Changes in store for 2025 tax time

This article was current at the time of publication.

The end of the 2024–25 financial year is fast approaching, so it is important for practitioners to be aware of changes relevant to individual clients, private groups and businesses.

SW Accountants & Advisors Partner and Tax Director, Daren Yeoh FCPA has developed CPA Australia’s tax tool kit for public practitioners, along with colleagues Eric Lay, Abi Chellapen and Ned Galloway. 

The tool kit will be available to members soon. Please keep an eye out in Tax News or in the next edition of In Practice, which hits your inbox on 7 July. 

Tax rates

Yeoh notes the rates for lower tax brackets were reduced at the start of 2024–25, while the thresholds for higher brackets were increased:

• The 19 per cent tax rate was reduced to 16 per cent for incomes between A$18,200 and A$45,000, while the 32.5 per cent tax rate was lowered to 30 per cent for incomes between A$45,000 and A$135,000.
• The threshold for the 37 per cent tax rate was increased from A$120,000 to A$135,000, and the threshold for the 45 per cent tax rate was lifted from A$180,000 to A$190,000.
  The Australian Government has also announced the following new individual tax cuts:
• From 1 July 2026, the 16 per cent rate will be reduced to 15 per cent.
• From 1 July 2027, the 15 per cent rate will be reduced to 14 per cent.

Work-related expenses

From 1 July 2024, the fixed rate method to claim additional running expenses from the working from home rate was increased from 67 cents to 70 cents per hour. The government also proposed an automatic deduction of A$1000, without the need for substantiation, before the recent election. If passed by Parliament, this will simplify tax returns for most taxpayers.

Crypto record-keeping

The Australian Taxation Office (ATO) is continuing to acquire account identification and transaction data from crypto designated service providers, which is being used to identify individuals who fail to report a disposal of crypto assets in their tax return.

“Practitioners should advise clients to maintain records of their crypto transactions to ensure any relevant disclosures are made in their tax returns, including where crypto is sold, converted into fiat currency, traded for another crypto, or used to purchase goods and services,” Yeoh says.

Foreign resident capital gains tax regime

The foreign resident capital gains tax (CGT) withholding rate was increased from 12.5 per cent to 15 per cent at the start of 2025 for contracts entered on or after 1 January 2025, and the A$750,000 property value threshold was removed.

Proposed changes to the indirect Australian real property interest (sale of shares and units) rules have been pushed back from 1 July 2025 to the quarter after the Bill receives royal assent.

“The government has also proposed measures to clarify that the CGT base for foreign residents will include leases or licences to use Australian land, and infrastructure and machinery installed on land,” Yeoh says.

Unpaid present entitlements, section 100A and Division 7A

The Federal Court of Australia recently held in Commissioner of Taxation v Bendel (2025) FCAFC 15 that outstanding unpaid present entitlements (UPEs) owed to a private company were not categorised as loans to the trust for Division 7A purposes. The Commissioner has since applied for special leave to appeal to the High Court.

“Until the appeal process is finalised, clients should consider their circumstances and manage the risks of private company UPEs accordingly. For certainty, taxpayers can follow the ATO guidance and put UPEs on Division 7A complying loan terms to manage their tax risks (including section 100A).

 “Where a UPE isn’t converted into a complying Division 7A loan, taxpayers face the risk that other integrity provisions may apply to their arrangement. The application of these integrity provisions is not dependent on the outcome of the High Court proceedings,” Yeoh recommends.

Instant asset write-offs

For the 2024–25 income year, small businesses with an aggregated turnover of less than A$10 million can claim an immediate deduction for the full cost of eligible assets costing less than A$20,000 per eligible asset under the instant asset write-off program.

To be eligible, assets must be purchased and installed ready for use between 1 July 2024 and 30 June 2025. Both new and second-hand assets qualify, including machinery, tools, office equipment and vehicles.

Interest charges

From 1 July 2025, taxpayers will no longer be able to claim tax deductions for general interest charges and shortfall interest charges. It is recommended that any amounts owing be paid prior to 30 June 2025.

Personal services income and Part IVA

Taxpayers should be aware that Part IVA of the Income Tax Assessment Act 1936 may still apply to arrangements – particularly income splitting and retention of profits arrangements – even if a personal services business (PSB) is being conducted.

Taxpayers should review their PSB arrangements and manage their circumstances accordingly if they fall within “higher risk arrangements” under PCG 2024/D2.

TD 2024/D2 and PCG 2024/D3, section 99B trust distributions

Practitioners should be aware that the ATO has outlined a simplified compliance approach for deceased estates where property is distributed within 24 months of the date of death, and for the use of trust property on commercial terms.

However, for all other section 99B related matters where a property is paid to a beneficiary of a foreign trust, regard should be had to exceptions in 99B(2)(a) and (b) – corpus and amounts not included in assessable income of resident taxpayers – to determine whether amounts can be excluded from 99B.