There were several regulatory and legislative changes that came into effect on 1 April 2024.

It's important to note these changes because they could have a big impact on your business or investments, depending on how they affect you specifically.

Below is a summary of some key changes to be aware of:

Tax laws for rental properties in 2024 

The Government is in the process of reversing current legislation and allowing any interest on loans used to acquire residential investment properties to be deductible for tax purposes again. 

Before this law change reversal residential property landlords were limited on what loan interest could be deducted against the taxable income the property made.  

So, in simpler terms, the Government is changing a law to make it easier for landlords to deduct loan interest from their taxes when they buy rental properties.

From 1 April 2024, 80% of all interest incurred on loans associated with residential rental properties will be deductible for tax purposes, and from 1 April 2025, this will increase to 100%.

This change in legislation is expected to significantly increase the profits that certain residential property landlords will receive in the future. For instance, let's say a landlord paid $30,000 in interest expenses on a loan for a rental property during the 2024/25 tax year. Under the new rules, $24,000 of this amount (which is 80%) will be allowed as a deduction for tax purposes. As a result, the landlord would pay approximately $7,000 less in taxes compared to the previous year.

This alteration in tax laws will lead to a significant boost in cash flow for many residential rental property owners going forward.

The minimum wage increase

The adult minimum wage increased by 2% to an hourly rate of $23.15 from 1 April 2024. For those who employ a number of staff on the minimum wage rate, this could impact your profit margins materially.

As a business owner, you may need to complete a forecast for your business to better understand the exact impact on your business and if you need to consider changing your business strategy to cover this cost increase and mitigate the underlying impact on cash flow.

Road user charges for electric vehicles

From 1 April road user charges will be charged on both full and battery electric vehicles. 

The cost works out at $76 per 1000km for EV’s and $38 per 1000km for plug-in hybrid vehicles. The reduced hybrid rate reflects the fact this type of vehicle already incurs a road user charge for the petrol engine component of the car.

Overall, it is estimated that road user charges for EV vehicles will increase by $1,000 per annum. If you have a fleet of EV vehicles, this could result in a significant cost increase for your business. Therefore, you may need to consider adjusting your business plan to mitigate these higher costs and minimise their impact on your cash flow.

39% trust tax rate change

The tax rate on profits earned through trusts has been increased to 39%, up from the previous rate of 33%.

This change could have a notable effect on your cash flow. If you generate a substantial income through a trust and haven't already done so, it would be a good idea to consider seeking advice tailored to your circumstances. This will help ensure that a trust structure remains suitable for both your business and investment endeavours in the future.

Summary

Those are just a few of the regulatory and legislative changes which came into force on 1 April 2024. Some of the changes may result in a material uplift in underlying cashflow for people, but others may also result in a material decline in cashflow generation.

If you haven’t done so already it may be prudent to review your forecast business cashflows in detail for the next 12-month period, and potentially take some advice where required to make sure you are fully across the changes and the potential impact on you and your business.

If you'd like some assistance or need some professional advice, BDO is here to offer support and leverage our expertise to help you adapt to these regulatory and legislative adjustments.