Another year has passed, and once again, filled with tax developments. As 2024 draws to a close, it is appropriate to reflect on the year that was and look ahead to what’s in store for 2025.
What happened this year
Stage 3 personal income tax cuts
The changes to the Stage 3 personal income tax cuts apply from 1 July 2024. The PAYG withholding tables were updated in mid-June 2024 to reflect the new rates and thresholds.
Change to indexation of student loans
The formula used to index Higher Education Loan Program (HELP) loans has been reformed so the indexation rate is the lower of the consumer price index (CPI) or the wage price index (WPI) in a given year. It means the CPI indexation rate of 7.1% applied on 1 June 2023 reduces to the WPI rate of 3.2% and the rate of 4.7% applied on 1 June 2024 reduces to 4%.
This change applies to relevant student loans that existed on 1 June 2023 and is expected to wipe $3 billion in student debt. Students who chose to repay their loans in full before 1 June 2023 are not eligible for the indexation reduction.
Separately, a one-off 20% reduction in outstanding balances before indexation is applied on 1 June 2025 is subject to the passage of legislation.
Small business instant asset write-off (IAWO) for 2023–24
The IAWO threshold for 2023–24 was temporarily increased to $20,000 after the enabling legislation oscillated between the Senate and the House of Representatives for several months earlier this year. It became law on 28 June 2024, a mere two days before year end.
The increased threshold applies to eligible assets that are first used or installed ready for use from 1 July 2023 to 30 June 2024 by businesses with an aggregated annual turnover of less than $10 million.
Energy incentive
The energy incentive, which is now law, enables businesses with an aggregated annual turnover of less than $50 million to claim an additional 20% deduction for the cost of eligible depreciating assets that support electrification and efficient energy usage.
Eligible assets or upgrades needed to be first used or installed ready for use between 1 July 2023 and 30 June 2024. Up to $100,000 of expenditure is eligible for the incentive, with a maximum bonus deduction of $20,000 allowed per business.
New reporting requirements for not-for-profits (NFPs)
New reporting obligations commenced this year for non-charitable NFP organisations with an active Australian Business Number (ABN) that seek to be income tax exempt. These NFPs are required to lodge an annual NFP self-review return (SRR) to self-assess as eligible for income tax exemption. The new annual reporting requirement came into effect on 1 July 2023, and the first SRR covers the 2023–24 income year. The SRR assists NFPs to determine the basis on which they self-assess as income tax exempt, and report this to the ATO. While NFPs need to report using the SRR, they will not pay tax on their income unless they are a taxable NFP.
The SRR for 2023–24 must be lodged by 31 October 2024. However, the ATO has advised that, for the 2023–24 income year, NFPs have been provided with additional time, where required, to lodge the SRR up to 31 March 2025. NFPs do not need to contact the ATO to request this extra time. The SRR can be submitted online through Online services for business, or by a registered tax agent if they are authorised to lodge on the NFP’s behalf.
If the NFP does not meet the eligibility criteria in one of the eight categories of NFPs that can self-assess as income tax exempt, it will be taxable. A taxable NFP is not required to lodge the SRR as it will already be required to lodge an income tax return (or notify the ATO that a return is not necessary).
Increase in superannuation guarantee rate
The superannuation guarantee rate for the period 1 July 2024 to 30 June 2025 increased to 11.5%, up from 11% for 2023–24. The increased rate applies to the ordinary time earnings of salaries and wages paid from 1 July 2024, irrespective of when the work was done or the pay period to which the payment relates.
myGovID renamed to myID
The Government’s Digital ID app, myGovID, has recently been renamed myID to reduce confusion with myGov. Users’ login details and identity strength remain the same, and users do not need to set up a new myID or reconfirm their details. Be wary of suspicious emails or SMS containing links as these are a scam.
Increase in penalty units
The amount of a penalty unit increased from 7 November 2024 from $313 to $330. This affects the amount of penalties imposed across the tax system for non-compliance.
Foreign resident capital gains withholding changes
Effective 1 January 2025, enabling legislation:
- increased the foreign resident capital gains withholding rate from 12.5% to 15%; and
- removed the $750,000 threshold below which withholding does not apply for transactions involving taxable Australian real property and certain indirect Australian real property interests.
Breach reporting and new Code of Professional Conduct rules
New breach reporting rules require registered tax practitioners (practitioners) to self-report and report breaches by other practitioners of the Code of Professional Conduct (Code), where the breach occurred on or after 1 July 2024.
Practitioners are also required to comply with eight new additional Code obligations. The new rules apply from either 1 January 2025 or 1 July 2025, depending on whether the practitioner had more than 100 employees on 31 July 2024. The Tax Practitioners Board has sought feedback on its draft guidance and is expected to release final guidance before the end of this year.
Luxury car tax (LCT) changes
The definition of a fuel-efficient car is proposed to be updated from 1 July 2025 by reducing the maximum fuel consumption for a car to be considered fuel-efficient for LCT purposes from (currently) 7 litres per 100 kilometres to 3.5 litres per 100 kilometres. Enabling legislation is before the House of Representatives.
Denying deductions for GIC and SIC
The general interest charge (GIC) and shortfall interest charge (SIC) is proposed to be non-deductible from 1 July 2025. Enabling legislation is before the House of Representatives.
Dispute resolution
The Administrative Appeals Tribunal (AAT) has been replaced with the Administrative Review Tribunal (ART). The ART is a new federal body tasked with conducting merits reviews of administrative decisions, including tax rulings and has assumed all existing AAT cases.
What we are still waiting on and what we can expect next year
Small business instant asset write-off (IAWO) for 2024–25
The temporary increase in the IAWO threshold to $20,000 is proposed to be extended to 30 June 2025 for eligible depreciating assets first used or installed ready for use by small businesses by 30 June 2025.
Amendments moved by the Opposition in the Senate proposed a permanent threshold of $30,000. However, on Parliament’s final sitting day for 2024, the relevant Bill was amended in the Senate to omit the enabling schedule, ensuring passage of the remaining measures in that Bill.
Accordingly, the proposed $20,000 threshold for 2024–25 is in limbo, with the Government indicating it will revisit the measure in the new year. Yet again, small businesses have no certainty on the tax treatment of their depreciating assets. Without this change, the threshold reverts to the standard legislated threshold of $1,000 from 1 July 2024.
Bendel appeal on Division 7A unpaid present entitlements
Those who control corporate beneficiaries that have UPEs with an associated trust continue to closely monitor the Commissioner's appeal to the Full Federal Court (the Court) from the Tribunal’s decision in Bendel and Commissioner of Taxation [2023] AATA 3074. The Tribunal found a UPE that arises from an entitlement to income of a trust is not a loan for Division 7A purposes, in direct contrast to the administrative position taken by the ATO in public guidance issued over the past 14 years.
An interim decision impact statement was issued by the ATO in November 2023 and the ATO will not be issuing any further guidance while the appeal is pending. The appeal had test case funding and the hearing before the Court was on 22–23 August 2024. The Court’s decision has been reserved.
Division 296 tax
The Government proposed to introduce a new tax from 1 July 2025 that would mean individuals with a total superannuation balance of more than $3 million at the end of the 2025–26 financial year would be subject to a 15% tax on earnings attributable to that part of their balance that exceeds $3 million. New Division 296 is proposed to be inserted into the Income Tax Assessment Act 1997.
On 28 November 2024, the enabling legislation, the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023, was divided into two bills ensuring passage of the non-Division 296 measures.
The Division 296 legislation remains before the Senate. This Bill is unlikely to be debated before the 2025 Federal election and is expected to lapse with the calling of the election.
Payday super
Payday super will require employers to pay their employees’ superannuation at the same time as their salary and wages from 1 July 2026. Targeted consultation continues with key industry stakeholders, as we await the release of exposure draft legislation. Treasury’s recent factsheet sets out further policy details.
