). 

As announced by the Victorian Government in its 2023-2024 State Budget, stamp duty on commercial and industrial property is being replaced by an annual property tax. Twelve months from this announcement, the Bill has only now passed the Legislative Assembly, with the 1 July 2024 commencement date fast approaching. This means all properties purchased from 1 July 2024 will now enter the 10 year transition period where the stamp duty will be spread over 10 years, but in year 11 a new annual property tax will start which represents 1% of the unimproved value of the property.

The 2024-2025 Budget included a slated increase in the tax-free threshold from $700,000 to $900,000 from 1 July 2024, with a further increase to $1 million from 1 July 2025. In addition, from 1 July 2024, the tax-free threshold will phase out for each dollar of wages a business pays over $3 million, with wages over $5 million not benefiting from the threshold.  

The budget provides increased funding to enhance tax compliance undertaken by the SRO. We have seen over the past two years the SRO has been more active in this space. The rise in the SRO’s data matching efforts has led to an increased amount of employment tax compliance audits, addressing issues like incorrect grouping and underreporting of wage components. If you have two businesses that employ staff and are not grouping for payroll tax, please contact us to discuss, before the SRO does.

We strongly recommend all clients have audit insurance to support any costs if they are reviewed.

The report card is in. Last year’s big tax hikes have not been enough to save the 2024- 2025 Budget spending, with major infrastructure projects being wound back or deferred indefinitely in an attempt to reign in the ballooning debt. Touted as a Budget focused on helping families, several sectors have taken a hit and Victoria’s ‘big build’ Budget is looking decidedly smaller.