Australian Federal Budget 2024-25 summary

By Lachlan Colquhoun

Read CPA Australia’s full media release

The 2024 Federal Budget offers cost of living relief to a wide range of stakeholders and funds the government’s flagship Future Made in Australia agenda but contains little in the way of support for small business. 

Support for small business is underwhelming, according to CPA Australia, and little has been done to address the fact that the Australian small business sector trails most nations in the Asia-Pacific in terms of innovation and the use of new technology.

Federal Treasurer Dr Jim Chalmers delivers a surplus of $9.3 billion for the 2023-24 fiscal year, the first time the Budget has posted successive surpluses in two decades, but with the economy slowing, the forecast is for deficits over the following four years.

The Budget is loaded with $3.3 billion in new cost of living relief through energy and rental subsidies for consumers. The government has also earmarked $22.7 billion in investment and incentives for business as part of its flagship Future Made in Australia program, set to be legislated later this year.

This includes $13.7 billion in tax credits for producers of critical minerals and green hydrogen from 2027-28 through to 2039-40.

Other Budget winners are an estimated 13.6 million taxpayers, who will receive the previously announced restructured stage three tax cut package, the aged care and health sectors and people needing medicines, while the Budget also earmarks extra funds for housing.

Fraudulent NDIS providers are likely losers and are in the government’s sights with extra funds for fraud detection. 

There is little in the Budget for small businesses, apart from the extension of the $20,000 instant tax write off until next year. 

CPA Australia Chief Executive Officer Chris Freeland AM says small business owners will be feeling underwhelmed by the Budget, which includes only a small relief on energy costs and limited initiatives that will encourage younger Australians to start or buy a business. 

“Small businesses – most of which already have very thin margins – desperately needed a Budget that would help alleviate the cost pressures they are facing on a daily basis,” says Freeland.
“While instant write-offs and subsidies for power bills are welcomed, the truth is small business needs more support, particularly those in energy-intensive sectors.”  

The Budget confirmed investments in supporting businesses in distress and those facing mental health issues, but Freeland says there is little in the way of additional funding for programs aimed at preventing businesses getting into trouble in the first place and enhancing business owners’ skills to help these businesses grow.

Deficits forecast ahead

Budget 2024, which could potentially be the last before the next Federal election, follows this year’s surplus with forecasts for a $28.3 billion deficit in the next financial year, a $10.5 billion improvement on previous estimates. 

For the four years after the current surplus, the forecast is for a combined deficit of $122 billion as the surplus disappears as commodity prices fall and a softer labour market reduces tax receipts from wages.

Total tax receipts increased by 11.1 per cent last year and the increase this year is a smaller 6.6 per cent to $692.3 billion, and while this is $27.0 billion higher than in the government’s December 2023 forecast, the government concedes that the “upgrades to receipts in this Budget are much smaller than recent Budget updates, at around a fifth of the average of the previous three Budgets.”

Dr Chalmers says gross debt was expected to come in at $904 billion this year, “instead of the more than one trillion we inherited.”

“A strong Budget means we save around $80 billion in interest costs over the decade,” Chalmers says.

Gross debt is forecast to peak at 35.2 per cent of GDP in 2026-27 and decline to 30.2 per cent by 2034-5. 

The Treasury is forecasting lower economic growth going forward, with 2 per cent expected this year and then 2.25 per cent in 2025-6. This is lower than the 3.5 per cent forecast for global growth over the next three years.

The outlook for both employment and inflation remains relatively benign, particularly on inflation. The Treasury forecast is for inflation to enter the Reserve Bank’s 2-3 per cent target range later this year, much earlier than the RBA forecast of late 2025.

Inflation is a key focus and Dr Chalmers says the Budget’s cost of living policies would “take another 0.75 of a percentage point off inflation this year, and 0.5 percent points next year.”

“We are banking 96 per cent of revenue upgrades this year – keeping pressure off inflation while it is still above band,” he announced.

“That means inflation is expected to be lower, sooner.”

On unemployment, the forecast is for the jobless rate, currently at 3.8 per cent, to tick up to 4.5 per cent by next year.

As telegraphed prior to Budget night, government spending is focused on aged care, tax cuts, household energy bills, the cost of medicines and green manufacturing, with some assistance for renters and graduates with HELP debt and VET student loans.

From July, 13.6 million workers will receive an average tax cut benefit of $1888 a year, at a total cost to the Budget of $26.3 billion, while all Australian households will get a $300 energy bill rebate and some small businesses will receive $325.

On aged care, $500 million will be spent in the next financial year to fund 24,100 more home care passages and $610 million will be given to the states to assist older patients in being discharged earlier from hospital care. 

The cost of medicines, which is normally indexed, will be frozen on the pharmaceutical benefits scheme until 2026 for the general population and until 2030 for pensions and cardholders.

A one-year extension to the freeze on the deeming rate will mean single aged pensioners will be $3300 better off each year.

The Budget includes an additional $4.3 billion to be spent on housing, with $1 billion this financial year in assistance to the states to build more dwellings.

There is also $423.1 million over five years from next year for more social housing and homelessness services.

Consultants out in the cold

Consultants are among the losers in the Budget as the government beefs up the public service in the wake of the PwC conflict of interest scandal.

Spending on consultants and contractors will fall by $1 billion in the next four years, and this will be balanced by the creation of 2500 new positions in the public service, which grew by 10 per cent this year.

The crackdown on fraudulent providers to the National Disability Insurance Scheme (NDIS) will continue, with Services Australia set to receive $23.5 million to investigate providers, and $240 million allocated for better technology to detect fraud.

The Australian Taxation Office and a cross-government task force will receive an additional $2.7 billion to assist them detect fraud and financial crime. 

Check out all of CPA Australia’s expert analysis of the 2024-25 Federal Budget and what it means for accounting, business and finance professionals.