An election, a growing deficit, geopolitical instability, looming trade wars, and continued cost of living pressures. Sounds challenging, right? While these issues may seem daunting, Australians are known for their resilience and ability to adapt. This year holds both challenges and opportunities for small and mid-sized businesses.
In this post, we break down the key factors shaping 2025 and how they could affect your business.
1. The Political Landscape
The 2025 Federal Election
With the Prime Minister’s election tour in full swing, it’s clear that an election announcement is imminent. The Federal Budget has been brought forward to 25 March 2025, suggesting that the election will occur between March and May, with 17 May 2025 as the latest possible date.
Renowned analyst Antony Green notes that Australia has never held a federal election in January or February, making March or May the most likely options. However, with the Western Australian state election set for 8 March, February remains a possibility.
Key Themes to Watch:
- Opposition leader Peter Dutton’s campaign mirrors the Trump administration’s strategy, focusing on whether voters feel better off than four years ago.
- Prime Minister Albanese’s messaging will emphasise stability and improved living conditions under his leadership.
- Advertising spend is in the spotlight, with government expenditure on campaigns hitting $251 million in 2023-24.
2. Legislative Changes and Potential Roadblocks
Lost Legislation and Lapsed Bills
When an election is called, the Houses of Parliament dissolve, and any pending Bills lapse. Despite the Senate pushing through 32 Bills in late 2024, several key proposals remain unresolved.
Key Legislation to Monitor:
- Zombie Tax on Superannuation: The proposed 30% tax rate on super balances above $3 million is set to commence from 1 July 2025. This contentious measure may face further delays or removal.
- Instant Asset Write-Off: The extension of the $20,000 threshold for small businesses was removed at the last minute in late 2024. Businesses currently face uncertainty over the tax treatment of asset purchases.
Fuel-Efficient Vehicle and Tax Integrity Measures
The Senate Economics Legislation Committee is due to report on several key measures by 30 January 2025:
- Luxury Car Tax (LCT) Reform: The threshold for fuel-efficient vehicles is tightening from 7 litres/100 km to 3.5 litres/100 km.
- BAS Refund Retention Period: Following the TikTok GST refund scam, the ATO will now have 30 days (up from 14) to notify businesses of withheld refunds.
3. Tax and Superannuation Changes
Clearance Certificates for Property Sales
From 1 January 2025, all Australian residents selling property must provide a clearance certificate to the buyer before settlement. Failure to do so will result in 15% of the sale price being withheld (up from 12.5%).
Superannuation Guarantee (SG) Increase
The SG rate will rise from 11.5% to 12% on 1 July 2025. This marks the final step in the legislated increases.
Super on Paid Parental Leave
Starting 1 July 2025, superannuation contributions will be included in Paid Parental Leave payments. Eligible parents will receive an additional 12% contribution, boosting their retirement savings.
4. Economic Factors
Interest Rate Predictions
While inflation has eased from 5.4% to 2.8%, the Reserve Bank of Australia (RBA) remains cautious. Economists predict rate cuts may occur in 2025:
- Commbank: February 2025
- ANZ and Westpac: May 2025
- NAB: June 2025
However, with the Australian dollar weakening amid potential US-China trade tensions, rate cuts could be delayed.
Cost of Living Pressures
The National Accounts report showed only a 0.2% increase in living standards for the September quarter. While personal income tax cuts and energy subsidies provided relief, mortgage costs remain high, keeping household budgets tight.
5. International Impact: The ‘Trump Effect’
President-elect Donald Trump’s policies could have a significant impact on Australia’s economy. Key proposals include:
- A 25% tariff on imports from Mexico and Canada.
- An additional 10% tariff on goods from China.
China accounts for 26% of Australia’s goods and services trade, making any slowdown in Chinese demand a major concern for local businesses.
6. Industry-Specific Updates
New Standards for Fuel-Efficient Vehicles
From 1 January 2025, vehicle manufacturers must meet new CO2 emission targets. Non-compliance could result in penalties, though companies can trade credits or generate new ones within two years.
Wage Theft Criminalisation
From 1 January 2025, intentional underpayment of workers is now a criminal offence. Penalties include fines up to three times the amount of underpayment, capped at $7.825 million.
Preparing Your Business for 2025
The economic and legislative changes ahead underscore the importance of being proactive. Whether it’s planning for tax changes, adjusting for new regulations, or preparing for market shifts, staying informed is crucial.
At Business Edge Advisors, we’re here to help you navigate these complexities. Contact us to discuss how we can support your business through 2025 and beyond.
FAQs
1. How will the 2025 Federal Election impact my business?
Election outcomes could affect government spending, tax policy, and regulations. Planning for different scenarios can help mitigate risks.
2. What happens if I don’t provide a clearance certificate for property sales?
Without a clearance certificate, 15% of the sale price will be withheld. It’s important to apply for this certificate early.
3. How can I prepare for wage theft criminalisation laws?
Ensure payroll processes are accurate and compliant with the Fair Work Act to avoid penalties.
4. Will superannuation changes affect employer costs?
Yes, the SG increase to 12% may increase overall employment costs. Budgeting for this increase is essential.
