Federal Budget 2024-25: How Are Hospitality Businesses Impacted?

On Tuesday, 14th May 2024, Treasurer Dr Jim Chalmers handed down the federal government’s budget for 2024-25. 

With inflationary pressures heightening over the last 12 months, impacting households and businesses further intensifying the cost-of-living crisis, the budget aims to balance initiatives to boost economic growth while reducing inflation and easing cost-of-living pressures.

While some initiatives were announced to help small and medium-sized businesses (SMBs), the budget largely focused on easing the financial burdens of everyday Aussies, from freezing medicine prices to increasing rental assistance and reducing student debts. 

However, the initiatives laid out in the budget to help SMBs will provide some financial relief and boost cash flow for thousands of hospitality businesses. 

To cut through the noise, we’ve nailed down the most important details for businesses and how they’re set to impact hospitality venues in the coming financial year.

What were businesses hoping for?

Hospitality businesses have been battling the cost of living crisis on two fronts. Firstly, their customers are feeling the pinch and are spending less. Secondly, the cost of operating has dramatically increased, denting already tight margins. 

Unsurprisingly, research conducted before the federal budget was announced found that SMBs wanted the budget to focus on measures that relieve cost-of-living pressures above other initiatives like removing red tape and lowering the company tax rate. 

While the budget didn’t offer any extensive relief packages for businesses, a number of policies should have a positive knock-on effect for small businesses. 

How does the budget impact hospitality businesses?

We examined the budget in depth to determine which new policies, grants, and initiatives will have an impact, either directly or indirectly, on hospitality venues.

1. Instant asset write-off extended
2. Energy bill relief
3. Stage 3 tax cuts
4. Reduced immigration

1. Instant asset write-off extended

Last year’s budget outlined a $20,000 instant asset write-off for businesses that was due to expire on 30 June 2024. However, the new budget has extended this initiative for another year.

Under the extension, businesses with an annual turnover of $10m or less can instantly deduct the entire cost of assets that cost less than $20,000. The asset must be installed or ready for use by 30 June 2025.

The $20,000 threshold applies to each individual asset, so businesses can buy and write off multiple assets as long as each one costs less than $20,000.

2. Energy bill relief

Around 1 million eligible small businesses will receive a $325 rebate on their energy bills from July this year. The $325 will automatically be deducted from businesses’ energy bills over the next financial year on a quarterly basis.

The scheme also extends to all Australian households; however, the rebate per household totals $300. The government says its energy bill relief amounts to a 17% reduction on the average power bill.

3. Stage 3 tax cuts

The stage 3 tax cuts had been announced prior to the budget address and will come into effect on July 1 this year. This means all of Australia’s 13.6 million taxpayers will receive tax relief from the middle of the year–essentially putting more money into consumers’ pockets.

What are the stage 3 tax cuts? 

• The 19% tax rate will be reduced to 16%
• The 32.5% tax rate will be reduced to 30%
• The threshold at which the 37% rate applies will be increased from $120,000 to $135,000
• The threshold at which the highest rate of 45% applies will be increased from $180,000 to $190,000

While the tax cuts are aimed at reducing the cost of living pressures, there is speculation that this will lead to more disposable income, which may have a knock-on effect on consumer spending in hospitality venues.

4. Reduced immigration

Net overseas migration is forecast to halve to 260,000 in 2024-2025, which could impact staffing levels for hospitality businesses.

The number of places for international students is being capped; however, the exact details are yet to be determined in negotiations with universities.

Additionally, the government will cap the next financial year’s permanent migration program at 185,000 places, with 132,200 of those places allocated to skill streams, potentially restricting the number of new foreign workers able to work in the hospitality industry.