The key tax changes are:
From 31 July 2024:
These thresholds were originally set in 2010 and over that time wage inflation has caused wages to increase by 63%. Against this, adjustments to thresholds of around 11.5% seem modest, but the Government needs to be mindful of the significant fiscal cost of adjusting these thresholds.
From 31 July 2024, the IETC will be available to eligible individuals earning between $24,000 and $70,000 per annum, up from the previous upper tax threshold of $48,000.
The IETC will now provide a $20 per fortnight tax credit for those earning between $24,000 and $66,000 and will abate for those earning over $66,000 down to zero at an income of $70,000 per annum. Wage inflation has meant that few taxpayers have qualified for this tax credit since its introduction, which has led to speculation the Government would drop it altogether.
For example, under the previous thresholds an individual working a 40-hour week on the minimum wage would earn more than the $48,000 threshold to receive the IETC. Increasing the threshold to $70,000 with abatement starting at $66,000 will make this credit available to more taxpayers.
The IWTC, available to families with dependent children, will increase by up to $50 per fortnight for eligible families, dependent on household income from 31 July 2024. The MFTC, which provides low-income working families with a guaranteed minimum amount, will also increase from 31 July 2024. The MFTC threshold will increase from $35,204 per year (after tax) to $35,316 per year (after tax). This represents a modest $4.30 increase in fortnightly income but is in addition to the $50 per fortnight increase in IWTC.
As announced pre-Budget, the Government is introducing a new childcare payment, known as FamilyBoost, available to low-to-middle-income families with children aged five and under who incur early childhood education (ECE) costs.
Under the scheme parents and caregivers can receive up to 25% of their ECE fees, up to a maximum of $150 per fortnight, as a tax credit. The maximum payment will be available for families with income up to $140,000 with the payment abating to zero for household incomes over $180,000 per annum. This scheme commences on 1 July 2024 with eligible taxpayers required to submit their ECE receipts through MyIR to claim the payment. Eligible households can make claims quarterly, six-monthly, or annually and will be able to make their first claim for a FamilyBoost payment from October 2024 for the period 1 July to 20 September 2024.
For those with student loans living overseas or about to head overseas, there is a 1% increase in the interest rate applying to their student loan balance for five years starting 1 April 2025. This is to compensate the Government for the loss in the real value of outstanding loan balances due to high inflation over the last three years.
These changes introduce the last of the tax policy commitments that the National Party and its coalition partners campaigned on during last year’s elections. The Coalition Government enacted the other significant tax policies they campaigned on during the election before the Budget which include restoring interest deductibility on residential investment properties, returning the bright-line test to two years, removing depreciation from commercial properties, and taxing overseas online gambling operators.
The extent of the Coalition Government’s personal income tax cuts and whether they are affordable has been the subject to speculation and debate since the Government’s election. With Budget 2024 we now know what the tax cuts look like. The Government claims savings in government expenditure and new revenue initiatives, such as the online gambling tax, mean they are fully funded and affordable. The Opposition continues to claim they are not. Who is right will be revealed over the coming months.
Should you have any questions regarding the Budget announcements and how they may impact you, please contact the Tax Advisory team or reach out to your local advisor.
Stephen Richards, Findex Partner in Tax Advisory
The views and opinions expressed in this article are those of the author/s and do not necessarily reflect the thought or position of Crowe Australasia.
This document contains general information and is also not intended to constitute legal or taxation advice. If you need legal or taxation advice, we recommend you speak to a qualified adviser.
31 May 2024