What’s Ahead in 2025?

2024 has been a rollercoaster year for businesses and individuals, but will 2025 be different?

Here are some of the key changes and challenges for 2025.

An election:

Welcome to political advertising slipping into your social media, voicemail, and television viewing, most likely with messages from the opposition asking if you are better off, and from the incumbents telling you all the reasons why you are.

The 2025-26 Federal Budget has been brought forward to 25 March 2025. This suggests an election will be held in either March or May 2025 but no later than 17 May 2025.

Legislation in limbo:

The Senate pushed through 32 Bills on the final sitting day of parliament for 2024 including seven of direct relevance to business and to the financial interests of some Australians.

However, two key announcements remain in limbo:

$3 million tax on earnings in a superannuation fund.

The proposed Division 296 tax, which imposes a 30% tax rate on future earnings for superannuation balances above $3 million, is proposed to commence from 1 July 2025. However, the Bill enabling the new tax is stalled in the Senate.

It’s unlikely that this tax will pass parliament prior to the election, so the bill will lapse. It then becomes a question of whether the elected Government chooses to rectify the concept or dismiss it.

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

In the 2024-25 Federal Budget, the government announced the extension of the $20,000 instant asset write-off threshold for small business for a further year to 2024-25. The concession enables businesses with an aggregated turnover of less than $10 million to immediately deduct the full cost of eligible depreciating assets costing less than $20,000. Without this measure, the threshold returns to $1,000.

The Government removed this concession at the last minute in the final sitting of Parliament of 2024. The removal of this measure is unfortunate, as once again, SMEs now have no confidence about the tax treatment of investments in assets that they might be looking to make, or have made, in the current financial year.

We will keep you informed of any updates to these measures in the new year.

Tax & superannuation changes:

Foreign resident capital gains withholding changes on sale of property.

One of the Bills pushed through Parliament at the end of 2024 changes how capital gains withholding applies to foreign residents from 1 January 2025.

Currently, residents selling taxable Australian property must provide a clearance certificate to the purchaser at or before settlement to avoid having 12.5% withheld from a property sale where the value of the property is $750,000 or more. If applicable, the withholding is then made available as a credit against any tax liability. The vendor only receives any refund due after their next income tax return is processed at tax time.

From 1 January 2025 however, the threshold will be removed and the withholding rate increased so that:

• The withholding is increased from 12.5% to 15%; and
• The withholding applies to the sale of all Australian land and buildings by foreign residents, regardless of the value of the assets.

The reforms apply to acquisitions made on or after 1 January 2025.

Superannuation rate increases to 12%.

The Superannuation Guarantee (SG) rate will rise from 11.5% to 12% on 1 July 2025 – the final legislated increase.

Superannuation on Paid Parental Leave.

From 1 July 2025, employers will pay superannuation on Paid Parental Leave payments. Eligible parents will receive an additional payment based on the superannuation guarantee as a contribution to their superannuation fund.

Interest rates:

At the last Reserve Bank Board (RBA) meeting, RBA governor Michele Bullock recognised the easing of inflation from 5.4% to 2.8%, but suggested that the economy still has some way to go.

The RBA appears wary of volatility and wants to see inflation sustainably trending down before making any move.

Note: CommBank is predicting a February 2025 rate cut, ANZ and Westpac May 2025, and NAB June 2025.

Cost of living pressures:

The National Accounts released in early December took economists by surprise with living standards growing by a mere 0.2% in the September quarter – the expectation was much higher. Discretionary spending only increased by 0.1%.

The personal income tax cuts that came into effect from 1 July 2024 helped households, as did energy subsidies, but the impact is still working its way through the system. At the same time, mortgage costs continue to rise as past increases continue to impact.

In 2024, Australia’s economy grew 0.8%, the lowest rate since the COVID-19 affected December quarter 2020. Economic activity in the Australian economy right now is heavily dependent on Government spending.

Slow and steady is the expectation for 2025.

Pay rates and awards:

In 2025, there will be new pay rates and rules for employees in the lowest classification level in various modern awards. Majority of these changes will take effect from 1 January 2025.

These changes include how long an employee can stay in the lowest classification level and increases to pay rates in this classification.

It’s crucial that employees understand these changes before the end of 2024.

Some affected modern awards include:

• Manufacturing Award.
• Fitness Award.
• Architects Award.
• Business Equipment Award.
• Live Performance Award.

Learn more here.

Trump’s presidency:

President-elect Trump will recite his oath of office on 20 January 2025. The Trump administration will hold the presidency, Senate and the House.

For Australia, the key question is how some of President-elect Trump’s stated policy objectives such as imposing tariffs are likely to impact us.

Another issue for Australia could be the secondary impact of a trade war. China is Australia’s largest two-way trading partner, accounting for 26% of our goods and services trade with the world in 2023. A slowdown in the Chinese economy impacts Australia and the region generally.

An immediate impact of the idea of a trade war has been the decline of the AUD/USD, currently sitting at around 64 cents.

Fuel efficient cars:

New standards for vehicle manufacturers come into effect from 1 January 2025. Vehicle manufacturers will have a set average CO2 target for all new cars they produce, which they must meet or beat. The Government will reduce the target over time and car companies must provide more choices of fuel-efficient, low or zero emissions vehicles.

Suppliers can still sell any type of vehicle they choose but with more fuel-efficient models offsetting any less efficient models. If suppliers meet or beat their target, they’ll receive credits. If they don’t, they will have two years to either trade credits with a different supplier, or generate credits themselves, before a penalty becomes payable.

Wage theft criminalised:

As of 1 January 2025, the intentional underpayment of workers will be criminalised.

Employers will commit an offence if:

• They’re required to pay an amount to an employee (such as wages), or on behalf of or for the benefit of an employee (such as superannuation) under the Fair Work Act, or an industrial instrument; and
• They intentionally engage in conduct that results in their failure to pay those amounts to or for the employee on or before the day they’re due to be paid.

Employers convicted of wage theft face fines of up to 3 times the amount of the underpayment and $7.825 million.

Want to discuss how these changes might impact you and your business?

Please get in touch with your Aintree Group adviser today!

This is general advice only and has not been prepared with your individual situation or needs in mind. For personalised advice, we highly recommend that you seek professional guidance from a qualified adviser.