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Key takeaways
- All Australian individual taxpayers will receive the already legislated tax cuts from 1 July 2024.
- Superannuation is to be paid on Paid Parental Leave scheme payments from 1 July 2025, adding to already-legislated reforms that increase the length and flexibility of the scheme.
There were few new announcements in the 2024-25 Budget relating to personal tax and superannuation. Rather, the Government has focussed on its already legislated revised Stage 3 tax cuts which will come into effect from 1 July 2024, and has also provided further information about its previously announced proposal for superannuation to apply to the Paid Parental Leave scheme.
Individual tax cuts
The Government reaffirmed that from 1 July 2024, the amended Stage 3 tax cuts will come into effect, which will deliver tax relief to all Australian individual taxpayers.
Under the already-legislated measures, from 1 July 2024 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 per cent. The top marginal tax rate of 45 per cent rate will apply to taxable income above $190,000.
The rate at which employers deduct Pay-As-You-Go (PAYG) withholding amounts are expected to be adjusted to take into account the revised tax rates from salary and wage payments made from 1 July 2024.
For a summary of the changes, refer to the table below.
Table 1: Income tax rates for Australian tax residents
Taxable Income ($) 1 July 2020 - 30 June 2024 |
Marginal Tax Rate (%) | Taxable Income ($) From 1 July 2024 |
Marginal Tax Rate (%) |
|---|---|---|---|
| 0 - 18,200 | Nil | 0 - 18,200 | Nil |
| 18,201 - 45,000 | 19 | 18,201 - 45,000 | 16 |
| 45,001 - 120,000 | 32.5 | 45,001 - 135,000 | 30 |
| 120,001 - 180,000 | 37 | 135,001 - 190,000 | 37 |
| Above 180,000 | 45 | Above 190,000 | 45 |
The above rates do not include the Medicare Levy which remains at 2 per cent.
Changes to student loans
A measure announced ahead of the Budget was reform to assist those who have student debts under the Higher Education Loan Program (HELP). Specifically, the way HELP loans are indexed each year is to be amended such that the lower of the Consumer Price Index (CPI) or the Wage Price Index will be used to apply indexation to HELP loans, effective 1 June 2023. Previously, HELP loans were indexed solely by reference to CPI.
Compulsory repayments against a HELP loan are made through the tax system when repayment income exceeds the minimum repayment threshold. The Australian Taxation Office (ATO) will automatically adjust any outstanding HELP loan balance that was indexed on 1 June 2023, and/or will be indexed on 1 June 2024, and apply any resulting credit to the individual’s HELP account.
No announcement on reforms to individual tax residency
Measures to modernise the individual tax residency rules were first announced in the 2021-22 Budget. While the Government has previously consulted on a new, modernised individual tax residency framework (based on recommendations from the 2019 Board of Taxation’s report), no announcements were made in the 2024-25 Budget relating to individual residency reform. Current guidance on the ATO’s approach to determining the tax residency of individuals is available from its Taxation Ruling TR 2023/1 (refer to our Tax Alert for further insight).
Superannuation payments for Paid Parental Leave
Following on recommendations from the Women’s Economic Equality Taskforce, in March 2024 the Government announced that superannuation will be added to the Paid Parental Leave (PPL) scheme from 1 July 2025.
It wouldn’t be a Federal Budget without superannuation changes, albeit largely limited to superannuation support on Commonwealth-funded paid parental leave.
The 2024-25 Budget contained further information on this measure, announcing $1.1 billion over four years to pay 12 per cent superannuation on Commonwealth government-funded paid parental leave for births and adoptions on or after 1 July 2025.
The reforms to superannuation payments add to other legislated measures to expand the PPL scheme which, among other measures, increase the maximum period of flexible paid PPL by two weeks each year from 1 July 2024 to 26 weeks from 1 July 2026.
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