What’s ahead for Australia in 2025? The past few years have been full of uncertainty, but 2025 holds hope of change. While stability is not guaranteed, there are several important developments that will shape the year ahead in Australia.

In this article, explore key challenges and changes in 2025, including elections, superannuation updates, wage theft laws, and economic shifts.

An Election:

Get ready for political ads everywhere on social media, TV, and even in your voicemail. Expect messages from the opposition questioning if you’re better off, while the current government will be telling you all the reasons why you are.

The 2025-26 Federal Budget is set for release on 25 March 2025, which suggests that a federal election will take place sometime between March and May 2025, but no later than 17 May 2025. 

Uncertain Legislation

 In late 2024, the Senate passed 32 Bills, including 7 that directly impact business and the financial interests of Australians. However, two major pieces of legislation are still in limbo:

$3 Million Tax on Superannuation Earnings

The proposed Division 296 tax would apply a 30% tax rate on future earnings from superannuation balances over $3 million, starting 1 July 2025. However, the Bill that would make this tax law is currently stalled in the Senate. It’s unlikely to pass before the election, meaning the Bill will expire.

After the election, it will be up to the new government to decide whether to revise the proposal or let it fade away as an idea.

$20,000 Instant Asset Write-Off for Small Businesses

In the 2024-25 Federal Budget, the government announced that the $20,000 instant asset write-off for small businesses will be extended for another year, until 2024-25.

This measure allows businesses with an annual turnover of less than $10 million to immediately deduct the full cost of eligible assets under $20,000. Without this extension, the limit would have dropped to $1,000.

However, this concession was unexpectedly removed during the final sitting of Parliament in 2024. The removal is disappointing, as it leaves small and medium-sized businesses (SMEs) uncertain about how their investments in assets will be taxed in the current financial year.

Tax and Super Changes 

Changes to Foreign Resident Capital Gains Withholding

A new law passed at the end of 2024 changes how capital gains withholding will work for foreign residents starting 1 January 2025.

When residents sell taxable Australian property worth $750,000 or more, they need to provide a clearance certificate to the buyer before settlement. This helps avoid a 12.5% withholding from the sale. If the withholding happens, the amount is credited toward the seller’s tax liability, and any refund is given after their next income tax return is processed.

But from 1 January 2025, the rules will change. The key changes include:

  • The withholding rate will increase from 12.5% to 15%.
  • The withholding will apply to all sales of Australian land and buildings by foreign residents, no matter how much the property is worth.

These changes apply to property sales that happen on or after 1 January 2025.

Superannuation Rate Increases to 12%

The Superannuation Guarantee (SG) rate will rise from 11.5% to 12% on 1 July 2025—the final increase in a series of legislated hikes. 

Superannuation on Paid Parental Leave

Starting 1 July 2025, eligible parents will receive superannuation contributions (12% of Paid Parental Leave payments) added to their super fund, helping to grow their retirement savings. 

Interest Rates

At the latest Reserve Bank of Australia (RBA) meeting, RBA governor Michele Bullock noted that headline inflation had decreased from 5.4% to 2.8% in the year leading up to September 2024.

However, she emphasized that the economy still needs more time to reach the target inflation range of 2% to 3%. The RBA is cautious about market volatility and wants to see inflation consistently trending down before making any changes.

According to predictions, Commbank expects a rate cut in February 2025, while ANZ and Westpac are forecasting one in May 2025, and NAB in June 2025.

Rising Cost of Living Challenges

The National Accounts released in early December surprised economists, showing that living standards only grew by 0.2% in the September quarter, which was much lower than expected. Discretionary spending, like non-essential purchases, increased by just 0.1%.

Personal income tax cuts introduced on 1 July 2024 helped households, along with energy subsidies, but their full effect is still being felt. Meanwhile, rising mortgage costs are continuing to impact households as previous interest rate hikes take effect.

For the year, Australia’s economy grew by 0.8%, the slowest growth since the COVID-19 impacted December quarter of 2020. Right now, the Australian economy is largely driven by government spending.

The outlook for 2025 is expected to be slow and steady.

The ‘Trump effect’

President-elect Trump will take the oath of office on 20 January 2025, marking the start of his administration, which will control the presidency, Senate, and House of Representatives.

For Australia, the key concern is how Trump’s proposed policies, such as tariffs, might affect the economy. On social media, Trump has said:

  • As one of my first Executive Orders, I will sign documents to impose a 25% tariff on all products coming into the United States from Mexico and Canada, and end their ridiculous open borders.
  • We will also charge China an extra 10% tariff on their products entering the US, to combat the flow of drugs like fentanyl from China into America.

For Australia, the risk is the ripple effect of a potential trade war. China is Australia’s largest trading partner, making up 26% of our goods and services trade in 2023. A slowdown in China’s economy could negatively impact Australia and the broader region.

As a result of concerns about a trade war, the Australian dollar (AUD) has dropped against the US dollar (USD), currently sitting at around 64 cents. 

New Car Standards for Fuel Efficiency 

New rules for car manufacturers will take effect on 1 January 2025. These companies will need to meet an average CO2 target for all the new cars they produce. This target will get stricter over time, and car makers will need to offer more fuel-efficient, low-emission, or zero-emission vehicles.

While suppliers can still sell any type of vehicle, they must balance less fuel-efficient models with more fuel-efficient ones to meet their target. If they meet or exceed the target, they’ll earn credits. If they fall short, they’ll have two years to trade credits with another supplier or create their own credits before facing a penalty. 

Wage Theft Now a Crime 

Starting 1 January 2025, intentionally underpaying workers will be a criminal offence.

Employers will be breaking the law if they:

  • Are required to pay an employee for things like wages or superannuation under the Fair Work Act or another agreement, and
  • Willfully fail to pay those amounts by the due date.

Employers found guilty of wage theft could face fines up to three times the amount they owe, with penalties reaching up to $7.825 million. 

Phasing Out Cheques 

The Government has announced a plan to gradually phase out the use of cheques. Under this plan, cheques will no longer be issued after 30 June 2028, and they will no longer be accepted after 30 September 2029.

Cheque usage has dropped significantly over the past 10 years, falling by about 90%. As a result, banks no longer provide chequebooks to new customers.

However, financial institutions are still required by law to accept cheques until the Government officially ends this requirement.

For reference, banks in Denmark stopped accepting cheques in 2017, and banks in New Zealand followed suit in 2021.

Cash Remains King as Cheques Fade Away

While many Australians have switched to digital payment methods, the Government is making sure cash remains an option for payments.

Around 1.5 million Australians still use cash for over 80% of their in-person transactions. Cash also serves as a useful backup when digital payment systems fail, such as during natural disasters or technical issues.

Recent data shows that up to 94% of businesses still accept cash. The Government has announced that businesses will be required to accept cash for essential items, with some exemptions for small businesses.

Currently, businesses are not required to accept cash and can set their own payment terms for goods and services.

Card surcharges are a common issue, where businesses add an extra fee for card payments instead of including it in the product price. While businesses can charge a card surcharge, it must not exceed the cost of processing that payment method.

What’s ahead For Australia in 2025: Stay Prepared

As we look ahead to 2025, it’s clear that change is on the horizon. Whether it’s new tax rules, wage theft laws, or economic shifts, there’s a lot to navigate. If you’re looking to prepare for the year ahead, it’s important to stay informed and adjust your financial plans accordingly. 

For help with tax, superannuation, or business strategy, reach out to our expert team to ensure you’re ready for the opportunities and challenges that 2025 may bring. 

Note: The information in this publication is for general purposes only and should not be taken as advice. Before making any decisions, please seek professional guidance if needed.

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About the Author: David McKeller

David McKellar is a Chartered Accountant and Director of Allied Business Accountants, an accounting firm specialising in providing strategic advice and taxation services to business owners, investors and Self Managed Superannuation Funds.

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