The 2024 Federal Budget was announced on Tuesday 9 May. Here are our highlights:
Increase to Medicare Levy low-income thresholds
The Government will increase the Medicare Levy low-income thresholds from 1 July 2022 as follows:
Singles: increase by $911 to $24,276, for pensioners by $1,440 to $38,365
Families: increase by $1,537 to $40,939, for pensioners by $2,005 to $53,406
Family income thresholds increase by $3,760 per dependent child or student.
Exempting lump sum payments in arrears from the Medicare Levy
From 1 July 2024, eligible lump sum payments in arrears will be exempt from the Medicare Levy. This will ensure that, subject to eligibility requirements, low-income taxpayers do not pay higher amounts of the Medicare Levy due to receiving an eligible lump sum payment, e.g. compensation for underpaid wages.
$20,000 Instant Asset Write-Off
One of the budget announcements we were most anticipating were potential changes to the instant asset write-off. The temporary full expensing of assets, implemented as a Covid measure, expires on 30 June 2023, after which the asset write-off threshold would revert to $1,000. However, in Tuesday night’s budget it was announced that the instant asset write-off threshold will be $20,000 (per asset) from 1 July 2023 to 30 June 2024.
Assets above the threshold can be placed into the small business simplified depreciation pool, and depreciated at 15% in the first income year and 30% each income year following, and the rules preventing small businesses from re-entering the simplified depreciation regime within five years of opting out will continue to be suspended until 30 June 2024.
Remember that for the 2023 year, in order to claim full expensing of assets that cost more than $20,000, the asset needs to be received and ready for use (not just ordered) by 30 June 2023.
New Energy Incentive for Small Businesses
Small and medium businesses will be able to deduct an additional 20%, up to a total of $20,000, of the cost of eligible depreciating assets that support electrification and more efficient use of energy. There are a number of conditions, including an exclusion for electric vehicles.
Increasing the Frequency of Superannuation Payments
From 1 July 2026, employers will be required to pay their employees' superannuation guarantee entitlements on the same day that they pay salary and wages.
Fringe Benefits Tax - Electric Car Discount
From 1 April 2025, the FBT exemption for eligible vehicles will no longer include hybrid electric cars, except where it was owned prior to 1 April 2025, and there is a binding agreement to continue. The current rules will continue to apply for all other electric vehicles.
Accelerating the Capital Works Tax Deduction
For eligible new build-to-rent projects where construction commences after 7:30 PM (AEST) on 9 May 2023, the Government will increase the rate for the capital works tax deduction to 4% per year, and reduce the final withholding tax rate on eligible fund payments from managed investment trust (MIT) investments from 30% to 15%. There are eligibility criteria that will apply. The reduced MIT withholding tax rate will apply from 1 July 2024.
Warning!
Sadly there was no extension to Low and Middle Income Tax Offset announced in the budget. The LMITO in previous years has saved low and middle income earners between $1,080 and $1,500 per year in 2018- 2022.
The Government did announce that it will be expanding the scope of tax integrity measures, including expanding the general anti-avoidance rule, improving the engagement with taxpayers and investing in a variety of compliance programs to ensure tax integrity is maintained.