Budget 2025 – Business Insights
The budget has not announced any significant new taxation measures impacting business taxpayers.
Therefore, our analysis considers what this means for existing announced measures, including those which have not yet been enacted:
MEASURES FOR SMALL & MEDIUM BUSINESS
- Private company loan rules
- Limiting non-compete clauses for workers
- Energy bill relief
- Non-deductibility of general interest charge
- Small business asset write-offs
MEASURES FOR LARGE BUSINESSES & INTERNATIONAL
- Managed Investment Trusts
- Foreign resident CGT regime
- Multinationals and large businesses continue to be in the spotlight
If you have any questions as to how this budget impacts you and your business, please contact your local Bentleys advisor. We are here to help you get where you want to be.
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SMALL & MEDIUM BUSINESS
- Private company loan rules
The ATO has previously interpreted the tax law such that unpaid trust distributions (UPEs) to company beneficiaries which remain unpaid are subject to the private company loan rules.
On 19 February 2025, the Full Federal Court handed down its decision in favour of the taxpayer in FCT v Bendel [2025] FCAFC 15 which overturned the ATO position.
On 18 March 2025, the ATO applied for special leave to appeal to the High Court.
On 19 March 2025, the ATO refreshed its Interim Decision Impact Statement warning that:
- While the appeal process continues, the ATO will continue to apply the private company loan rules to company UPEs; and
- Irrespective of the outcome of the appeal, company UPE’s may continue to have tax implications under other taxation laws, such as section 100A (a specific anti-avoidance provision dealing with trust distributions)
The budget has not made any further announcements in relation to the treatment of company UPEs under the private company loan rules. Therefore, trust distributions for the 2025 year and funding arrangements between trusts and companies will need to be carefully considered by business owners and their advisors given the uncertain with the court case and ATO position.
- Limiting non-compete clauses for workers
From 2027, the government is proposing to ban non-compete clauses for certain low and middle income employees with annual wages up to $175,000 which prevent employees moving to a competitor or commencing their own business.
Employers will need to carefully consider the impact on their workforce retention policies and their current employment agreements.
- Energy bill relief
The government will provide $1.8 billion over two years from 2025–26 to continue energy bill rebates of $75 per quarter for eligible Australian households and small businesses until 31 December 2025 to provide cost-of-living relief.
- Non-deductibility of general interest charge
On 13 December 2023, as part of the 2023–24 Mid-Year Economic and Fiscal Outlook (MYEFO), the government announced it will amend the tax law to deny deductions for ATO interest charges.
This measure will mean that taxpayers will no longer be able to claim deductions for general interest charges (GIC) and shortfall interest charges (SIC) for income years starting on or after 1 July 2025. Any remitted interest will no longer need to be included in assessable income.
The legislation has stalled in parliament and there are no new announcements in relation to this measure in this budget and what will occur if it is not passed before the election.
- Small business asset write-offs
For many years small business has had the ability to write-off the cost of assets at various higher thresholds. It appears that this will no longer be the case from 1 July 2025 unless the asset cost is less than $1,000.
On 14 May 2024, as part of the 2024–25 budget, the government announced it will continue to provide support for small businesses by extending the $20,000 instant asset write-off limit for a further 12 months until 30 June 2025. This measure was announced in the 2024 budget but has not been legislated.
In the 2025 budget delivered on 25 March 2025 there was no mention of extending this measure beyond 1 July 2025.
As this measure is not proposed to be extended and has not been legislated it will affect small business asset purchases made before or after 1 July 2025 and may impact purchases in the current financial year if the legislation is not passed.
LARGE BUSINESS & INTERNATIONAL
- Managed Investment Trusts
The federal government has announced it will clarify the operation of the Managed Investment Trust (MIT) rules to ensure that widely held offshore investors such as pension funds are able to access the concessional withholding MIT rates on eligible fund distributions.
The proposed changes are also intended to maintain current industry understanding of the operation of the MIT pooling requirements under Division 275 of the Income Tax Assessment Act 1997 and remove ambiguity around the use of MITs.
The proposed changes are also intended to support the ATO’s recent tax alert TA 2025/1 that was issued on 7 March 2025 targeting inappropriate re-structures to take advantage of the MIT concessions.
The MIT changes are to take effect from 13 March 2025.
- Foreign resident CGT regime
In the previous budget, the federal government had announced changes to the foreign resident CGT regime.
These proposed changes centred on the operation of foreign resident CGT rules found in Division 855 of the Income Tax Assessment Act. In particular, three areas of change are to be targeted:
a) Clarify and broaden the types of assets that foreign residents will be subject to CGT
b) Amending how the principal test is to be measured over a period
c) Require foreign residents to notify the ATO when disposing of shares and other membership interests exceeding $20m in value prior to executing the transaction
The above measures were to apply from 1 July 2025 but this is now to be deferred to the later of 1 October 2025 or the first 1 January, 1 April, 1 July or 1 October after the Act receives Royal Assent.
For foreign investors generally, the deferred start date of the changes to the foreign resident CGT regime may provide slightly more time to assess or reassess their investment strategies in Australia.
- Multinationals and large businesses continue to be in the spotlight
The ATO Tax Avoidance Taskforce has proven successful for the federal government over the years in generating additional tax revenues from multinationals and taxpayers at the larger end of town.
Additional funding of $717.8 million for the Tax Avoidance Taskforce is to be provided by the federal government which will allow the ATO to continue its focus on multinationals and other large taxpayers.
The role of the taskforce is to monitor tax compliance activities at the larger end of town. Such activities have included the Top 1000 Public Groups Performance Program and Next 5000 Private Groups Tax Performance Program.
The federal government has previously seen additional revenue collections exceeding $12 billion over a 5-year period as a result of the taskforce review activities since its establishment in July 2016.
With ongoing ATO scrutiny, it is expected that many larger businesses, including multinationals operating in Australia, will continue to review and reassess their tax governance procedures and tax protocols in anticipation of ongoing ATO reviews.
INNOVATION & INCENTIVES
There are no planned changes to the R&D tax incentive. This is the federal government’s premier mechanism to incentivise and reward companies for undertaking research and development activities in Australia.
The federal government has allocated $2 billion over 19 years from 2024–25 for Green Aluminium Production Credits to provide production-based grants to support Australian aluminium smelters switching to renewable electricity before 2036.
A further $1 billion has been allocated over seven years from 2024–25 for the Green Iron Investment Fund to fund green iron projects through capital grants to support producers to establish or transition into low emissions facilities in Australia, including up to $500 million earmarked to transform the Whyalla Steelworks.
INDIRECT TAX & GST
- Tax relief for Australian wine producers, distillers and brewers
To support hospitality venues, beer brewers, alcohol manufacturers and wine producers, the federal government has announced the following concessions relating to excise and the WET rebate:
- Freezing indexation from August 2025 on draught beer excise and excise equivalent customs duty for a two year period up to August 2027
- Increasing the cap for all eligible alcohol manufacturers by $50,000 per year, from the current annual cap of $350,000 to $400,000. This is to start from 1 July 2026
- Increasing the maximum WET rebate for wine producers from $350,000 to $400,000 per year. This is to start from 1 July 2026
Wine producers will note that the proposed increase in the WET rebate still falls short of the earlier higher rebate of up to $500,000 prior to 1 July 2018, but the new concessions should still be welcomed news for many brewers, distillers and wine producers with the government hoping that it will also support hospitality venues, jobs and regional tourism.
- Goods and Services Tax
There are no further changes proposed to the Goods and Services Tax.
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Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.
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