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With the delivery of Treasure Jim Chalmers third budget to surplus, the key take aways appear to be cost-of-living relief, support for renewables, and expansion on the previously announced tax cuts.

We provide a brief summary of topics most relevant to our clients:

Foreign Resident Capital Gains Tax 

The government has proposed significant changes to the capital tax regime for non-residents. 

Broadly speaking, the current regime allows non-residents to disregard any capital gain or loss incurred when disposing assets, with the notable exclusion on transactions of Australian real property (TARP). 

The government is proposing, from 1 July 2025 to:

  • Expand the types of assets captured by the regime.
  • Introduce a 365-day test which will replace the principal asset test.
  • Introduce reporting requirements for transactions on share (or other interests) exceeding $20 million.

We anticipate further consultations and announcements to follow. 

Instant Asset Write-off

The government announced the extension of the instant asset write off scheme. The scheme allows small business, with an aggregated turnover of less than $10 million, an instant deduction on new assets purchased up to the value of $20,000. Assets are required to be installed and ready to use between 1 July 2024 and 30 June 2025.

Superannuation on Parental Leave

The government announced payments under the Paid Parental Leave (PPL) scheme will now also include the superannuation guarantee. This will apply to birth or adoption, on or after 1 July 2025, and will see a payment of 12% superannuation guarantee on top of eligible PPL payments as contributions to recipients superannuation fund. 

Stage 3 Tax Cuts & Medicare Levy

The government announced revision to the Stage 3 Tax Cuts, previously announced 25 January 2024. 

The planned cuts, to be effective from 1 July 2024:

  • 19% tax rate will be reduced to 16%;
  • 32.5% tax rate will be reduced to 30%;
  • Threshold above which the 37% rate applies will be increased from $120,000 to $135,000; and
  • Threshold above which the 45% tax rate applies will be increased from $180,000 to $190,000.

The government also announced an increase to the Medicare low-income thresholds. Effective from 1 July 2023:

  • Threshold for singles increased from $24,276 to $26,000;
  • Family threshold increased from $40,939 to $43,846;
  • Threshold for single seniors and pensioners increased from $38,365 to $41,089;
  • Family threshold for seniors and pensioners increased from $53,406 to $57,198; and
  • Family income thresholds increase by $4,027 for each dependent child, up from $3,760.

Estimates indicate the average household will be $1,900 better off because of the tax cuts.

Energy Price Relief

The government announced an investment of $3.5 billion over the preceding 3 years to provide relief from increasing energy prices. From July 2024, households will have a $300 rebate applied directly to their electricity accounts. Small business who are classified as a ‘small customer’ will have a $325 annual rebate applied to electricity accounts, administered quarterly.  

Student Debt

The government announced changes for people with Higher Education Loan Program (HELP) and other Australian government student debt. The proposed changes will see indexing to lower of the consumer price index or wage price index. Those who have paid off their debts from 30 June 2023 and now, will have their previous charges amended.

Multinationals and High-Wealth Individuals

The government announced intentions to expand the current Tax Avoidance Taskforce. 

This will address critical tax avoidance risks, particularly amongst multinationals, large businesses, and high net wealth individuals.