Federal Government Budget 2024/25: what's in store?

On Tuesday 14 May 2024 Treasurer Jim Chalmers set out the Labor Government’s plans for revenue and expenditure for 2024-25 as a part of its Federal Budget. Boasting a second consecutive surplus forecast for the financial year ending June 2024, the Albanese Government is now getting ready to spend up.

With an estimated budget bottom line to be cumulatively $13.9 billion worse off over the next four years to 2026-27, the Federal Government placed a spending emphasis on cost-of-living assistance and an increased investment in certain industries such as clean energy manufacturing and renewable hydrogen as a part of its new National Interest Framework. The new Federal Budget also sets out a range of support measures targeted at small businesses to financially against a backdrop of high inflation, and also locked in a range of new measures and reinvestment regarding tax compliance at all levels.

This article focuses on two key limbs of the Federal Budget. One, the range of assistance afforded to small Australian businesses, and the second being the measures taken to enhance tax compliance nationwide, which some commentators are calling a band-aid approach where the framework requires a more comprehensive overhaul.

Small Business Support via the 2024/25 Budget

The Federal Government have estimated that $641.4 million is being allocated in targeted support to small businesses as a part of its 2024/25 Budget.

$20,000 instant asset write-off

Small businesses with a turnover in aggregate of less than $10 million will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2025. The Federal Government has estimated this measure will save $290 million for small businesses by improving cash flow and reducing compliance costs.

The policy formed a part of the Federal Government’s 2023/24 Budget when it was announced that this instant asset write-off would increase from $1,000 to $20,000. The Government has committed to extending this measure until 30 June 2025, and the law effecting this change is currently on the floor of Parliament.
Small businesses can still utilise a small business simplified depreciation pool - for assets valued at $20,000 or more (which cannot be immediately deducted) - meaning these assets depreciate at 15% in the first income year and 30% each subsequent income year.

Increased funding targeted for small businesses

An allocation of $10.8 million to support the mental and financial wellbeing of small business owners is being introduced by:

• extending the Small Business Debt Helpline; and
• extending the NewAcess for Small Business Owners program, which operates to provide free mental health support to small business owners.

Approximately 1 million small businesses that are on small customer electricity plans will receive ‘direct energy bill’ relief of $325. In addition, $1.8 million is also being spent by the Labor Government on progressing retail energy regulatory reform with the hope of enabling small businesses to sign up to electricity contracts more suited to their needs.

Cyber resilience and data protection

Cyber resilience and data protection for small business has been a key message the Labor Government has sought to push as a part of its 2024/25 Budget. Funding support in this sphere has come via investment in a variety of cyber-safe initiatives, including:

• a $23.4 million investment in the Cyber Wardens programs, which operates to provide free online cyber-safety training for small businesses and their staff;
• $7.2 million for the Cyber Health Check assessment tool; and
• $11.1 for the Small Business Cyber Resilience Service, for when small businesses are affected by a cyber incident.

Further, $288.1 million has been allocated to expand the Digital ID system. Once operational, it is intended that this enhanced system will lower the administrative burden on small businesses when it comes to the time and investment they have to allocate to protect and store customer and employee ID data. Further, the business.gov.au website – the Government’s primary information service for small businesses in Australia – is receiving an additional $11 million in funding support to ensure it remains modernised and assists small businesses efficiently.

And finally, the Government is assisting small businesses to navigate the conspicuous arrival of artificial intelligence (AI). $39.9 million has been committed to the Safe and Responsible AI program, which aims to mitigate risks and maximise the benefits of AI as more and more small businesses begin implementing AI into their frameworks.

Changes to the Australian tax compliance framework

A familiar inclusion in recent budgets, the Federal Government has provided additional investment toward tax compliance measures but has avoided announcing any level of significant reform to the tax framework as it currently stands.

Compliance Program and Taskforce upgrades

There is a commitment to extend the Personal Income Tax Compliance Program for another year from 1 July 2027. The Government has highlighted matters involving inappropriate tax agent influence as well as improper deductions relating to short-term rental properties as some of the key areas of non-compliance that the Personal Income Tax Compliance Program will be able to continue to combat. The Shadow Economy Compliance Program is also being extended for two years from 1 July 2026. The program aims to reduce activity in the shadow economy which, in turn, protects revenue and decreases the incidence of businesses circumventing their tax obligations in the Australian framework.

The Labor Government has also extended the Tax Avoidance Taskforce, which pursues key tax avoidance risks, including multinational corporations and high-net-worth individuals, for two years from 1 July 2026.

The extension of the above programs and taskforces are estimated to increase tax receipts by $4.5 billion over the five years to 2027/28, which is in part offset by an associated increase in payments of $1.8 billion.

Australian Taxation Office Counter Fraud Strategy

There will be $187 million of funding over four years from 1 July 2024 allocated to the Australian Taxation Office Counter Fraud Strategy. Broadly, this strategy aims to equip the ATO with a greater ability to identify and mitigate fraudulent tax and superannuation behaviour. The funding will be put toward upgrading information and communication systems, and also a new compliance taskforce. Over the 5 years from 2023/24, this investment is estimated to increase receipts by $302.2 million and increase payments by $187.4 million.

Strengthening the foreign resident capital gains tax regime

A closer eye is being cast on foreign residents and the imposition of capital gains tax (CGT). Amendments to the foreign resident CGT framework are coming and will apply to CGT events commencing on or after 1 July 2025 to:

• broaden the types of assets that foreign residents will be subject to pay CGT on;
• change the point-in-time principal asset test to a 365-day testing period; and
• mandate a notification to the ATO when a foreign resident intends on disposing shares (or other membership interests) when such a disposal would exceed $20 million in value. This notification process is being implemented to improve the oversight on foreign resident CGT withholding rules.

The Federal Government has noted that they want to ensure that foreign residents are being taxed appropriately and more in-line with Australian residents on the direct and indirect sale of assets that have a close economic connection to Australian land.

These changes intend to align Australia’s tax law for foreign residents closer to OECD standard and at the same time are expected to increase receipts by $600 million and increase payments by $8 million over the 5 years from 2023/24.

More information from Maddocks

For more information on how the 2024/25 budget announcements may impact you, contact Maddocks on (03) 9258 3555 and ask to speak to a member of the Tax & Structuring team.

More Cleardocs information on related topics

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• Faster, Stronger and Simpler? Merger Rules To Be Re-Shaped In Major Reforms
• Making ‘Cents’ of Division 7A Loan Agreements

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