Treasury Laws Amendment (More Cost of Living Relief) Act 2025

Overview

The Treasury Laws Amendment (More Cost of Living Relief) Act 2025 was enacted by the Parliament of Australia on 27 March 2025. This Act aims to amend the law relating to taxation, specifically targeting cost-of-living relief for Australian taxpayers. It introduces measures such as new tax cuts and adjustments to Medicare levy low-income thresholds to provide financial relief. The Act commenced on 28 March 2025, the day following Royal Assent, and applies to assessments for the 2024-25 year of income and subsequent years. The policy objective of the Act is to alleviate the financial burden on taxpayers by reducing their tax liability and adjusting relevant thresholds.

Scope and Application

The Treasury Laws Amendment (More Cost of Living Relief) Act 2025 is a Commonwealth Act aimed at amending tax laws to provide relief for Australian taxpayers by introducing new tax cuts and increasing the low-income thresholds for the Medicare levy. This Act applies to all Australian residents and entities, affecting their income tax rates and the Medicare levy thresholds. The Act commenced on 28 March 2025, the day after it received Royal Assent. The amendments primarily target the Income Tax Rates Act 1986 and the Medicare Levy Act 1986, modifying tax rates for different income brackets and adjusting income thresholds for the Medicare levy. The changes are set to take effect from the 2024-25 year of income onwards. While the Act itself specifies the changes, further application and details may be provided through subordinate instruments, which are not explicitly mentioned in the provided text.

Key Provisions

The Treasury Laws Amendment (More Cost of Living Relief) Act 2025 (C2025A00028) introduces significant amendments to existing tax legislation aimed at providing cost of living relief to Australian taxpayers. Key provisions of the Act include changes to income tax rates and adjustments to the Medicare levy low-income thresholds (Schedule 1 and 2). Specifically, Schedule 1 amends the Income Tax Rates Act 1986 by introducing new tax rates for resident taxpayers for the 2024-25, 2025-26, 2026-27, and 2027-28 years of income. These new rates are intended to reduce the tax burden on taxpayers, with a gradual decrease in rates over successive years. For instance, for the 2024-25 year of income, the tax rate for income exceeding the tax-free threshold but not exceeding $45,000 is set at 15%, decreasing to 14% for the 2027-28 year of income. The Act also imposes new obligations on taxpayers and entities governed by the amended legislation. For example, taxpayers must now declare their income in accordance with the new tax rates specified in Schedule 1. Additionally, the amendments to the A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Act 1999 and the Medicare Levy Act 1986 require adjustments to the low-income thresholds for the Medicare levy, affecting eligibility for certain surcharges and levies. These changes mandate that taxpayers and entities ensure their income assessments and related surcharges or levies are correctly calculated based on the updated thresholds. Failure to comply with the new requirements set out in the Act can result in various consequences. For instance, taxpayers who do not accurately report their income under the new tax rates may face penalties, including financial penalties or interest on unpaid taxes. Additionally, incorrect calculations of the Medicare levy surcharge due to non-compliance with the updated low-income thresholds may lead to fines or other civil penalties. The specific penalties and consequences will depend on the nature and severity of the breach, with maximum penalties outlined in the respective Acts being amended. The Act's provisions ensure that taxpayers and entities are aware of their obligations and the potential repercussions of non-compliance.