The past few years have certainly been marked by instability, with numerous uncertainties affecting businesses, economies, and governments around the world. As we look ahead to 2025, there’s hope for greater stability, but it’s by no means a guarantee. From elections to tax changes and global policy shifts, there are several key developments that business owners and individuals alike should prepare for in the coming year.
An Election on the Horizon
Get ready for political ads infiltrating your social media, voicemail, and TV screens, as the 2025 federal election draws near. Expect opposing parties to pitch their agendas, with the opposition likely questioning whether you’re “better off” and the incumbents highlighting their achievements.
The 2025-26 Federal Budget has been brought forward to 25 March 2025, suggesting that the election could take place between March and May 2025, with the latest possible date being 17 May 2025.
Legislation in Limbo
While the Senate passed 32 Bills on the final sitting day of 2024, including several directly impacting businesses and financial interests, there are still two key pieces of legislation hanging in the balance:
- $3 Million Tax on Superannuation Earnings
A proposed tax of 30% on superannuation fund earnings over $3 million is set to begin in July 2025. However, the Bill enabling this tax is stalled in the Senate and is unlikely to pass before the election, meaning it could expire unless the next government chooses to revive it. - Instant Asset Write-Off for Small Business
The $20,000 instant asset write-off for small businesses was extended for the 2024-25 financial year, but it was removed from the enabling legislation in the final days of Parliament. As a result, SMEs remain uncertain about tax treatment for assets they plan to acquire, especially given the potential return to the $1,000 threshold.
Tax and Super Changes
Several important changes to tax and superannuation will take effect in 2025:
- Foreign Resident Capital Gains Withholding Changes
From 1 January 2025, the capital gains withholding rate on property sales by foreign residents will increase from 12.5% to 15%, and it will apply to all sales of Australian land and buildings, regardless of the property’s value. - Superannuation Guarantee Increases to 12%
The Superannuation Guarantee rate will rise from 11.5% to 12% on 1 July 2025, marking the final legislated increase. - Superannuation on Paid Parental Leave
From 1 July 2025, superannuation will be paid on Paid Parental Leave (PPL) at the rate of 12%, providing additional contributions to eligible parents’ superannuation funds.
Interest Rates and Economic Outlook
Despite easing inflation in 2024, the Reserve Bank of Australia (RBA) remains cautious, with inflation still above the target range. The RBA is unlikely to make significant moves until inflation is sustainably within the 2% to 3% range. Several banks, including CommBank, ANZ, Westpac, and NAB, have forecasted potential rate cuts, with predictions ranging from February to June 2025.
Cost of Living Pressures
Australia’s economy grew at a mere 0.8% in 2024, the slowest rate since the COVID-19 downturn. The increase in living standards was lower than expected, and discretionary spending remained minimal. While personal income tax cuts and energy subsidies have helped, the cost of living is still under pressure, with mortgage costs rising and the economy reliant on government spending. The outlook for 2025 suggests slow and steady recovery.
The ‘Trump Effect’
With President-elect Trump set to take office in January 2025, his administration’s policies, including the imposition of tariffs on trade with Mexico, Canada, and China, could have significant global repercussions. For Australia, this could mean a slowdown in trade with China, our largest trading partner, which could affect the economy and regional stability. The uncertainty around trade relations and a potential trade war could also lead to a weaker Australian dollar.
Fuel-Efficient Cars: New Standards Take Effect
From 1 January 2025, new vehicle emissions standards will be enforced, requiring manufacturers to meet CO2 targets for all new cars they produce. While suppliers can still offer less fuel-efficient vehicles, they must balance these with more fuel-efficient or low-emission models to meet the targets. Failure to do so will result in penalties unless credits are generated or traded with other manufacturers.
Wage Theft Becomes a Criminal Offence
Starting 1 January 2025, employers will face criminal charges if they intentionally underpay employees, including unpaid wages or superannuation contributions. Employers convicted of wage theft could face penalties up to three times the amount of underpayment, with fines reaching up to $7.825 million.
Phasing Out Cheques
The Australian Government has announced a phased plan to end the use of cheques by 2029. While cheques have declined dramatically in use, banks are still required to accept them until the official transition ends. However, the move towards digital payments is unlikely to be reversed, and businesses will need to adapt to new payment methods as cheques become increasingly obsolete.
Cash Remains King – For Now
While digital payments have surged, the Australian Government is committed to ensuring that cash remains a viable payment method. Around 1.5 million Australians still rely on cash for in-person transactions, particularly in emergencies. Businesses are required to accept cash for essential items, with small business exemptions, ensuring cash continues to play a role in the Australian economy for the foreseeable future.
Card Surcharges
The issue of card surcharges continues to be a point of contention. While businesses can charge a surcharge for card payments, it must reflect the actual cost to the business of processing those payments. Overcharging or adding excessive surcharges could lead to legal consequences, so businesses should carefully monitor their surcharge practices.
Conclusion
As we step into 2025, businesses and individuals alike will need to stay alert to the shifting economic, political, and regulatory landscape. From potential changes in tax policy to global trade challenges and evolving standards in wages and vehicle emissions, there’s much to anticipate in the coming year. By staying informed and agile, Australian businesses can navigate these changes effectively and position themselves for long-term success.
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How can we help?
If you have any questions or would like further information, please feel free to give our office on 08 9221 5522 or via email – info@camdenprofessionals.com.au or arrange a time for a meeting so we can discuss your requirements in more detail.
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