The Federal Budget has been released, and for the current financial year, it is once again in surplus, albeit by a smaller margin than last year: $9.3 billion. This is better than the deficit which was forecast in last year’s budget. However, forecasts are showing four consecutive deficits beyond this financial year, which are estimated to push gross debt over $1 trillion in 2025-26.

Cost of Living

The government will extend its energy bill relief to all households, at a cost of $3.5 billion. Last year’s scheme applied only to low-income households, but this year all households will receive a one-off $300 rebate applied directly to the bill, while small businesses will be eligible for $325.

Tax

These changes were announced some time ago now, but very simply, from 1 July 2024:

The 19% tax rate will be reduced to 16%.

The 32.5% tax rate will be reduced to 30%.

The income threshold above which the 37% tax rate applies will be increased from $120,000 to $135,000.

The income threshold above which the 45% tax rate applies will be increased from $180,000 to $190,000.

 

Almost everyone sees a cut, except for those in the tax-free threshold, who pay no income tax. Earners in the higher thresholds are getting a tax cut that’s now less than was previously in the Stage 3 cuts. For those in the middle, sharp minds may recall the Low & Middle Income Tax Offset which disappeared in 2022-23. For income earners in those income brackets, it’s a case of moving closer to where they were a couple of years ago.

The main difference for those earners, is the LMITO came when a person’s tax was done. These tax cuts will be seen in their regular pay packets.

Seniors

Aside from energy rebates, pensioners will likely see the most benefit from the government’s move to freeze the cost of medicines on the pharmaceutical benefits scheme. PBS co-payments are normally tied to inflation, but the government will freeze prices until 2026 for the general population, and until 2030 for pensioners and concession cardholders. 60% of PBS prescriptions go to seniors and concession cardholders.

Deeming rates are held at 0.25% at the lower end and 2.25% at the higher end for another year. The deeming rate usually moves in line with the RBA cash rate, but was frozen in 2022 in a bid to ease cost of living pressures. This is said to help around 450,000 seniors.

Aged Care

$531 million for another 24,100 Home Care Packages in 2024–25. This will help reduce average wait times and enable people to age at home if that’s their preference.

$110 million over four years will support an increase in the Aged Care Quality and Safety Commission’s regulatory capabilities.

The Government is providing $87 million for workforce initiatives to attract nurses and other workers into aged care.

Superannuation

There’s up to 22 weeks of superannuation payments for the recipients of Commonwealth parental leave payment, starting in the next financial year.

The proposed Div 296 tax on earnings on super balances above $3 million has not been amended.

Students

The budget will knock $3 billion from HECS/HELP debts for 3 million university students. Essentially indexation of debts is no longer done using annual inflation, but annual wage growth. This is also revisionary and takes into account last year’s 7.1% increase, this will be revised to 3.2%. This should put some people in credit if they made final payments in the recent financial year.

However, the timing of indexation calculations remains unchanged. People with HECS/HELP debts generally pay them off during the year, but the payments are not applied until after people do their tax post June 30, while indexation is calculated on June 1. The quirk is while students have paid down debt, the indexation is then applied on money they’ve already paid off.

Housing

Developers, tradespeople, and social housing providers will benefit from $4.3 billion worth of new expenditure on housing There is an extra $1 billion for state governments to build infrastructure for new homes, there is also $1.9 billion in extra concessional financing for providers and charities to help deliver new social and affordable dwellings. There is nearly $840 million for housing in remote Northern Territory communities.

Visas will be fast tracked for 1900 migrants for housing construction, which is a positive because constructions skills are now needed.

Renters will have an additional $1.9 billion put towards increasing the maximum payment of Commonwealth Rent Assistance by 10%. This is the first back-to-back increase in more than 30 years, with a 15% increase in last year’s budget. However rents have increased by 8.6% in the year to March, and a record low vacancy rate of 0.7%.

Instant Asset Write-off

Extended again for small businesses with an annual turnover of less than $10 million. They will be eligible to immediately deduct the full cost of eligible assets costing less than $20,000 until Jun 30, 2025.

Immigration

When looking at budget documents it’s always interesting to have last year’s documents handy. Last year’s budget suggested net overseas migration for the 22/23 year was increasing from 235,000 to 400,000, it ended up being 528,000. In last year’s budget the 23/24 was forecast at 315,000, that’s now revised to 395,000. Next year is forecast down to 260,000, as it was in last year’s budget, so it will be an interesting figure to keep an eye on.