The past few years have been a whirlwind of change and uncertainty, but 2025 offers a glimmer of hope for greater stability. However, as always, there are no guarantees. Here’s a detailed look at some of the major changes, challenges, and opportunities on the horizon.
Political Landscape: Federal Election Incoming
Brace yourself for a surge of political advertisements across social media, voicemail, and television. Expect the opposition to question whether you’re better off and the incumbents to tout their achievements.
The 2025-26 Federal Budget has been brought forward to 25 March 2025, signaling an impending election likely in March or May but no later than 17 May 2025. This election will play a crucial role in shaping Australia’s immediate future.
Legislative Uncertainty
Superannuation Tax Proposal in Limbo
A proposed 30% tax on earnings in superannuation balances exceeding $3 million remains stalled in the Senate. With elections looming, it’s unlikely this legislation will pass before Parliament dissolves. The fate of this measure will depend on the priorities of the next government.
Small Business Instant Asset Write-Off
The government had extended the $20,000 instant asset write-off for small businesses in the 2024-25 Federal Budget. However, this extension was unexpectedly removed during the final parliamentary session of 2024. Without clarity, small businesses face uncertainty about tax treatment for asset investments, which undermines confidence and planning.
Tax and Superannuation Changes
Changes to Foreign Resident Capital Gains Withholding
From 1 January 2025, foreign residents selling Australian property will face stricter capital gains withholding rules:
- The withholding rate increases from 12.5% to 15%.
- The withholding applies to all property sales, regardless of value.
These changes aim to improve tax compliance but could impact foreign investment sentiment.
Superannuation Guarantee Increase
On 1 July 2025, the Superannuation Guarantee (SG) rate will rise from 11.5% to 12%, completing the legislated increases.
Super on Paid Parental Leave
From 1 July 2025, superannuation contributions will be made on Paid Parental Leave payments, enhancing retirement outcomes for eligible parents.
Economic Outlook and Interest Rates
Interest Rates and Inflation
The Reserve Bank of Australia (RBA) highlighted a reduction in headline inflation from 5.4% to 2.8% over the year to September 2024. However, achieving a sustainable 2%-3% inflation target remains challenging. Banks predict potential rate cuts in 2025:
- Commbank: February
- ANZ/Westpac: May
- NAB: June
Cost of Living Pressures
Living standards grew by a modest 0.2% in Q3 2024, reflecting subdued economic activity. While personal tax cuts and energy subsidies have eased pressures, rising mortgage costs continue to weigh on households. Economic growth, heavily reliant on government spending, is expected to remain slow and steady.
Global Developments: The “Trump Effect”
The inauguration of President-elect Donald Trump on 20 January 2025 brings potential shifts in global trade policies. Tariff threats against Mexico, Canada, and China could escalate trade tensions, potentially slowing China’s economy—a critical trading partner for Australia.
The AUD/USD exchange rate, currently around 64c, reflects market uncertainty. A trade war could exacerbate currency volatility and impact Australian exports.
Sustainability and Compliance
Fuel Efficiency Standards for Vehicles
From 1 January 2025, vehicle manufacturers must meet average CO₂ emissions targets for new cars. Companies that exceed targets can trade credits, while those falling short face penalties after two years. This move aims to encourage more fuel-efficient and low-emission vehicles in Australia.
Wage Theft Criminalised
Effective 1 January 2025, intentional underpayment of workers will become a criminal offense. Employers found guilty face fines up to three times the underpaid amount and/or additional fines up to $7.825 million. This measure emphasises compliance with Fair Work laws and protects employee rights
In Summary
2025 promises both challenges and opportunities for individuals, businesses, and the broader economy. Whether it’s navigating legislative uncertainty, adapting to tax and superannuation changes, or responding to global trade dynamics, staying informed and prepared will be key to making the most of the year ahead.
