2024/25 Federal Budget

The Government’s May 2024 budget surplus of $9.3 billion was delivered against a challenging financial outlook with economic growth forecast to slow to just 1.75% this financial year. Unemployment is forecast to rise and Australia’s National Debt to surpass one trillion dollars within the next two years. Interest rates are expected to remain elevated in the outlook although inflation is forecast to stabilise within the RBA’s target range of 2 – 3%.

Cost-of-living pressures remained a central theme in 2024 with new support measures announced in areas including energy bills, housing, rent, education and health.

A major new initiative was the estimated investment of $22.7 billion over the next decade into the Future Made in Australia strategy, with Australia’s transition to clean energy remaining an important theme.

2024/25 Federal Budget snapshot

• $9.3 surplus: second consecutive surplus for almost 20 years but with declining revenue growth the budget is forecast to return to deficit in 2025 and into the foreseeable future.
• Economic outlook: economic growth is slowing under the weight of higher interest rates combined with declining commodity prices and employment. Treasury is forecasting inflation will stabilise within the RBA’s target range of 2 – 3 %.

Superannuation reforms

Commonwealth Paid Parental Scheme:

• From 1 January 2025, eligible parents of the Commonwealth Paid Parental Leave Scheme will receive an additional 12% superannuation with the Government allocating $1.1 billion to fund the initiative, forecast to benefit up to 180,000 families per year. Furthermore, a couple with a newborn or newly adopted child can access up to 20 weeks of paid leave at the national minimum wage. This will increase to 26 weeks by 1 July 2026.

Payday super and recovering unpaid super:

• From 1 July 2026, employers will be required to pay their employees’ super at the same time as their wages (rather than the current quarterly payment cycles).
• The Government will also oversee a continuing focus on recovering unpaid super through a range of education, training, prevention, detection and enforcement measures.

Increased tax on super balances over $3 million:

• From 1 July 2025, the tax rate on super balances over $3 million is expected to increase from 15% to 30%.

Superannuation Guarantee:

• The Superannuation Guarantee (SGC) schedule of increases remains in place with the next increase, to 11.5% on 1 July 2024.

Stage 3 tax cuts:

• All Australian individual taxpayers will receive the already legislated tax cuts from 1 July 2024.
• Under the legislated measures there is a reduction in the lower marginal tax rates and thresholds such that no individual with taxable income of $135,000 or less will have a marginal tax rate of more than 30%. The top marginal tax rate of 45% will apply to taxable income above $190,000.

Freeze on Deeming Rates extended:

• There will be a 12-month extension on the freeze in deeming rates through to 1 July 2025. This measure will assist part pensioners with super pension income streams, bank deposits, and investments, which are captured under the deeming rules.
• The measures will allow retirees to benefit from increases in interest rates and returns without reductions in their age pension. The deeming rate has been frozen for the last two years with the top rate unchanged at 2.25%.

 

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