Federal Budget 2024-2025 Overview

 

The Federal Treasurer, Dr Jim Chalmers, handed down the 2024–25 Federal Budget at 7:30 pm (AEST) on 14 May 2024.

Described as a “responsible Budget that helps people under pressure today”, the Treasurer has forecast a second consecutive surplus of $9.3 billion. The main priorities of the government, as reflected in the Budget, are helping with the cost of living, building more housing, investing in skills and education, strengthening Medicare and responsible economic management to help fight inflation.

The key tax measures announced in the Budget include extending the $20,000 instant asset write-off for eligible businesses by 12 months until 30 June 2025, introducing tax incentives for hydrogen production and critical minerals production, strengthening foreign resident CGT rules and penalising multinationals that seek to avoid paying Australian royalty withholding tax.

The Budget also includes various amendments to previously announced measures, as well as a number of income tax measures that have already been enacted prior to the Budget announcement, including:

  • the revised stage 3 personal income tax cuts (enacted by the Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024 (Act No 3 of 2024))
  • Medicare levy and surcharge threshold changes (enacted by the Treasury Laws Amendment (Cost of Living—Medicare Levy) Act 2024 (Act No 4 of 2024)), and
  • a specific exemption for Australian plantation forestry entities from the new earnings-based rules introduced as part of thin capitalisation reforms (enacted by the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share—Integrity and Transparency) Act 2024 (Act No 23 of 2024)).

These enacted measures have not been discussed in detail in this report.

The government anticipates that the tax measures put forward will collectively improve the Budget position by $3.1 billion over a 5-year period to 2027–28.

The full Budget papers are available at www.budget.gov.au and the Treasury ministers’ media releases are available at ministers.treasury.gov.au.

The tax, superannuation and social security highlights are set out below.

 

Income tax

  • The instant asset write-off threshold of $20,000 for small businesses applying the simplified depreciation rules will be extended for 12 months until 30 June 2025.
  • The foreign resident CGT regime will be strengthened for CGT events commencing on or after 1 July 2025.
  • A critical minerals production tax incentive will be available from 2027–28 to 2040–41 to support downstream refining and processing of critical minerals.
  • A hydrogen production tax incentive will be available from 2027–28 to 2040–41 to producers of renewable hydrogen.
  • The minimum length requirements for content and the above-the-line cap of 20% for total qualifying production expenditure for the producer tax offset will be removed.
  • A new penalty will be introduced from 1 July 2026 for taxpayers who are part of a group with more than $1 billion in annual global turnover that are found to have mischaracterised or undervalued royalty payments.
  • The Labor government’s 2022–23 Budget measure to deny deductions for payments relating to intangibles held in low- or no-tax jurisdictions is being discontinued.
  • The start date of a 2023–24 Budget measure to expand the scope of the Pt IVA general anti-avoidance rule will be deferred to income years commencing on or after assent of enabling legislation.
  • Income tax exemptions for World Rugby and/or related entities for income derived in relation to the Rugby World Cup 2027 (men’s) and Rugby World Cup 2029 (women’s).
  • Deductible gift recipients list to be updated.

 

Social security

  • Social security deeming rates will be frozen at their current levels for a further 12 months until 30 June 2025.
  • Carer payment recipients will have greater flexibility with their participation requirements.
  • Eligibility for the higher rate of Jobseeker payment will be extended to single recipients with a partial capacity to work of zero to 14 hours per week.
  • The maximum rates of the Commonwealth Rent Assistance will increase by 10% from 20 September 2024.
  • Funding will be provided to implement a social security means test treatment for military invalidity payments affected by the Full Federal Court’s decision of FC of T v Douglas 2020 ATC 2020 ATC ¶20-773;[2020] FCAFC 220.
  • Funding will be provided to enable Australia to enter into a bilateral social security agreement with Uruguay.
  • Foreign investors will be allowed to purchase established build-to-rent properties with a lower foreign investment fee.

 

Superannuation

  • Superannuation will be paid on government-funded paid parental leave (PPL) for parents of babies born or adopted on or after 1 July 2025.
  • The Fair Entitlements Guarantee Recovery Program will be recalibrated to pursue unpaid superannuation entitlements owed by employers in liquidation or bankruptcy from 1 July 2024.

 

Tax administration

  • The ATO will be given a statutory discretion to not use a taxpayer’s refund to offset old tax debts on hold.
  • Indexation of the Higher Education Loan Program (and other student loans) debt will be limited to the lower of either the Consumer Price Index or the Wage Price Index, effective from 1 June 2023.
  • A pilot program of matching income and employment data of migrant workers will be conducted between the Department of Home Affairs and the ATO.
  • A new ATO compliance taskforce will be established to recover tax revenue lost to fraud while existing compliance programs will be extended.
  • The ATO will have additional time to notify a taxpayer if it intends to retain a business activity statement refund for further investigation.
  • The 2019–20 Budget measure “Black Economy — Strengthening the Australian Business Number system” will not proceed.

 

GST

  • Refunds of indirect tax (including GST, fuel and alcohol taxes) will be extended under the Indirect Tax Concession Scheme.

 

Excise and customs duty

  • Tariffs identified as a nuisance across a range of imported goods will be removed from 1 July 2024.
  • The start dates for certain components of a measure to streamline excise administration for fuel and alcohol announced in the Coalition government’s 2022–23 Budget will be deferred.

 

Please check the following link for our PDF report on the 2024-2025 Budget:

Federal Budget PDF 2024-2025

 

What Happens if Your Business Misses Superannuation Payments?

Understanding what’s at stake should motivate your business to organise its finances to meet vital deadlines. Read on to learn what each penalty entails and where you can find dependable support.

What are the 8 penalties for late payments?

The SG payment, due on the 28th day following the end of each quarter, carries penalties that can quickly spiral out of control, even if you’re just a day late. Here’s a breakdown of the significant penalties you’ll face when you miss the mark:

Penalty 1: The Superannuation Guarantee Charge (SGC) statement 

Late payments necessitate the completion of a time-consuming SGC statement, to be lodged with the ATO within one month after the SG due date. This intricate form calculates the total superannuation, administrative fees, and interest amounts payable.

Penalty 2: Administrative fee per employee 

For every quarter that the SG payment is late, an automatic non-deductible administrative fee of $20 per employee is slapped onto your bill. It may seem trivial initially, but when multiplied by your workforce, this fee can rapidly accumulate.

Penalty 3: Interest charges 

The ATO levies interest at a nominal rate of 10%, calculated from the start of the relevant quarter until the SGC statement is lodged. This interest is paid to the ATO as part of the SGC and then disbursed as a concessional contribution to employees’ superannuation accounts. Unfortunately, there’s no escaping or negotiating this interest—it must be paid in full.

Penalty 4: Super on all salaries and wages 

While ordinarily, SG is payable solely on Ordinary Time Earnings (OTE), excluding overtime, late payments require superannuation to be calculated on all salaries and wages, including overtime. This means a more substantial chunk of your payroll budget will be allocated to superannuation.

Penalty 5: Lost tax deduction

Late superannuation payments come at a cost—specifically, the loss of a crucial tax deduction. According to section 26.95 of the Income Tax Assessment Act 1997 (ITAA97), no part of the SGC statement payment, including the superannuation component, is tax-deductible. This loss of a tax deduction often constitutes the largest expense for businesses when superannuation payments are only slightly delayed.

Penalty 6: 200% “Part 7” Penalty

The ATO can impose an additional penalty known as the “Part 7” penalty for late lodgement of the SGC statement. By default, this penalty amounts to a staggering 200% of the SGC amount, turning a financial setback into a full-blown disaster.

Penalty 7: Director’s personal liability 

The ATO wields the power to issue a Director Penalty Notice (DPN) for unpaid SGC amounts, making directors personally liable. If the SGC statement was lodged on time, directors can avoid the DPN by appointing an administrator within 21 days. However, if the statement was lodged late, the only option is to settle the DPN by paying the full amount. Even if the company is liquidated, the ATO retains the authority to estimate SG amounts and hold directors accountable.

Penalty 8: Potential criminal charges

Since 2019, the Commissioner of Taxation can pursue criminal penalties, including imprisonment for up to 12 months, for directors involved in serious breaches of SG obligations. It’s a harsh reality that could turn a business owner’s world upside down.

But wait, there’s more to consider:

  • Single Touch Payroll (STP) and electronic super reporting have given the ATO real-time data on late super payments, leading to increased scrutiny in this area.
  • The ATO leaves no stone unturned—they pursue every dollar owed in SGC, regardless of the amount.
  • The law does not discriminate; even if the SG is owed to a sole director and shareholder, the penalties still apply. 
  • Prospective buyers conducting due diligence on businesses will meticulously review several years’ worth of super payments to ensure there are no unfiled SGC statements. 
  • Employees now have easier access to their super balances, empowering them to report any unpaid super complaints directly to the ATO.

So, when exactly is super considered paid?

Super is deemed paid only when it reaches the employee’s super fund bank account. While some clearing houses recommend allowing 10 business days for processing, it’s essential to verify the timeline with your chosen clearing house.

Let’s illustrate the potential costs with an example:

Imagine SmallBus Pty Ltd, with 10 employees, paid wages of $250,000 in the March 2022 quarter, with $25,000 in accrued super. Although SmallBus Pty Ltd pays the full $25,000 on April 27, 2022, the amount doesn’t reach the employees’ super funds until April 29. Unfortunately, no SGC statement is lodged until April 1, 2023, prompted by a letter from the ATO.

The non-negotiable cost of this one-day late payment would be: 

  • Admin fee: $200 
  • Interest: $3,116 
  • Lost tax deduction (at 25%): $6,250 

 Total: $9,566

In addition, the ATO could impose a total penalty of 200% of the SGC amount, amounting to $19,132. Assuming the ATO reduces it to 100%, the total cost of paying the super just one day late would still be a staggering $19,132.

And that’s not all—directors could also face personal liability for the SGC amount, even if SmallBus Pty Ltd goes into liquidation.

Tips to minimise SGC risk:

To avoid this financial nightmare, consider the following strategies: 

  • Make monthly super payments or include them in each pay run to spread the risk and reduce the impact of any potential mistakes at the end of a quarter. 
  • Pay super well in advance of the due date to ensure ample time for processing. 
  • Monitor the super payable account closely to ensure that super accrued from payroll aligns with the payments made.

Remember, the cost of late superannuation payments can be astronomical, and staying on top of your obligations is crucial to avoiding the financial storm that awaits those who fall behind.

Financial Checklist for Tradies: What You Should Include

Whether running a small business or operating as a sole trader, having a good eye for financial planning and meeting obligations is key to keeping your services afloat.

A good strategy should facilitate growth, raise profit margins, and prepare for tax. Analysing your cash flow and understanding how to manage various reporting sheets will give you the information needed to succeed. So, where do you start?

We’ve compiled a helpful checklist outlining the fundamental aspects of developing a reliable strategy.

 

Manage Taxes Obligations 

Regardless of whether you’ve registered your small business under a company, trust or sole trader structure, you may have the following obligations:

  • Goods and services (GST) tax (You must register and pay GST if you generate revenue greater than $75,000 on an annual basis)

  • Superannuation contributions (if you employ yourself or staff)

  • Income tax

  • PAYG Tax withholding

If you’re keen to discuss a few strategies around tax, then we’re ready to give you a hand and provide some expert advice.

Remember, setting aside profit for taxes is important as well, because your quarterly BAS and income tax obligations come around quicker than you might think!

 

Mastering the basics: Financials Statements

These are the foundations (pun intended) of understanding your business’s financial health and there are two primary areas to focus on for you.

  • Balance sheet: This provides a snapshot of your business’s financial position at any given time. It shows your assets, liabilities and equity giving you the best overview of what your business owns and owes.

  • Profit-and-loss statement: This statement summarises all your revenue, expenses and profit over a specific period of time (usually a month, quarter or year) and helps provide the best insight into whether your business is making a profit or a loss. It’s handy for knowing if you have made money over a specific period of time, even if you don’t get paid for a while after.

Accounting software such as Xero, makes creating and managing these financial statements easier.

 

Identify Your Profit Margins

Evaluating your business’ profitability lets you identify expansion opportunities, whether that’s by recruiting new individuals so you can take on more jobs efficiently or investing in cutting-edge equipment. It also encourages you to review your pricing strategy to ensure it remains profitable but reasonable.

So, how do you work out your profit margin? Using your profit-and-loss statement, try this calculation: Net Profit divided by your Total Revenue = Net Profit Margin.

This indicator then shows you that on average, when you make $1 dollar of revenue, how much money do you make as profit as a result. A healthy profit margin ensures your business remains sustainable going forward.

Receive Professional Support 

Financial management is a whole job in itself. Enlisting the support of skilled accountants takes the weight off and lets you focus on the work you enjoy. Contact us to get the ball rolling on developing a financial strategy right for your business’ unique needs.

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