Overview
The 2024–25 financial year (starting 1 July 2024) has seen the rollout of the Australian Government's Stage 3 tax cuts, offering substantial relief to many taxpayers. New business-related measures for the upcoming 2025–26 year (starting 1 July 2025) are also in motion, transforming how individuals, businesses, and investors plan their taxes.
Key Changes for Individuals
Stage 3 Income Tax Cuts
The tax-free threshold remains at $18,200, but new marginal rates apply from the 2024–25 financial year:
- 16% on income between $18,201–$45,000
- 30% on income between $45,001–$135,000
- 37% on income between $135,001–$190,000
- 45% on income above $190,000
These reforms simplify the tax scale and reduce withholding for many employees, providing immediate benefits to Australian taxpayers.
Medicare Levy Threshold Changes
Starting from July 2025, low-income thresholds for the Medicare levy are increasing, providing additional benefits to low-income earners. This change will reduce the tax burden on those who need it most.
Future Personal Tax Cuts
Further personal tax cuts are already legislated for future years:
- The 16% rate will be reduced to 15% from 1 July 2026
- Further reduction to 14% from 1 July 2027
These progressive reductions demonstrate the government's commitment to ongoing tax relief.
Small Business and Corporate Tax Changes
Instant Asset Write-Off Extension
Small businesses with annual turnover under $10 million can continue to claim up to $20,000 per eligible asset until 30 June 2025. This measure provides significant cash flow benefits for small businesses investing in equipment and technology.
Historical Instant Asset Write-Off Limits
The following table shows the instant asset write-off limits for small businesses with an aggregated turnover less than $10 million that apply the simplified depreciation rules:
| Eligible Businesses | Date Range | Limit |
|---|---|---|
| Less than $10 million aggregated turnover | 1 July 2023 to 30 June 2025 | $20,000 |
| Less than $10 million aggregated turnover | 12 March 2020 to 30 June 2021 (asset purchased on or after 7:30 pm AEST on 12 May 2015 and by 31 December 2020) |
$150,000 |
| Less than $10 million aggregated turnover | 7:30 pm AEDT on 2 April 2019 to 11 March 2020 | $30,000 |
| Less than $10 million aggregated turnover | 29 January 2019 to prior to 7:30 pm AEDT on 2 April 2019 | $25,000 |
| Less than $10 million aggregated turnover | 1 July 2016 to 28 January 2019 | $20,000 |
Important: These limits apply to businesses that apply the simplified depreciation rules and have an aggregated turnover of less than $10 million. Each eligible asset must be first used or installed ready for use within the specified date ranges.
ATO Interest Deductibility Changes
From 1 July 2025, interest charged by the ATO on outstanding tax debts will no longer be tax deductible. This change affects approximately 2.6 million small businesses and emphasizes the importance of meeting tax obligations on time.
Enhanced Compliance and Enforcement
The ATO is expanding its compliance programs from 1 July 2025, including:
- Shadow economy audits
- Enhanced personal income tax compliance reviews
- Increased scrutiny of business tax obligations
These measures highlight the importance of maintaining accurate records and meeting all tax obligations.
Superannuation and Investment Updates
Tax on Large Superannuation Balances
A proposed 30% tax on concessional earnings for superannuation balances over $3 million (Division 296) is scheduled to apply from 1 July 2025, although the legislation remains pending. This measure targets very high-balance superannuation accounts and may affect investment strategies for high-net-worth individuals.
"Many experts warn this could reduce the attractiveness of voluntary superannuation contributions for high earners, potentially changing retirement planning strategies."
Superannuation Guarantee Rate Increase
Employer contributions through the Superannuation Guarantee (SG) will reach 12% of ordinary time earnings from 1 July 2025. This represents the final step in the gradual increase of superannuation contributions, providing enhanced retirement savings for all Australian workers.
Other Important Updates
Luxury Car Tax Thresholds
For the 2024–25 financial year, luxury car tax thresholds are:
- $91,387 for fuel-efficient vehicles (consuming 7 litres per 100km or less)
- $80,567 for other vehicles
Luxury car tax is charged at 33% on the amount above these thresholds.
GST Reform Discussions
While broader GST reform discussions continue, political resistance has made significant expansion unlikely in the near term. However, businesses should stay informed about potential future changes.
Key Dates Summary
Here's a quick reference for the most important implementation dates:
- 1 July 2024: Stage 3 tax cuts and new income tax brackets
- 30 June 2025: End of current instant asset write-off provisions
- 1 July 2025: Multiple changes including Medicare levy thresholds, ATO interest deductibility, superannuation guarantee rate, and enhanced compliance measures
- 1 July 2026: Further reduction in personal tax rates (16% to 15%)
- 1 July 2027: Additional personal tax rate reduction (15% to 14%)
What This Means for You
Understanding these tax year changes is vital for effective financial planning. Whether you're an individual taxpayer benefiting from Stage 3 cuts, a small business owner navigating new compliance requirements, or planning for retirement with superannuation changes, proactive planning can help maximize your financial outcomes.
The combination of personal tax relief, business tax changes, and superannuation updates creates both opportunities and challenges. We recommend reviewing your current tax strategy and consulting with qualified professionals to ensure you're taking advantage of all available benefits while remaining compliant with new requirements.