Prepare for 2025: What the Latest Federal Tax Changes Mean for You

The Federal Government has recently proposed and implemented a series of tax and legislative changes that will impact individuals, small businesses, and larger entities alike. These updates—introduced through various Schedules across multiple Treasury Laws Amendment Bills—are designed to deliver cost-of-living relief, encourage investment in sustainable technologies, and tighten tax integrity measures. Below is a summary of key measures, including the extension of the $20,000 instant asset write-off, personal income tax cuts, and other important changes affecting deductions, thresholds, and reporting obligations.

$20,000 instant asset write-off for small business entities

Parliamentary amendments insert an additional Schedule, Sch 4, to the Bill to amend the Income Tax (Transitional Provisions) Act 1997 to extend the $20,000 instant asset write-off for small business entities by 12 months until 30 June 2025.

This will allow small businesses (with an aggregated annual turnover of less than $10 million) to immediately deduct the full cost of eligible depreciating assets costing less than $20,000 that are first used or installed ready for use on or before 30 June 2025.

This measure was originally Sch 7 in the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024, omitted by Senate amendments to that Bill.

Schedule 4 to the Bill fully implements the “Small Business Support – $20,000 instant asset write-off” measure in the 2024-25 Budget.

[Note there was no mention of extending the instant asset write-off after 1 July 2025 in the 2025-26 Federal Budget, although the Liberals have promised to support a $30k IAWO if elected]

Denying deductions for interest charges

Schedule 2 to the Bill will amend ss 25-5 and 26-5 of ITAA 1997 to deny the income tax deductions for amounts of general interest charge (GIC) and shortfall interest charge (SIC) incurred by a taxpayer in income years starting on or after 1 July 2025.

GIC and SIC are incurred where tax debts have not been paid on time, or a tax liability has been incorrectly self-assessed and resulted in a shortfall of tax paid, respectively. Both GIC and SIC are currently tax-deductible for all entities.

Schedule 2 to the Bill will commence on the first day of the first quarter following assent.

Schedule 2 fully implements the “Denying deductions for interest charges” measure in the 2023–24 MYEFO.

Increasing the Medicare levy low-income thresholds

Schedule 2 to the Bill amends the Medicare Levy Act 1986 and the A New Tax System (Medicare Levy Surcharge — Fringe Benefits) Act 1999 to increase the following thresholds in line with movements in the Consumer Price Index (CPI) retrospectively from the 2024–25 income year:

• The Medicare levy low-income thresholds for individuals and families (along with the dependent child/student component of the family threshold)
• The Medicare levy low-income thresholds for individuals and families eligible for the Senior Australian and Pensioner Tax Offset (SAPTO) (along with the dependent child/student component of the family threshold), and
• The surcharge low-income threshold.

Incentivising the take-up of fuel-efficient and electric vehicles

The Treasury Laws Amendment (Tax Incentives and Integrity) Bill 2024, Sch 1, will amend s 25-1 of the A New Tax System (Luxury Car Tax) Act 1999 by updating the definition of a fuel-efficient car by:

• Reducing the maximum fuel consumption for a car to be considered fuel-efficient for the LCT to 3.5 litres per 100 kilometres from the current 7 litres per 100 kilometres.
• Amending the index number used to index the LCT threshold from All Groups Consumer Price Index (CPI) to the motor vehicle purchase sub-group of the CPI.