Tax Announcements to watch
There are a couple of key changes announced by the Federal Government but are not yet law.
With a Federal Election due before 17 May 2025, these changes may or may not be passed prior to a potential change in government.
General Interest Charge Deductibility
The Australian Tax Office may apply General Interest Charge (GIC) on any liabilities not paid by the due date. These liabilities include unpaid Tax Return amounts, GST and Superannuation.
The annual GIC rate is currently 11.42% (Jan to March 2025) and compounds daily.
At present, the General Interest Charge is a tax deduction for individuals and businesses.
There is currently legislation before Parliament Treasury Laws Amendment (Tax Incentives and Integrity) Bill 2024 that will amend the law to deny a deduction for the General Interest Charge from 1 July 2025.
This change would affect many taxpayers and if enacted would require consideration of cash flow, debt reduction and possibly refinancing. For taxpayers running a business, they may be able to refinance and claim an interest deduction for income tax debt. It is not clear though whether this will apply to other debts such as GST and FBT. Individuals however who are not running a business would be unable to claim a deduction for any interest expense on their tax debts.
Higher Education Loans
The Australian government announced in November 2024 that they plan to make two significant changes to the higher education loan scheme from 1 July 2025.
1/ Increase the minimum repayment threshold to $67,000 and reduce the level of repayment for those earning up to $180,000.
2/ Anyone with a student loan will have the debt reduced by 20% before indexation is applied on 1 June 2025.
These two changes are also subject to the applicable legislation being passed. Both would be welcome changes to those struggling with the current cost of living and the burden of a ballooning HELP debt.
Please contact Cambrian Hill Accounting if you would like any assistance with your cashflow and tax planning needs.