FY25 budget guide for individuals and families

The FY25 budget puts focus on easing the cost of living pressures for individuals and families. In this article we outline the key changes and what this will mean for you.

The Treasurer is promising that inflation will decline by 0.75% as a direct result of the
2024-2025 Federal Budget initiatives including energy relief for all households, a boost to Commonwealth Rent Assistance, and the freezing of the maximum co-payment on the Pharmaceutical Benefits Scheme.

If the consumer price index (CPI) returns to target by the end of 2024, the Reserve Bank of Australia (RBA) may be inclined to reduce interest rates. However, at this stage, the RBA is not expecting inflation to return to the target range of 2-3% until the second half of 2025, and to the midpoint in 2026.

The 2023-24 surplus has increased to $9.3bn but is expected to decline to a deficit of $28.3bn in 2024-25, driven primarily by the Stage 3 tax cuts.

This is a pre-election budget for the people, with everyone getting a little something to ease cost of living pressures.

Personal income tax cuts confirmed

As previously announced, the Government has legislated permanent tax cuts for all Australian taxpayers from 1 July 2024.

Relative to the previous Stage 3 plan, the redesigned cuts broaden the benefits of the tax cut by focussing on individuals with taxable income below $150,000.

For rates, see Personal income tax rates from 1 July 2024. 

Medicare levy low-income thresholds increase

The Medicare levy low-income thresholds will be increased for singles, families, and seniors and pensioners from 1 July 2023. 

[1] For each dependent child or student, the family income threshold increases by the stated amount.

The increases to the thresholds take account of recent movements in the CPI so that low-income taxpayers generally continue to be exempt from paying the Medicare levy.

$300 energy relief for households

Households will receive a credit of $300 on their energy bills credited as automatic quarterly instalments across 2024-25.

Costing $3.5bn over three years from 2023-24, the measure extends and expands the Energy Bill Relief Fund.

Capping indexation of HELP debts

The Government will cap the HELP indexation rate to be the lower of either the CPI or the Wage Price Index (WPI) with effect from 1 June 2023. The change will apply to all HELP, VET Student Loans, Australian Apprenticeship Support Loans and other student support loan accounts that existed on 1 June 2023.

By changing the calculation of HELP indexation from 1 June 2023, the indexation rate is reduced from:

• 7.1% to 3.2% in 2023, and
• 4.7% to around 4% in 2024.

The change resolves an issue for more than 3 million Australians with a HELP debt when the CPI indexation rate spiked to 7.1% last year. 

Estimated indexation for HELP debts

*Actual credit amount will vary depending on individual circumstances including repayments made during the year. All HELP debts that were indexed in 2023 and are subject to indexation on 1 June 2024 will receive an indexation credit.

Improving aged care support

The Government will provide funding of $2.2 billion over the next five years to deliver key aged care reforms and to continue to implement recommendations from the Royal Commission into Aged Care Quality and Safety.

This funding includes the release of an additional 24,100 home care packages in 2024-25.

The Government has also agreed to defer the commencement date of the new Aged Care Act to 1 July 2025.

The Government is currently in the middle of considering and implementing changes to the way aged care is funded on the back of the Royal Commission into Aged Care Quality and Safety report released in 2021. 

This will likely impact home care and residential care fees in the future. Generally, with past reform we have seen existing residents and home care recipients ‘grandfathered’ under the rules at the time they entered.

Increasing commonwealth rent assistance

The Commonwealth rent assistance maximum rates will increase by 10% from 20 September 2024.

Recipients of Centrelink/Department of Veterans Affairs payments and those receiving family tax benefit may also receive rent assistance if they are paying rent or other rent like payments over a minimum fortnightly threshold. 

The current maximum fortnightly rates are $188.20 for a single person and $177.20 combined for a couple.

The measure will cost $1.9 billion over five years from 2023–24 (and $0.5 billion per year ongoing from 2028–29), and builds on the 15% increase in September 2023, taking the maximum rates over 40% higher than in May 2022.

Increased flexibility for carer payment

Currently, to receive the Centrelink Carer Payment, the care giver is required to not be involved in work, study or training for more than 25 hours per week. This is to reflect the requirement that to receive this payment the care giver should be providing the care recipient with ‘constant care’.

From 20 March 2025, the existing 25 hours per week will be amended to 100 hours over four weeks. 

This limit will no longer capture study, volunteering and travel time so will only apply to employment.

In addition:

• Carer Payment recipients exceeding the participation limit or their allowable temporary cessation of care days will have their payments suspended for up to six months, rather than cancelled.
• Recipients will also be able to use single temporary cessation of care days where they exceed the participation limit, rather than the current seven day minimum.

Higher JobSeeker rate for partial capacity to work

The Government will extend eligibility for the existing higher rate of JobSeeker payment to single recipients with a partial capacity to work (zero to 14 hours per week) from 20 September 2024.

Currently, those on JobSeeker payments aged 55 or over and who have been on the payment for nine continuous months receive a higher rate of payment. These are:

Pharmaceutical Benefits Scheme co-payments

The Government will ensure that the cost of medicines remains low by freezing indexation:

• PBS general co-payments to not be indexed between 1 January 2025 and 31 December 2025 (inclusive), with indexation resuming on 1 January 2026 
• PBS concessional co-payments to not be indexed between 1 January 2025 and 31 December 2029 (inclusive), with indexation resuming on 1 January 2030 

Domestic violence 

As previously announced, the Government has committed almost $1bn over 5 years to permanently establish the Leaving Violence Program – so those escaping violence can receive financial support, safety assessments and referrals to support pathways. Those eligible will be able to access up to $5,000 in financial support along with referral services, risk assessments and safety planning.

Federal, state and territory governments focus on housing

Housing initiatives address three key areas:

1. Private commercial development of future housing supply – the Government has outlined an ambitious goal of building 1.2 million homes by the end of the decade. The 2023-24 Budget announced new measures to encourage investment and development of housing, particularly build-to-rent developments that included affordable housing. However, the draft legislation enabling the announced incentives has only recently been released by Treasury. It is difficult to encourage large scale investment if you do not follow through with legislation which provides certainty. No new measures have been announced to date.
   
   
2. Support to help ease the path to home ownership for first home buyers – also a policy dominant in the 2023-24 Budget with $5.5bn over a decade committed to the Help to Buy scheme. No new incentives have been announced to date.
   
   
3. Crisis and social housing support – the Government has announced $1bn directed towards crisis and transitional accommodation for women and children fleeing domestic violence, and youth. This measure is on top of the 15% increase to Commonwealth Rent Assistance in the 2023-24 Budget.

• $1bn for states and territories to build the roads, sewers, energy, water and community infrastructure; and
• A new $9.3 billion 5‑year National Agreement on Social Housing and Homelessness – for states and territories to combat homelessness, provide crisis support and build and repair social housing. This includes a doubling of Commonwealth homelessness funding to $400 million every year, matched by states and territories.

WLM can help

This is general advice only and does not take into account your financial circumstances, needs and objectives. Information is current at the date of issue and may change. Before making any decision based on this article, you should assess your own circumstances or seek advice from your financial adviser and accountant.

Please contact us if you would like to review your current position and take advantage of the FY25 budget opportunities.