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The federal budget 2024\u201325 was delivered by Treasurer Jim Chalmers on 25 March 2025, just days out from the 3 May election being called by Prime Minister Anthony Albanese. Final notice of the budget was a little over two weeks out, and the budget papers were briefer than usual, perhaps reflective of the imminent election. Given this, the Treasurer\u2019s fourth budget was never going to be particularly controversial and, unsurprisingly, contained few mentions of tax.<\/span>
\n<\/p>\n The expected focus of the budget confirmed cost-of-living support, improved access to healthcare and housing, investment in education and strengthening the economy are front and centre for the government.<\/span>
\n<\/p>\n But two questions emanate from the budget:<\/span>
\n<\/p>\n How will we pay for it all?<\/span><\/span><\/p>\n<\/li>\n
<\/p>\n Will a government ever commit to serious, overdue, holistic tax reform of a system that everyone can see is creaking under its own weight?<\/span><\/span><\/p>\n<\/li>\n
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<\/p>\n As emphasised in nearly every<\/span> <\/span>Intergenerational Report<\/span><\/a> (a Treasury publication that outlines anticipated trends and future challenges), expenditures aimed at addressing the requirements of our ageing population are projected to rise, while tax revenues are likely to remain stable or decline. This situation is unsustainable.<\/span><\/span>
\n<\/p>\n It takes little effort to compile a long list of the challenges and issues that contribute to the inefficiencies and complexities in our tax and superannuation system. It takes tremendous commitment to openly have a sensible, bipartisan conversation about the solutions to address the mounting challenges we have in our system and to undertake the necessary reforms (whatever their form).<\/span>
\n<\/p>\n While the government\u2019s policy agenda has been laid out, the unenacted budget measures (discussed below) are contingent on the government being re-elected and the passage of enabling legislation through the new Parliament. The unenacted budget measures will hang in the balance until the new government is formed and its priorities are laid down. Of course, the composition of the House of Representatives and the Senate post-election is also, at present, unclear.<\/span>
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<\/p>\n Fiscal challenges remain far into the future, with the budget revealing:<\/span>
\n<\/p>\n A forecast deficit of $42.1 billion for 2025\u201326 and deficits of $35\u201337 billion each year thereafter to 2028\u201329.<\/span><\/span><\/p>\n<\/li>\n
<\/p>\n Gross debt tipped to exceed $1 trillion for the first time in 2025\u201326, rising to $1.223 trillion by 2028\u201329, resulting in net interest payments of nearly $95 billion over the forward estimates.<\/span><\/span><\/p>\n<\/li>\n
<\/p>\n Inflation (CPI) is expected to be 3 per cent for 2025\u201326 then stabilise at 2.5 per cent from 2026\u201327 to 2028\u201329.<\/span><\/span><\/p>\n<\/li>\n
<\/p>\n The unemployment rate will remain at 4.25 per cent through to 2028\u201329.<\/span><\/span><\/p>\n<\/li>\n
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<\/p>\n The budget contained details of more reforms aimed at enhancing the integrity of the tax profession through strengthening the Tax Practitioners Board (TPB) sanctions regime (from 1 July 2026) and modernising the registration framework for tax practitioners (from 1 July 2027). The budget Papers clarified the measures the government will proceed with and those it will not pursue.<\/span>
\n<\/p>\n In particular, the government will:<\/span>
\n<\/p>\n Proceed with:<\/span><\/span><\/p>\n<\/li>\n
<\/p>\n Reintroducing criminal penalties for unregistered preparers.<\/span><\/span><\/p>\n<\/li>\n
<\/p>\n Broadening civil penalties in the <\/span>Tax Agent Services Act 2009<\/span> (TASA), to enable the TPB to apply to the Federal Court for civil penalties for breaches of the Code of Professional Conduct by registered tax practitioners, and for false or misleading statements made by unregistered preparers.<\/span><\/span><\/p>\n<\/li>\n
<\/p>\n Introducing infringement notice penalties for alleged contraventions of the TASA.<\/span><\/span><\/p>\n<\/li>\n
<\/p>\n Introducing enforceable voluntary undertakings.<\/span><\/span><\/p>\n<\/li>\n
<\/p>\n Increasing the maximum period a terminated practitioner is banned from reapplying for registration from five to 10 years.<\/span><\/span><\/p>\n<\/li>\n
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<\/p>\n Not proceed with:<\/span><\/span><\/p>\n<\/li>\n
<\/p>\n Mandating a specific ratio of registered practitioners within entities that are registered as tax agents.<\/span><\/span><\/p>\n<\/li>\n
<\/p>\n Removing the professional association accreditation and registration pathways.<\/span><\/span><\/p>\n<\/li>\n
<\/p>\n Requiring in-house tax advisers, secondees and lawyers to register with the TPB.<\/span><\/span><\/p>\n<\/li>\n
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<\/p>\n Further consultations are expected after the election.<\/span>
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<\/p>\n Most did not see further tax cuts coming, although perhaps not surprising given the forthcoming election. The tax cuts are framed as providing more cost-of-living relief and returning some bracket creep, although the modest reduction in tax does not fully address the impact of inflation pushing people\u2019s income into higher tax brackets over time. These cuts are on top of the previous stage three tax cuts that took effect from 1 July 2024.<\/span>
\n<\/p>\n The tax cuts reduce the:<\/span>
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<\/p>\n Compared to the 2024\u201325 settings, every Australian taxpayer earning:<\/span>
\n<\/p>\n Between $18,200 and $45,000 will get a further tax cut of up to $268 in each of 2026\u201327 and 2027\u201328 (up to just over $5 per week).<\/span><\/span><\/p>\n<\/li>\n
<\/p>\n More than $45,000 \u2013 around 80 per cent of taxpayers \u2013 will get a further tax cut of $268 in each of 2026\u201327 and 2027\u201328 (just over $5 per week).<\/span><\/span><\/p>\n<\/li>\n
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<\/p>\n Enabling legislation<\/span><\/a> was introduced the day after the budget and promptly passed by both houses, before being enacted on 27 March 2025. Accordingly, the tax cuts are now law for 2026\u201327 and 2027\u201328. However, as these changes do not apply before 1 July 2026, the impact of the tax cuts to alleviate pressure on taxpayers will not be apparent for more than 12 months. Further, tax liabilities or income tax returns for the 2025\u201326 income year are not impacted.<\/span><\/span>
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<\/p>\n The annual indexation of the Medicare levy low-income thresholds has been<\/span> <\/span>legislated<\/span><\/a> with effect from 1 July 2024. These unremarkable changes ensure that low-income individuals continue to be exempt from paying the Medicare levy or pay the levy at a reduced rate.<\/span><\/span>
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<\/p>\n The budget extends the federal budget <\/span>2024\u201325<\/span><\/a> measure, Energy Bill Relief Fund \u2013 extension and expansion, until 31 December 2025 to provide cost-of-living relief. Additional rebates of $75 per quarter (totalling $150) will be provided to every household and around one million small businesses to reduce energy bills. The rebates will be automatically applied to electricity bills in two quarterly instalments.<\/span><\/span>
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<\/p>\n You may have missed the fleeting reference in the budget papers (in the<\/span> <\/span>Small Business statement<\/span><\/a>) where the government reaffirmed its commitment to extending the temporary increase in the small businesses instant asset write-off (IAWO) threshold, announced as part of the federal budget <\/span>2024\u201325<\/span><\/a>.<\/span><\/span>
\n<\/p>\n It has taken nine months into this income year to have certainty, but the<\/span> <\/span>enabling legislation<\/span><\/a> finally passed Parliament on 26 March 2025 and was enacted the following day. The $20,000 IAWO threshold for 2023\u201324 has now been extended by an additional 12 months, until 30 June 2025. This means that businesses with an aggregated turnover of less than $10 million can immediately deduct eligible assets costing less than $20,000 in 2024\u201325.<\/span><\/span>
\n<\/p>\n Further legislative amendments will be needed to prevent the IAWO threshold reverting to $1,000 from 1 July 2025 (noting the budget did not contain an announcement on the threshold for 2025\u201326). The Coalition has stated that, if elected, it would increase the threshold to $30,000 and make it permanent.<\/span>
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<\/p>\n As part of the federal budget <\/span>2024\u201325<\/span><\/a>, the government announced that it would:<\/span><\/span>
\n<\/p>\n Clarify and expand the range of assets on which foreign residents are subject to capital gains tax.<\/span><\/span><\/p>\n<\/li>\n
<\/p>\n Modify the principal asset test from a point-in-time to a 365-day testing period.<\/span><\/span><\/p>\n<\/li>\n
<\/p>\n Require foreign residents disposing of shares or other membership interests worth more than $20 million to notify the ATO before the transaction is executed.<\/span><\/span><\/p>\n<\/li>\n
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<\/p>\n A<\/span> <\/span>consultation paper<\/span><\/a> on this measure was released on 23 July 2024. In the budget, the government announced that it will defer the start date of this measure from 1 July 2025 to the later of 1 October 2025 or the first 1 January, 1 April, 1 July or 1 October after enactment of the enabling legislation. While the budget reaffirmed the government\u2019s commitment to progressing this measure, linking the application date to the date of Royal Assent defers the measure indefinitely.<\/span><\/span>
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<\/p>\n The tax treatment of managed investment trust arrangements will be clarified, ensuring legitimate investors can continue to access concessional withholding tax rates in Australia while preventing misuse, as outlined in Taxpayer Alert<\/span> <\/span>TA 2025\/1<\/span><\/a>. Once legislated, this measure will apply to fund payments from 13 March 2025.\u00a0<\/span><\/span>
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Snapshot of the fiscal position<\/span><\/h3>\n
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What was announced?<\/span><\/h2>\n
Further regulation of tax practitioners<\/span><\/h3>\n
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More tax cuts for individual taxpayers<\/span><\/h3>\n
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Medicare levy low-income thresholds<\/span><\/h3>\n
Energy Bill Relief Fund extension<\/span><\/h3>\n
Small business instant asset write-off threshold finally extended<\/span><\/h3>\n
International tax measures<\/span><\/h3>\n
Capital gains tax for foreign residents<\/span><\/h4>\n
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Managed investment trusts\u00a0<\/span><\/h4>\n