Key Tax Changes for the 2025 Financial Year: What You Need to Know

As we approach the 2025 financial year, several important tax updates are set to take effect from 1 July 2024. These changes will impact individual taxpayers and businesses alike. Here’s a concise overview to help you navigate the upcoming adjustments.

1. Revised Individual Income Tax Rates

The Australian Government has implemented modifications to individual income tax brackets and rates, aiming to provide relief across various income levels. The new tax rates for residents are as follows:

• $0 to $18,200: 0%
• $18,201 to $45,000: 16%
• $45,001 to $135,000: 30%
• $135,001 to $190,000: 37%
• $190,001 and above: 45%

These adjustments include a reduction of the 19% tax rate to 16% and the 32.5% rate to 30%. Additionally, the thresholds for the 37% and 45% tax rates have increased to $135,000 and $190,000, respectively.

2. Updated Cents Per Kilometre Rate

For those claiming work-related car expenses using the cents per kilometre method, the Australian Taxation Office (ATO) has increased the rate to 88 cents per kilometre for the 2024–25 income year. This method allows claims for up to 5,000 business kilometres annually without the need for detailed expense records, covering all vehicle running costs, including fuel, maintenance, and depreciation.

3. Superannuation Guarantee Increase

Employers should note that the Superannuation Guarantee (SG) rate will rise to 12% from 1 July 2025. This increase is part of the government’s ongoing efforts to enhance retirement savings for Australian workers.

4. Adjustments to Superannuation Tax Concessions

The government has announced changes to superannuation tax concessions for high-balance accounts. From 1 July 2025, earnings on superannuation balances exceeding $3 million will be taxed at 30%, up from the current 15%. This measure aims to improve the equity and sustainability of the superannuation system.

5. Medicare Levy and Surcharge

The Medicare levy remains at 2% of taxable income for most residents. However, an additional Medicare levy surcharge of between 1% and 1.5% may apply to higher-income taxpayers without adequate private health insurance coverage.

Stay Informed and Prepared

These tax changes present opportunities and obligations for both individuals and businesses. To ensure you maximize benefits and remain compliant, it’s advisable to review your financial plans and consult with a tax professional. If you have questions or need personalized advice regarding how these updates affect your situation, feel free to reach out to us. We’re here to help you navigate the evolving tax landscape with confidence.