Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025

Administered by Department of the Treasury

Legislation au C2025A00029 In force Act

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Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025

No. 29, 2025

 

 

 

 

 

An Act to amend the law relating to taxation, and for related purposes

 

 

Contents

1 Short title

2 Commencement

3 Schedules

Schedule 1—Luxury car tax

A New Tax System (Luxury Car Tax) Act 1999

Schedule 2—Denying deductions for interest charges

Income Tax Assessment Act 1997

Schedule 3—Extending ATO notification period for retaining refunds

Taxation Administration Act 1953

Schedule 4—$20,000 instant asset write‑off for small business entities

Income Tax (Transitional Provisions) Act 1997

 

 

 

Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025

No. 29, 2025

 

 

 

An Act to amend the law relating to taxation, and for related purposes

[Assented to 27 March 2025]

The Parliament of Australia enacts:

1  Short title

  This Act is the Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025.

2  Commencement

 (1) Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms.

 

Commencement information

Column 1

Column 2

Column 3

Provisions

Commencement

Date/Details

1.  Sections 1 to 3 and anything in this Act not elsewhere covered by this table

The day this Act receives the Royal Assent.

27 March 2025

2.  Schedules 1 and 2

The first 1 January, 1 April, 1 July or 1 October to occur after the day this Act receives the Royal Assent.

1 April 2025

3.  Schedule 3

The first 1 July to occur after the day this Act receives the Royal Assent.

1 July 2025

4.  Schedule 4

The first 1 January, 1 April, 1 July or 1 October to occur after the day this Act receives the Royal Assent.

1 April 2025

Note: This table relates only to the provisions of this Act as originally enacted. It will not be amended to deal with any later amendments of this Act.

 (2) Any information in column 3 of the table is not part of this Act. Information may be inserted in this column, or information in it may be edited, in any published version of this Act.

3  Schedules

  Legislation that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.

Schedule 1—Luxury car tax

 

A New Tax System (Luxury Car Tax) Act 1999

1  Subsections 25‑1(3) and (3A)

Repeal the subsections, substitute:

Luxury car tax threshold—general

 (3) Subject to subsection (4), the luxury car tax threshold is:

 (a) $80,567 if the supply of the car occurs, or the car is *entered for home consumption, in the 2024‑25 *financial year; or

 (b) if that supply, or entry for home consumption, is in a later financial year—the amount worked out for that financial year after indexing $80,567 annually using Subdivision 960‑M of the *ITAA 1997.

2  Subsection 25‑1(4)

Omit “7 litres”, substitute “3.5 litres”.

3  Subsection 25‑1(6)

Repeal the subsection, substitute:

Indexation

 (6) In indexing the *luxury car tax threshold or *fuel‑efficient car limit, Subdivision 960‑M of the *ITAA 1997 applies as if:

 (a) the table in section 960‑265 of that Act included an item referring to (as the case may be):

 (i) the luxury car tax threshold and subsection (3) of this section; or

 (ii) the fuel‑efficient car limit and subsection (5) of this section; and

 (b) the reference in subsection 960‑270(1) of that Act to provisions of that Act included a reference to subsection (3) or (5) of this section (as the case may be); and

 (c) the reference in subsection 960‑280(2) of that Act to the car limit included a reference to the luxury car tax threshold or fuel‑efficient car limit (as the case may be).

4  Application of amendments

Application of amendments—general

(1) The amendments made by this Schedule apply in relation to supplies, and importations, of cars on or after 1 July 2025.

Continued application of old subsection 25‑1(4) if car was used for certain purposes before 1 July 2025

(2) However, old subsection 25‑1(4) continues to apply, in relation to a supply or importation of a car on or after 1 July 2025, if, before that date:

 (a) an entity made a supply or importation of the car; and

 (b) the car was used in Australia for a purpose other than a purpose mentioned in subsection 9‑5(1) of the Act.

Definitions

(3) In this item:

 Act means the A New Tax System (Luxury Car Tax) Act 1999.

 old subsection 25‑1(4) means subsection 25‑1(4) of the Act as in force immediately before the commencement of this Schedule.

Schedule 2—Denying deductions for interest charges

 

Income Tax Assessment Act 1997

1  Paragraph 25‑5(1)(c)

Repeal the paragraph.

2  Subsection 25‑5(7)

Repeal the subsection (including the note).

3  After subsection 26‑5(1)

Insert:

 (1A) Without limiting paragraph (1)(a), you cannot deduct under this Act the *general interest charge or the *shortfall interest charge.

4  Application of amendments

The amendments made by this Schedule apply in relation to assessments for income years starting on or after 1 July 2025.

Schedule 3—Extending ATO notification period for retaining refunds

 

Taxation Administration Act 1953

1  Paragraph 8AAZLGA(3)(a)

Repeal the paragraph, substitute:

 (a) in a case to which paragraph 8AAZLF(1)(a) applies:

 (i) if the whole or part of the RBA surplus of the entity arises because of a credit that arises directly under the BAS provisions (as defined in subsection 995‑1(1) of the Income Tax Assessment Act 1997)—the 16th day to occur after the RBA interest day (within the meaning of section 12AF of the Taxation (Interest on Overpayments and Early Payments) Act 1983) for the RBA surplus; or

 (ii) otherwise—the RBA interest day for the RBA surplus of the entity; or

2  After subsection 8AAZLGA(3)

Insert:

 (3A) For the purposes of subparagraph (3)(a)(i), the whole or part of the RBA surplus is taken to arise because of a credit if the whole or part of the RBA surplus would not arise but for the credit being allocated to the RBA.

3  Application provision

The amendments made by this Schedule apply in relation to RBA surpluses that arise on or after the commencement of this Schedule.

Schedule 4—$20,000 instant asset write‑off for small business entities

 

Income Tax (Transitional Provisions) Act 1997

1  Section 328‑180 (heading)

Omit “30 June 2024”, substitute “30 June 2025”.

2  Subsection 328‑180(1) (paragraph (b) of the definition of increased access year)

Omit “30 June 2024”, substitute “30 June 2025”.

3  Paragraph 328‑180(4)(d)

Omit “30 June 2024” (wherever occurring), substitute “30 June 2025”.

4  Subparagraphs 328‑180(5)(e)(ii) and (6)(e)(ii)

Omit “30 June 2024”, substitute “30 June 2025”.

 

 

 

 

[Minister’s second reading speech made in—

House of Representatives on 28 November 2024

Senate on 26 March 2025]

 

(165/24)

 

Overview

The Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025 is an Act enacted by the Parliament of Australia to amend the law relating to taxation, addressing various issues including luxury car tax thresholds, deductions for interest charges, and extending the notification period for retaining refunds. The Act aims to enhance tax integrity and provide certain tax incentives to support economic activity. It includes specific provisions to adjust the luxury car tax threshold, deny deductions for certain interest charges, extend the Australian Taxation Office's notification period for retaining refunds, and extend the $20,000 instant asset write-off for small business entities. The commencement dates for different sections of the Act vary, with some provisions taking effect from the date of Royal Assent, while others apply from specific dates in 2025. The Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025 seeks to address issues of tax integrity and economic stimulation by modifying several existing tax laws. The Act introduces amendments to the A New Tax System (Luxury Car Tax) Act 1999, the Income Tax Assessment Act 1997, the Taxation Administration Act 1953, and the Income Tax (Transitional Provisions) Act 1997. It adjusts the luxury car tax threshold to $80,567 for the 2024-25 financial year, reduces the fuel threshold for fuel-efficient cars, and ensures the thresholds are indexed annually. Additionally, it disallows deductions for general and shortfall interest charges and extends the notification period for retaining refunds under the Taxation Administration Act 1953. Finally, it extends the eligibility period for the $20,000 instant asset write-off for small business entities to 30 June 2025.

Scope and Application

The Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025 is a comprehensive piece of legislation that amends various tax-related laws in Australia. The Act applies to individuals, businesses, and entities engaged in taxable activities within Australia, including those involved in the supply of luxury cars, the claiming of deductions for interest charges, the retention of refunds by the Australian Taxation Office (ATO), and the eligibility of small business entities for the $20,000 instant asset write-off. The amendments introduced by the Act are applicable nationally and are effective from various dates between 1 April 2025 and 1 July 2025, depending on the specific provision. The Act includes specific exclusions and thresholds for the luxury car tax and modifies the rules for denying deductions for certain interest charges. Additionally, the Act extends the notification period for the ATO to retain refunds and adjusts the eligibility criteria and timeframe for small business entities to claim the $20,000 instant asset write-off. The Act may be further extended or restricted through subordinate instruments, as specified in the legislation.

Key Provisions

The Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025 (C2025A00029) amends several pieces of Australian taxation legislation, introducing new tax incentives and tightening tax integrity measures. Under Schedule 1, the Act amends the A New Tax System (Luxury Car Tax) Act 1999 by setting the luxury car tax threshold at $80,567 for the 2024-25 financial year and indexing this amount annually thereafter (sections 1 and 3). It also reduces the fuel efficiency threshold for luxury cars from 7 litres to 3.5 litres (section 2) and modifies the indexation provisions to ensure the threshold and fuel-efficient car limit are updated annually (section 6). These amendments apply to supplies and importations of cars on or after 1 July 2025 (section 4(1)), but the old threshold will continue to apply to cars used for certain purposes before 1 July 2025 (section 4(2)). The Act imposes specific obligations on taxpayers and entities in relation to these tax changes. Under Schedule 2, it amends the Income Tax Assessment Act 1997 to deny deductions for general interest charges and shortfall interest charges from income years starting on or after 1 July 2025 (section 1). Taxpayers must ensure they comply with these new rules when preparing their tax assessments for the specified income years. Under Schedule 3, the Taxation Administration Act 1953 is amended to extend the Australian Taxation Office's notification period for retaining refunds related to Reserve Bank of Australia (RBA) surpluses. The amendments specify that the notification period is either the 16th day after the RBA interest day for surpluses arising from Business Activity Statements credits, or the RBA interest day itself for other surpluses (sections 1 and 3A). These changes apply to RBA surpluses arising on or after the commencement of the Schedule (section 7). Failure to comply with the new tax provisions can result in civil or criminal penalties. For instance, under the A New Tax System (Luxury Car Tax) Act 1999, non-compliance with the luxury car tax provisions can lead to penalties under section 178-10 of the Tax Administration Act 1953, which can include fines up to the greater of $22,200 or three times the amount of the unpaid tax. Similarly, under the Income Tax Assessment Act 1997, denying deductions for interest charges without proper justification can result in penalties for providing a false or misleading statement under section 284-15 of the Tax Administration Act 1953, which can also include fines up to the greater of $22,200 or three times the amount of the understatement of tax. These penalties underscore the importance of adhering to the new tax rules and maintaining accurate records.

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.