By Sessional Lecturer in Accounting Ms Liza Byrnes (pictured inset) in the Charles Sturt School of Business.

The federal Budget for 2024-25 was handed down on Tuesday 14 May 2024 and in his speech the Treasurer, The Hon. Dr Jim Chalmers, MP, stated “… the number one priority of this government and this Budget is helping Australians with the cost of living”.

It’s now up to the court of public opinion to decide if they have, in fact, delivered on that claim.

“It’s a responsible Budget.” - The Hon. Dr Jim Chalmers

In terms of tax initiatives, one might say this Budget was quite ‘vanilla’, with not a lot to get excited about.

The government has promised, however, “a tax cut for every taxpayer,” and as such, from 1 July 2024, the Stage 3 tax cuts will commence in their revised format.

This will see not only the top two tax brackets increase to $135,000 and $190,000, but the tax rate on the bottom two taxable brackets will be reduced to 16 per cent and 30 per cent, down from 19 per cent and 32.5 per cent.

The tax-free threshold will remain unchanged at $18,200. While these changes will certainly impact on the take home pay of individual taxpayers, is it enough to stave off the effects of rising costs and living pressures?

The Government had already released some tax-related measures prior to the federal Budget, including in relation to the Medicare Levy. The low-income thresholds are announced annually and usually increase from year-to-year.

The Medicare Levy surcharge thresholds, however, had not increased since 2014-15 until now. It was announced that the thresholds for 2023-24 would increase from $90,000 to $93,000 for individuals and $180,000 to $186,000 for families.

Then for 2024-25 it will jump up again to $97,000 and $194,000 respectively. This will impact on those taxpayers that don’t have, either by choice or circumstance, the required level of private health insurance cover to exempt them from paying the surcharge once their income breaches the threshold. A small win with some monetary relief at tax time for those affected.

“Going to university can be a life‑changing opportunity.” - The Hon. Dr Jim Chalmers

There was also some debt relief for students promised in the Budget. While not strictly a tax measure but a debt collected via the tax system nonetheless, unpaid HELP and other student loan debts are to be indexed at the lower of the Consumer Price Index (CPI) or Wage Price Index (WPI).

This will be back dated to 1 June 2023 and will result in the Government cutting approximately $3 billion in student debt for more than three million Australians. The move is estimated to save the average student around $1,200 which is better than nothing.

Business taxpayers weren’t totally overlooked in the Budget. For those with turnover of less than $10 million, the plan is to extend the Instant Asset Write Off currently in operation, for another year, up to 30 June 2025.

This allows the taxpayer to immediately deduct the cost of eligible assets costing less than $20,000 and to pool non-eligible assets, to be depreciated at 15 per cent in the first year and 30 per cent thereafter. Without the extension, the immediate write-off would revert to the originally legislated amount of $1,000, therefore it’s a small win for small business.

Obviously, tax wasn’t the only consideration when the Government was handing out incentives. As touted in the Budget, there will be a rebate on energy bills of $300 for households and $325 for small business and an increase in the maximum rate of Commonwealth Rent Assistance by a further 10 per cent.

There was also an announcement in June by the Fair Work Commission to increase the National Minimum Wage by 3.75 per cent from 1 July 2024.

Collectively these measures are aimed at helping to alleviate the financial stress on families and reduce inflation.

What applies for this year?

A lot of the Budget initiatives apply from 1 July 2024 or later. However, some of the measures such as the increased Medicare Levy and Medicare Levy Surcharge thresholds and the student loan indexation cap will affect the current year tax return.

Some other commonly used rates and thresholds that tend to vary from year-to-year are as follows for the year ending 30 June 2024:

• Motor vehicle expense claim using cents per kilometre method - $0.85 per kilometre (2024-25 $0.88)
• Working from home expenses fixed rate method - $0.67 per hour
• Car depreciation cost limit - $68,108 (2024-25 $69,674)

Taxpayers should consult with their tax agent on how best to apply these rates to their particular circumstances.

What will the ATO be looking at?

 Every year the Australian Taxation Office (ATO) announces its priorities for tax time and this year is no different. For the year ending 30 June 2024, they will be focussing on the following key areas:

• Work-related expenses

The ATO will be looking for incorrect claims, in particular, in relation to working from home expenses, which must be calculated using either the Fixed Rate or Actual Method. The ATO has three golden rules for claiming a deduction for work-related expenses:

• you must have spent the money yourself and weren’t reimbursed
• the expense must directly relate to earning your income, and
• you must have a record (usually a receipt) to prove it.

• Rental property expenses

Rental properties have been on the ATO hit list for years and this one is no different. They don’t want to see taxpayer’s over-claiming or incorrectly claiming expenses. Things like treating capital improvements or asset purchases as repairs to get an outright deduction in the current year or not apportioning interest on a loan that may be partly private. These are the types of considerations the ATO are highly conscious of.

• Omission of income

The ATO does data match with banks, public companies and other agencies such as Office of State Revenue. It also has the data provided by employers via Single Touch Payroll (STP). However, it is still the responsibility of the taxpayer to make sure that the income recorded is correct and that they have declared income from any other sources, for example, rent, business income and capital gains. Under-stating income in the tax return could result in penalties and interest being applied by the ATO.

Preparing your return

The information contained in this article should not be relied upon as legal authority when determining your eligibility to any of the tax concessions it contains.

Not all measures mentioned in this article may have been enacted as law at the time of writing and as such you should make your own enquiries as to what is currently applicable and relevant to you.

You should therefore seek advice from a qualified accountant or registered tax agent in relation to your own personal tax affairs.