Every year around tax time, things can change. The government may introduce new schemes, tax cuts, or rate adjustments, making it challenging to keep track of what’s happening.
At TaxReturn.com.au, we want to help you understand exactly what has changed for the 2024/25 tax year. This handy guide outlines the key updates you need to know when it comes to tax.
The Simple Tax Changes for 2024/25 in Australia
The 2024/25 tax year in Australia brings several important changes that impact both individuals and businesses. These updates aim to provide tax relief, adjust income tax thresholds, and support economic stability. Understanding these changes is crucial for effective financial planning and ensuring compliance with tax obligations.
Summary of Tax Changes for 2024-25
- Income Tax Cuts: Adjusted tax brackets and reduced rates, including a lower 16% rate for incomes between $18,201 and $45,000 and a 30% rate for incomes between $45,001 and $135,000.
- Superannuation Guarantee: Increased from 11% to 11.5% from 1 July 2024.
- Stage 3 Tax Cuts Adjustments: The originally planned tax cuts have been modified to provide greater benefits to middle-income earners.
- Electric Vehicles (EVs): Ongoing fringe benefits tax (FBT) exemption for eligible EVs under the luxury car tax threshold.
- Medicare Levy Thresholds: Increased to adjust for inflation, providing relief to low-income earners.
- Small Business Instant Asset Write-Off: The $20,000 instant asset write-off remains available for eligible small businesses.
Tax Brackets and Rate of Tax for 2024/25
Here are the tax rates for 2024/25. Note that the following rates do not include the 2% Medicare levy.
| Tax Brackets | Tax Rates |
|---|---|
| $18,000 or below | No taxes |
| $18,201 to $45,000 | 16c for every $1 over $18,200 |
| $45,001 to $135,000 | $4,288 + 30% for every $1 over $45,000 |
| $135,001 to $190,000 | $31,288 + 37% for every $1 over $135,000 |
| $190,001 or more | $51,638 + 45% for every $1 over $190,000 |
For the 2024/25 tax year, the Australian government has introduced significant changes to individual income tax rates and thresholds, reducing tax rates for low and middle-income earners while adjusting higher-income thresholds to provide broader tax relief compared to the unchanged 2023/24 tax rates.
What Are the Main Tax Changes for 2024/25
For the 2024/25 financial year, the government has adjusted tax brackets and reduced rates to provide tax relief:
-
Lower tax rates for low and middle-income earners:
- The 19% rate (for incomes between $18,201 and $45,000) is now 16%.
- The 32.5% rate (previously for $45,001 to $120,000) is now 30% and applies to incomes up to $135,000.
-
Higher income thresholds for top tax brackets:
- The 37% tax rate now applies to incomes over $135,000 (previously $120,000).
- The 45% tax rate now starts at $190,000 (previously $180,000).
These changes mean most Australians will pay less tax, with bigger savings for middle-income earners.
For the 2024/25 financial year, the Medicare Levy low-income thresholds have been increased to provide relief to low-income earners and account for inflation.
Here are the updated Medicare Levy thresholds:
| Category | 2023/24 Threshold | 2024/25 Threshold |
|---|---|---|
| Singles | $24,276 | $26,000 |
| Families | $40,939 | $43,846 |
| Seniors & Pensioners (Singles) | $38,365 | $41,089 |
| Seniors & Pensioners (Families) | $53,406 | $57,198 |
- For families, the threshold increases by $4,027 per dependent child or student.
- If your taxable income is below these thresholds, you are exempt from the Medicare Levy.
- If your income is slightly above, you may pay a reduced levy before reaching the full 2% rate.
This change ensures low-income earners pay less or no Medicare Levy while maintaining funding for Australia’s healthcare system.
- The Superannuation Guarantee (SG) rate has increased from 11% to 11.5%, effective 1 July 2024.
- This means that employers must contribute 11.5% of an employee’s ordinary earnings to their superannuation fund.
- The SG rate is legislated to increase to 12% from 1 July 2025.
This change aims to boost retirement savings for Australian workers, ensuring they have more financial security in the future. Employers must ensure their payroll systems are updated to reflect the new rate.
For the 2024/25 financial year, the government has extended the $20,000 Instant Asset Write-Off for eligible small businesses.
Key Details:
- Eligible businesses: Small businesses with an annual turnover of less than $10 million.
- Threshold: Businesses can immediately deduct assets costing up to $20,000.
- Applies to: New or second-hand assets first used or installed ready for use between 1 July 2023 and 30 June 2025.
- Multiple purchases allowed: Businesses can claim multiple assets, provided each item costs less than $20,000.
Eligible Assets
Eligible assets must be used for business purposes and can include:
- Business vehicles (excluding passenger vehicles above the luxury car tax threshold)
- Machinery and equipment
- Computers, office furniture, and technology
- Tools and work-related devices
Assets not eligible for the write-off include capital works (such as buildings) and some leased assets. For a full list of eligible assets, refer to the Australian Taxation Office:
👉 ATO Instant Asset Write-Off Guide
How It Helps:
- Reduces taxable income in the year of purchase, lowering tax bills.
- Encourages investment in business equipment and growth.
- Simplifies tax reporting by allowing immediate deductions instead of depreciation over time.
Businesses purchasing assets over $20,000 will need to depreciate them over time using the small business simplified depreciation rules.
For the 2024/25 financial year, the Fringe Benefits Tax (FBT) exemption for eligible electric vehicles (EVs) continues, making EVs more affordable for businesses and employees using salary packaging.
Key Details:
-
FBT Exemption Applies To:
- Battery electric vehicles (BEVs)
- Hydrogen fuel cell electric vehicles (FCEVs)
- Plug-in hybrid electric vehicles (PHEVs, until 1 April 2025)
-
Eligibility Criteria:
- The vehicle must be first held and used on or after 1 July 2022.
- The purchase price must be below the luxury car tax (LCT) threshold for fuel-efficient vehicles, which is $89,332 for 2024/25.
- The exemption applies only to cars used by employees (including via novated leasing arrangements).
-
Exemption Does Not Apply To:
- Non-electric vehicles (such as petrol/diesel/hybrid cars that are not PHEVs).
- EVs exceeding the LCT threshold.
- PHEVs purchased after 1 April 2025.
How It Helps Businesses and Employees:
- No FBT payable on eligible EVs, reducing costs for employers.
- Employees can salary package an EV, lowering taxable income and increasing take-home pay.
- Encourages businesses to transition to lower-emission vehicles.
More Information:
For further details, refer to the Australian Taxation Office’s guidelines:
👉 ATO FBT Exemption for Electric Vehicles
As a taxpayer, many of these reforms may have changed how you should pay your taxes. Be sure to stay updated with any alterations that may impact your obligations. To make everything easier, have experts sort your tax return for you. Contact TaxReturn.com.au today.
