What Does the 2024 Federal Budget Mean for Doctors?

The 2024 Federal Budget was announced on Tuesday, 14th May. The Budget proposed key aims are to provide cost of living relief through 1 July tax cuts, lower power bills, higher welfare payments and support for small businesses. It remains to be seen whether the government can avoid the Budget spending stoking inflation, and any resultant impact on interest rates. Please note that as with every Budget, the government announcements outlined are proposals only and need to successfully pass through Parliament before becoming law. Announcements may be subject to change during this process.

 
The key announcements in the Budget of potential relevance for you as a Doctor are:

1. Lower Income Tax

No further changes proposed to the revised Stage 3 tax cuts commencing 1 July 2024 were announced. The maximum tax cut will be for those earning $190,000 or more who will save $4,529 p.a. The tax savings depend on taxable income and can be estimated using this government: tax cuts calculator.

Our thoughts: Best consider utilising some of your tax savings to invest, top up your super or reduce debt.

2. Business Tax: Further Extension to the Instant Asset Write-Off

Small businesses, including most self-employed Doctors, will be able to deduct the full cost of eligible assets up to $20,000 per item incurred until 30 June 2025. 

Eligible capital assets include:

• New depreciable assets e.g. medical or computer equipment

• The cost of improvements to existing eligible assets

• Second-hand assets e.g. car or medical equipment

 Assets valued at $20,000 or more, which cannot be immediately deducted, can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year after that (i.e. effectively a tax deduction over years rather than immediately).

Our thoughts: You may wish to consider acquiring eligible business assets and take advantage of the upfront tax deduction.  Please contact us if you would like more information about the above initiative and what it may mean for your business planning.

3. Health – Overview of Some Key Changes

Funding proposed to support earlier discharge from hospital for older Australians, improving access to essential services, modernising Australia’s digital health infrastructure, funding to address long stay patient challenges, extensions to existing initiatives and other measures.

Our thoughts: This may have direct or indirect benefits for some Doctors in specific areas of medicine, such as Psychiatrists, Geriatricians, GPs and Oncologists.

4. Energy Bill One-Off Rebate

As a relief measure for all Australian families and eligible small businesses to help with the rise in energy costs, the Government has proposed an energy bill rebate of:

• $300 for each household

• $325 for eligible small businesses.

The relief will apply from 1 July 2024 until 30 June 2025. There is no additional requirement in order to claim this benefit. The energy provider will deliver the rebate to eligible households and businesses through a quarterly reduction in your energy bills.

Our thoughts: A bit of a ‘sugar hit’ with a small rebate to offset rising energy costs.

5. Superannuation

Payday super: Starting from 1 July 2026, employers must pay superannuation at the same time they pay salary and wages to employees. This change aims to give employees better visibility and control over their entitlements and helps the ATO recover unpaid superannuation.

Super on Paid Parental Leave: Superannuation Guarantee contributions will be paid to all recipients of Government-funded Paid Parental Leave from 1 July 2025. Contributions will be at the same rate as employer contributions under the Superannuation Guarantee, which will be 12% from 1 July 2025.

Our thoughts: These are favourable changes for employee Doctors. For employers and practice owners, it will be important to ensure you comply with these changes. There should be plenty of notice before the changes are introduced though and we can also support you with this.

6. HECS/HELP Annual Indexation Reduction

Higher Education Loan Program (HELP) loan holders will benefit from changes to indexation, with debts to be will be indexed at the lower of the Consumer Price Index (CPI) and the Wage Price Index (WPI). Currently, HELP debt is indexed to CPI on 1st June each year. The change will be backdated to 1 July 2023 and an ‘indexation credit’ may be provided to reduce outstanding loan balances. To estimate indexation credits, check out this HELP Indexation Credit Estimator.

 Our thoughts: Following the 7.1% indexation on 1st June 2023, this will be welcomed by those with remaining HECS/HELP debts. This is likely to mean financially it will make sense again to focus on paying down higher interest rate non-deductible debt or offsetting home loans, rather than making voluntary extra repayments on HECS/HELP debts.

 
7. Infrastructure Investment

Direct support in delivering priority road and rail infrastructure in Australia’s $120bn infrastructure investment pipeline. This includes $4.1bn over seven years for 65 new priority projects and $10.1bn over eleven years for existing projects.

Our thoughts: This may be good news for property investors who have well-located properties near new key infrastructure. However, for those looking to develop or renovate properties, this may impact labour and material costs.

 
8. Legislative Update

The Government has a number of measures both legislated and unlegislated yet. A number of superannuation caps and thresholds are also due to increase on 1 July 2024. Whilst not addressed in the Budget, the following is provided as a reminder of some of these measures:

 Superannuation rates and thresholds:

• Concessional contributions (CC) cap increases from $27,500 to $30,000

• Non-concessional contributions (NCC) cap increases from $110,000 to $120,000

• General NCC cap 3-year bring-forward increases from $330,000 to $360,000

• Co-contribution lower threshold increases from $43,445 to $45,400

• Co-contribution higher threshold increases from $58,445 to $60,400

Superannuation Guarantee Charge (SGC):

·        SGC percentage increases from 11% to 11.5%

·        Maximum SG contribution per quarter increases from $62,270 to $65,070

·        Maximum SG contribution base (annualised) increases from $249,080 to $260,280

Our thoughts: These changes should provide further opportunities for your tax planning and/or building your wealth within the tax-advantaged super environment opportunities. The increase in the SGC from 11% to 11.5% is also favourable for employee Doctors who are not already benefiting from a higher employer super contribution (e.g. 12.75% at Qld Health) or at the maximum income threshold.

Summary

With the proposed changes requiring Parliament approval, all of these changes remain to be legislated. New spending is front-loaded into the next two years and adds upside risk to demand and so inflation. So the impact on interest rates and how this affects loan repayments, property prices, the sharemarket and otherwise will be of interest to most.

In addition, well-located, investment-grade properties will likely benefit further if the Budget measures don’t stoke inflation and impact interest rates, as well as those with improved amenity from future infrastructure investments. As with any change in legislation, there are typically strategies to make the most of the changes, and even emerge in a better financial position than before.

Please feel free to contact us if you have any questions or would like to discuss how these changes may affect you.