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Federal budget 2024-25: Here’s what you need to know

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Treasurer Jim Chalmers delivered the Albanese government’s third federal budget on Tuesday evening, 14 May, touting a balanced approach in an environment of cross currents.

The Treasurer has forecast a surplus of $9.3 billion for this financial year on the back of “responsible economic management”.

The surplus, although a reversal of the government’s previously forecast $1.1 billion deficit, will be wiped out by government spending on things deemed “unavoidable”, such as its Future Made in Australia Act, with the Treasurer predicting a period of larger than anticipated successive deficits will ensue.

“Pressures on the budget [will] intensify after that, rather than ease,” Chalmers said.

“We are expecting a deficit of $28.3 billion in 2024–25. But a stronger fiscal outcome in every year, compared to when we came to government.”

The government’s second successive surplus, after it announced a $22 billion surplus last year, has made room for cost-of-living relief and investments in the future, according to the treasurer.

“The budget will ease cost-of-living pressures, not add to them, and incentivise investment in a Future Made in Australia,” Chalmers said.

He also revealed the government banked 96 per cent of revenue upgrades in the 2023-24 financial year, including through $77.4 billion in savings and re-allocations of funds.

Chalmers noted a significant improvement of over $215 billion spanning the six years leading to FY27-28 compared to the pre-election economic and fiscal outlook. Additionally, he said, the economy is poised to surpass forecasts outlined in the mid-year economic update.

Cost of living relief

Changes to stage three tax cuts took centre stage on Tuesday evening despite being announced in January and legislated in February.

“From July 1, all 13.6 million taxpayers will get a tax cut,” Chalmers said.

“And for 84 per cent of taxpayers, and 90 per cent of women, a bigger tax cut than they would have under the previous government”.

Individuals earning under $150,000 will benefit most from the changes due to kick in on 1 July, but according to the government “every Australian taxpayer will get a tax cut”.

Those earning $200,000 or more will receive a $4,529 cut, instead of the legislated $9,075 they were due to receive from 1 July.

Under the changes, the 19 per cent tax rate that applies to incomes between the $18,200 tax-free threshold and $45,000 will be lowered to 16 per cent.

Those earning between $45,000 and $135,000 will be taxed at 30 per cent, while the 37 per cent tax rate will be reinstated and apply to incomes between $135,000 and $190,000, after which the 45 per cent rate will apply.

This means that someone on $73,000 will receive a tax cut over $1,500, more than double the amount under the previous plan, while somebody on $100,000 will have their tax cut increased from $1,375 to $2,179.

Alongside changes to stage three tax cuts, the government has announced measures such as energy bill relief.

Cost relief for business

Other tax changes targeted particularly at encouraging businesses to invest were also announced on Tuesday.

One such tax includes $290 million to extend the government’s instant asset write-off scheme for small businesses for another year. This means businesses with a turnover of less than $10 million will be able to claim $20,000 from eligible assets.

The government has, however, been criticised because although this was also announced in last year’s budget, it has yet to be legislated.

In addition to the instant asset write-off, small and medium businesses switching to energy-efficient equipment or facilities can obtain additional (accelerated) depreciation deductions of 20 per cent.

Moreover, the government is giving small businesses a one-time payment to help with power bills.

Money laundering crackdown & tougher foreign investment framework

The government has announced it will provide $168.0 million over four years from 2024–25 to implement reforms to strengthen Australia’s Anti-Money Laundering and Counter-Terrorism Financing Act 2006, to enhance Australia’s ability to detect and disrupt illicit financing.

Funding includes:

  • - $160.8 million over two years from 2024–25 for the Australian Transaction Reports and Analysis Centre to expand its regulatory, intelligence and data capabilities and provide guidance to newly regulated entities.
  • - $7.0 million over four years from 2024–25 for the Attorney-General’s Department to support the implementation of the legislative reforms through the provision of policy and legal advice and stakeholder consultation, and to deliver a program of anti-money laundering and counter-terrorism financing capacity building in the Pacific.

The new obligations will require real estate agents, lawyers and accountants to report dodgy transactions in a move that will bring Australia in line with the rest of the developed world.

The government is also strengthening Australia foreign investment framework by investing $15.7 million over four years from 2024–25 (and $4.1 million per year ongoing from 2028–29) to fund more effective monitoring, enforcement of conditions and timely review of foreign investment applications.

This includes refunding 75 per cent of fees for foreign investment applications that do not proceed because the applicant was unsuccessful in a competitive bid process.

More homes and better infrastructure

The government has unveiled a multi-billion-dollar investment aimed at constructing additional homes for Australians. This commitment includes a further $6.2 billion allocated to specific housing initiatives, bringing the government’s total new investment since 2022 to $32 billion.

This includes

  • - $1 billion directed towards crisis and transitional accommodation for women and children fleeing domestic violence, and youth under the National Housing Infrastructure Facility.
  • - $1 billion to get homes built sooner – funding for states and territories to build the roads, sewers, energy, water and community infrastructure that we need for new homes and for additional social housing supply.
  • - A new $9.3 billion 5year National Agreement on Social Housing and Homelessness – for states and territories to combat homelessness, provide crisis support and build and repair social housing.
  • - A $1.9 billion investment to increase the maximum rates of Commonwealth Rent Assistance by a further 10 per cent to further alleviate rental stress. This builds on the 15 per cent increase already made in September 2023.
  • - Supporting more community housing providers to access finance through the Affordable Housing Bond Aggregator by increasing the cap on the Government’s guarantee of Housing Australia’s liabilities by $2.5 billion to $10.0 billion (with an associated increase in the line of credit that supports the Affordable Housing Bond Aggregator of $3.0 billion to $4.0 billion).
  • - Providing an additional $1.9 billion in concessional loans to community housing providers and other charities to support delivery of new social and affordable homes under the Housing Australia Future Fund and National Housing Accord.

The government has also committed $1.9 billion to fund a number of upgrades in Western Sydney including road improvements and train line extensions. Other projects include $2.75 billion to fund a Brisbane to Sunshine Coast rail link, and $3.25 billion for the North East Link in Melbourne.

Future Made in Australia

The government is firmly set on reviving local manufacturing, with its Future Made in Australia Act sharing the limelight in this year’s budget with the changes to stage three tax cuts.

The $22.7 billion Future Made in Australia initiative essentially groups a number of new and existing manufacturing and renewable energy projects under one umbrella.

On Tuesday evening, Chalmers said Future Made in Australia is “a crucial part of a growth agenda which is all about attracting investment in key industries, making our country a renewable energy superpower, strengthening our defence capabilities and economic security, supporting small business to grasp the opportunities of our transforming economy, and expanding and reforming tertiary education for a more skilled workforce”.

As part of this initiative, the government will provide an estimated $19.7 billion over ten years from 2024–25 to accelerate investment in Future Made in Australia priority industries, including renewable hydrogen, green metals, low carbon liquid fuels, refining and processing of critical minerals and manufacturing of clean energy technologies including in solar and battery supply chains.

Funding is expected to catalyse clean energy supply chains and support Australia to become a renewable energy superpower.

Also a part of the Future Made in Australia initiative is the provision of $17.3 million over four years from 2024–25 (and $3.1 million per year ongoing) to promote the development of sustainable finance markets in Australia.

This includes $10 million over four years from 2024–25 (and $1.9 million per year ongoing) for additional resourcing for ASIC to investigate and take enforcement action against market participants engaging in greenwashing and other sustainability-related financial misconduct, as well as $5.3 million over four years from 2024–25 (and $1.2 million per year ongoing) for the Treasury, ASIC and APRA to deliver the sustainable finance framework, including issuing green bonds.

Changes to super

Payday super plus paid parental leave

Starting from July 1, 2026, employers must pay superannuation at the same time they pay salary and wages to employees.

This change aims to give employees better visibility and control over their entitlements and helps the Australian Taxation Office (ATO) in recovering unpaid superannuation.

The ATO will receive $40.2 million to improve their ability to match data and take action against cases of underpaid super.

Moreover, the Treasurer announced $1.1 billion for parents accessing the government-funded paid parental leave scheme will be paid superannuation in addition to their payments from next July.

Under Labor’s proposal, super will be paid at 12 per cent of the paid parental leave rate with about 180,000 families said to benefit on an annual basis.

Super recovery program

The government said it will recalibrate the Fair Entitlements Guarantee Recovery Program to pursue unpaid superannuation entitlements owed by employers in liquidation or bankruptcy from 1 July 2024.

This will achieve efficiencies of $13.0 million over four years from 2024–25 (and $29.9 million over the medium term) through an expected increase in tax receipts of $63.1 million over four years from 2024–25 (and $114.4 million over the medium term), with $44.4 million over four years from 2024–25 (and $96.9 million over the medium term) expected to be paid to superannuation funds.

Additional funding

The government also confirmed $187.0 million will be allotted over four years from 1 July 2024 to the ATO to strengthen its ability to detect, prevent and mitigate fraud against the tax and superannuation systems.

Maja Garaca Djurdjevic

Maja Garaca Djurdjevic

Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.