The past few years have brought plenty of uncertainty, but 2025 offers the hope of greater stability – though there are no guarantees. Here’s a look at the key changes and challenges shaping the year ahead.
A Federal Election is Looming
Prepare for political advertising to flood your social media feeds, voicemail, and TV screens. The outcome of the election could significantly impact tax policies, business regulations, and economic stability. Expect opposition campaigns asking, “Are you better off?” and the government highlighting their achievements.
The 2025-26 Federal Budget, which is scheduled for 25 March 2025, is a key event that could shape the economic landscape for the year. This timing also indicates that a Federal Election is likely to take place in March or May but no later than 17 May 2025.
Key Legislation in Limbo
1. $3 Million Superannuation Tax
The proposed Division 296 tax, which would impose a 30% rate on earnings in superannuation balances exceeding $3 million starting 1 July 2025, is currently stalled in the Senate. If it doesn’t pass before the election, it could lapse altogether, leaving the next government to decide whether to proceed or scrap the idea. This uncertainty could impact high-earning individuals and their retirement planning.
2. $20,000 Instant Asset Write-Off
Initially extended to 2024-25 in the Federal Budget, this measure allows small businesses (with a turnover under $10 million) to immediately deduct eligible assets under $20,000. However, the provision was removed from the legislation in the final 2024 sitting. Without it, the threshold reverts to $1,000, creating uncertainty for SMEs planning investments this financial year.
Tax and Superannuation Updates
1. Capital Gains Withholding for Foreign Residents
From 1 January 2025, changes to foreign resident capital gains withholding will apply:
- The withholding rate increases from 12.5% to 15%.
- The current $750,000 threshold is removed, meaning all Australian property sales by foreign residents are subject to withholding.
These reforms apply to acquisitions made from 1 January 2025 onwards.
2. Superannuation Guarantee Increase
On 1 July 2025, the Superannuation Guarantee rate rises from 11.5% to 12%, marking the final legislated increase.
3. Superannuation on Paid Parental Leave
From the same date, superannuation will be paid on Paid Parental Leave. Eligible parents will receive a 12% contribution on their PPL payments, boosting their retirement savings.
What’s Happening with Interest Rates?
At its latest meeting, the Reserve Bank of Australia (RBA) noted a drop in inflation—from 5.4% to 2.8% over the year to September 2024. However, the RBA remains cautious, aiming to see inflation sustainably within the 2–3% range before considering interest rate cuts.
Predictions for a rate cut vary:
- Commonwealth Bank: February 2025
- ANZ and Westpac: May 2025
- NAB: June 2025
Fuel-Efficient Cars Get a Push
From 1 January 2025, new emissions standards for car manufacturers will come into effect. Each manufacturer will need to meet average CO2 targets for their vehicle range, with the targets tightening over time.
Manufacturers can still produce any type of vehicle, but more fuel-efficient models will offset less efficient ones. Those meeting their targets will earn credits, while those falling short will have two years to trade or generate credits before penalties apply.
How Will 2025 Impact You?
With significant changes on the horizon, staying informed is essential. Whether it’s superannuation, tax, or interest rates, planning ahead can help your business navigate the challenges and opportunities 2025 brings. Contact us today to discuss how we can help you prepare for the year ahead.