Federal budget: The tax implications for property investors

The headline measure in this year’s federal budget is one we already knew about – individual tax cuts.

From 1 July 2024, all 13.6 million taxpayers will get a tax cut, which will flow through into their pay packets immediately thereafter. These tax cuts replace the original stage three tax cuts which were legislated by the former government.

The tax cuts will put more money into the pockets of taxpayers, especially low and middle income taxpayers, and provide welcome relief from the surging cost of living.

As originally designed by the Liberal/National government, the tax cuts delivered most of the benefit to those on high incomes. So, nothing at all for people earning $40,000 and only $875 for people earning $80,000. This has now been rectified – people earning $40,000 will get a tax cut of $654 and people earning $80,000 will get a tax cut of $1,679.

With the cost of living disproportionately impacting low and middle income taxpayers, this will provide some much-needed extra cash in the pockets of hardworking families to pay mortgages, food and fuel bills.

Taxpayers don’t need to do anything to get the tax cut. Employers will automatically adjust the amount of tax they take out of pay which means that employees should see an immediate increase in their take home pay from 1 July 2024.[1]

ATO tax compliance programs to be beefed up

The government has awarded more money to the ATO to help beef up its compliance programs. Among the measures that are relevant are:

• $78.7 million for upgrades to information and communication technologies to enable the ATO to identify and block suspicious activity in real-time.
• $83.5 million for a new compliance taskforce to recover lost revenue and intervene when attempts to obtain fraudulent refunds are made.
• $24.8 million to improve the ATO’s management and governance of its counter-fraud activities, including improving how the ATO assists individuals harmed by fraud.

The government will also strengthen the ATO’s ability to combat fraud by extending the time the ATO has to notify a taxpayer if it intends to retain a business activity statement (BAS) refund for further investigation. The ATO’s mandatory notification period for BAS refund retention will be increased from 14 days to 30 days to align with time limits for non-BAS refunds.

ATO to be granted greater discretion over old tax debts

The government will amend the tax law to give the ATO the discretion to not use a taxpayer’s refund to offset old tax debts, where the commissioner had put that old tax debt on hold prior to 1 January 2017. This discretion will apply to individuals, small businesses and not-for-profits.

Other property specific measures

The other measures in the budget which could affect property investors are not tax measures but involve additional spending to enhance (indirectly) the interests of property developers.

For example, the government announced a 10 per cent increase in the maximum Commonwealth Rent Assistance payment, a supplemental payment for renters receiving government benefits. Since 2020, typical rents have increased by around $200 per week, pushing many low income renters into stress.

In addition, more spending has been directed at alleviating current constraints to building new homes. An additional $1 billion is to be made available to states and territories through the Housing Support Program to build “enabling infrastructure” for new housing, including items such as water, power, sewerage and roads.

[1] Personal tax cuts

The effect of the tax cuts can best be illustrated in table form. The original stage three cuts are those suggested by the Coalition, and the revised tax cuts are those announced (and legislated) by the Albanese government.

Redistribution of tax cuts

Mark Chapman is the director of tax communications at H&R Block.