What we know about Budget 2024-25

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The Federal Budget will be released at 7.30pm AEDT tonight. What we know is that the Government will be at pains to deliver cost of living relief to a community battling persistently high inflation and interest rates that have eroded living standards, but with policies that are not inflationary. Expect short term measures not long-term structural reform.

Of pivotal importance, and something that seems to have been forgotten, is that legislation enabling any announced measure or incentive needs to be released in a timely manner. There are still a series of reforms from the 2023-24 Federal Budget that have not been legislated including the increase to the instant asset write-off threshold for small business, and the tax deduction for electrification for 2023-24. There is no point in an incentive aimed at productivity if there is no certainty for business to invest.

Here’s what we know so far:

Cost of living

The Government credits its cost of living policies - energy bill relief, cheaper child care and rent assistance – for reducing the Consumer Price Index (CPI) by 0.5% in the year to the March quarter. We expect to see extensions and some deepening of existing measures.

The redesigned Stage 3 tax cuts set to commence on 1 July 2024 are the keystone of the cost of living relief measures (see Treasury Laws Amendment (Cost of Living Tax Cuts) Bill 2024, Royal Assent 5 March 2024).

Paid parental leave

As previously announced, from 1 July 2025 superannuation will be paid on the Paid Parental Leave payment. This is in addition to the changes that saw families provided with an extra two weeks of leave (22 weeks total), which will increase to 24 weeks from July 2025 and 26 weeks from July 2026 (see Paid Parental Leave Amendment (More Support for Working Families) Bill 2023, Royal Assent 20 March 2024).

Cutting student debt

The Government will cap the HELP indexation rate to be the lower of either the CPI or the Wage Price Index (WPI) with effect from 1 June 2023. The change will apply to all HELP, VET Student Loans, Australian Apprenticeship Support Loans and other student support loan accounts that existed on 1 June 2023.

The change resolves an issue for more than 3 million Australians with a HELP debt when the CPI indexation rate spiked to 7.1% last year. The 2023 indexation rate based on WPI would only have been 3.2%.

An individual with an average HELP debt of $26,500 will see around $1,200 wiped from their outstanding HELP loans this year, pending the passage of legislation.

Federal, state and territory governments focus on housing

Housing initiatives address three key areas:

• Private commercial development of future housing supply – the Government has outlined an ambitious goal of building 1.2 million homes by the end of the decade. The 2023-24 Budget announced new measures to encourage investment and development of housing, particularly build-to-rent developments that included affordable housing. However, the draft legislation enabling the announced incentives has only recently been released by Treasury. It is difficult to encourage large scale investment if you do not follow through with legislation which provides certainty. No new measures have been announced to date.
• Support to help ease the path to home ownership for first home buyers – also a policy dominant in the 2023-24 Budget with $5.5bn over a decade committed to the Help to Buy scheme. No new incentives have been announced to date.
• Crisis and social housing support – the Government has announced $1bn directed towards crisis and transitional accommodation for women and children fleeing domestic violence, and youth. This measure is on top of the 15% increase to Commonwealth Rent Assistance in the 2023-24 Budget.

Much of the Budget funding however flows to the States and Territories to increase housing stock, increase social housing, and provide crisis accommodation. New measures include:

• $1bn for states and territories to build the roads, sewers, energy, water and community infrastructure; and
• A new $9.3 billion 5‑year National Agreement on Social Housing and Homelessness – for states and territories to combat homelessness, provide crisis support and build and repair social housing. This includes a doubling of Commonwealth homelessness funding to $400 million every year, matched by states and territories.

Domestic violence

The Government has committed almost $1bn over 5 years to permanently establish the Leaving Violence Program – so those escaping violence can receive financial support, safety assessments and referrals to support pathways. Those eligible will be able to access up to $5,000 in financial support along with referral services, risk assessments and safety planning.

Small and medium business

The Treasurer has promised a budget for sustainable growth. When it comes to small and medium business, the 2023-24 Budget announced:

• An increase to the instant asset write-off threshold to $20,000. However, the Senate has recommended that the threshold change to $30,000; and
• The introduction of a bonus tax deduction for electrification.

However, the legislation enabling these measures has not as yet passed Parliament (see Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023).

No further measures have been announced but we expect at least the same for the 2025 income year.

Picking winners

As with last year’s Federal Budget, the Government is directing investment to certain industries and developments. This includes over $566m over 10 years to find new deposits of minerals and sources of energy (data, mapping and technology). And, we expect to see a continued push towards green and clean energy.

That’s it for now!

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