The 2025 budget, released amidst significant deficit projections, introduces a mix of tax cuts, compliance measures, and regulatory changes. Key highlights include a reduction in personal income tax rates, a two-year ban on foreign property purchases, and a 20% reduction in student debt. The budget also focuses on increasing ATO compliance activities and strengthening regulations for tax agents and non-compete clauses in employment contracts. However, it offers minimal support for small businesses and leaves several anticipated reforms unaddressed.
Key Elements of the Budget
- Budget Deficits:
- The budget projects significant deficits for the next four years, ranging from AUD $30 to $40 billion annually.
- There is minimal support for small businesses and little of substance overall.
- Personal Income Tax Rates:
- Unexpected announcement of a reduction in the marginal tax rate for individuals.
- The rate for the income band AUD $18,201 to $45,000 will drop from 16% to 15%, and then to 14%.
- This measure is described as giving every taxpayer a tax cut, though it has been met with scepticism.
- Tax Avoidance and Compliance:
- Nearly AUD $1 billion allocated to expand and extend various ATO compliance programmes, including the Tax Avoidance Task Force and the Shadow Economy Compliance Programme.
- Increased audit and compliance activities expected, affecting both large and small businesses.
- Foreign Property Ownership:
- A two-year ban on foreign persons purchasing established residential dwellings starting 1 April 2025.
- Temporary residents are also affected, though they can still purchase new residential properties.
- Non-Compete Clauses:
- Ban on non-compete clauses in employment contracts for individuals earning below AUD $175,000.
- Aimed at protecting lower-paid workers and increasing job mobility.
- Tax Agent Regulations:
- Strengthening sanctions available to the Tax Practitioners Board (TPB) and increased funding for compliance activities targeting high-risk tax practitioners.
- Student Debt:
- A 20% reduction in student debt, amounting to AUD $16 billion, benefiting around 3 million Australians.
- Increase in the minimum repayment threshold from AUD $54,000 to $67,000.
- Changes to the repayment calculation, moving to a marginal system similar to income tax.
- Small Business and Franchising:
- Small allocation of AUD $7 million to strengthen the ACCC’s enforcement of the franchising code.
- Discussions on extending unfair trading practices protections to small businesses.
- Foreign Resident CGT Measures:
- Deferral of changes to the CGT regime for foreign residents until 1 October 2025, or the first quarter after legislation is passed.
- Other Notable Points:
- No extension of the instant asset write-off.
- No mention of Division 7A reform, tax residency rules, or changes to the taxation of trusts.
- The proposed Division 296 super tax legislation failed to pass.
For personalised advice and detailed insights on how the 2025 budget impacts you or your business, contact I DO TAX accountants today!
Email: info@idotax.com.au
Tel: (03) 8594 1811 ~ 1800 955 811
Our team of experts is here to help you navigate the complexities of the new budget and optimise your tax strategy. Reach out to us now!