On Tuesday 9th May, the Labour government handed down its Budget for 2023-24. Here are some of the key Budget announcements that may affect you.
Note that each of these proposals will only become law if it is passed by Parliament.
A surplus for now but stormy seas ahead
Treasurer Jim Chalmers bills his 2023 Federal Budget as an economic strategy to help ease cost-of-living pressures.
To that end, he has delivered a modest but welcome package of cuts to healthcare, housing and energy costs as well as boosts to welfare payments for single parents and the unemployed.
Banking an unexpected bonus in increased tax revenue and rising commodity prices, the Albanese government has aimed to help the most disadvantaged while also looking ahead with new plans for renewable energy, defence and the arts.
But it has kept its spending under control to deliver a forecast $4.2 billion budget surplus – the first in 15 years.
The Treasurer sums up his second budget as “a plan for security, for prosperity, for growth”.
The big picture
While the first budget surplus in a decade and a half is to be celebrated, the joy will be short-lived. By next year’s budget, it’s expected there will be a return to small deficits for the next few years.
That’s because the global economy is slowing thanks to persistent inflation and higher interest rates. Aside from the pandemic and the 2007 Global Financial Crisis, the next two years are expected to be the weakest for global growth in more than two decades.
As a result, the government expects Australia’s economic growth to slow from 3.25 per cent in 2022-23 to just 1.5 per cent the following year, before recovering a little to 2.25 per cent.
In this environment, the treasurer continues to mark inflation as the government’s primary economic challenge. He says that is why the budget is “calibrated to alleviate inflationary pressures, not add to them”.
The good news is that the Reserve Bank says inflation is falling slightly faster than it had first forecast and has now passed its peak.i It is expected to be around 4.5 per cent by the end of the year, a long way from last year’s CPI rate of 7.8 per cent.ii
Cost of living
Energy bill relief:
An electricity bill credit of up to $500 will be available in 2023/24 for:
- Pensioners
- Commonwealth Seniors Health Card holders and other concession card holders
- Recipients of Carer Allowance and Family Tax Benefit A and B
- Veterans, and
- those eligible for existing State and Territory electricity concession schemes.
Eligible small businesses will receive a credit of up to $650. The amount of the credit will vary depending on the location, with no further details revealed in the Budget.
Pharmaceutical Benefits Scheme changes:
Individuals will be allowed to buy twice as many common medicines for the price of one script under changes to the Pharmaceutical Benefits Scheme from 1 July 2023. This will allow a patient access to 60 days worth of medicine for each script.
The change will save general patients up to $180 a year per subsidised prescription. Concession card holders are expected to save up to $43.80 a year per medicine.
Increased bulk billing:
Children under the age of 16, pensioners and other Commonwealth concession cardholders will have increased access to free healthcare under this measure, with bulk billing incentives being tripled for the most common consultations. This includes face-to-face, telehealth and video conference consultations.
Household energy upgrades:
A number of low-cost loans will be provided to access energy-saving home upgrades, such as battery-ready solar panels, modern appliances an other energy efficiency improvements.
Superannuation
Better targeted superannuation concessions:
The Government will reduce tax concessions on certain superannuation accounts for individuals with a ‘total super balance’ (TSB) of more than $3 million (unindexed). The earnings on any balance that exceeds the $3 million threshold will be subject to an additional tax of 15% (up to 30% in total).
Individuals with a TSB less than $3 million will not be impacted by this change, and investment earnings on the accumulation balance will continue to be taxed at the maximum rate of 15%.
Increasing the payment frequency of employer super payments:
Employers will be required to pay their employees’ super at the same time as their salary and wages from 1 July 2026.
Social security
Increase to working age payments:
The fortnightly rate of JobSeeker Payment and certain other benefits will increase by $40 ($1,040 pa) on 20 September 2023.
The minimum age for the higher rate of JobSeeker Payment will also reduce from age 60 to 55 and over for those who have received the payment for nine or more continuous months. Single recipients aged 55 to 59 with nine continuous months on payment will receive an extra $99.40 pf as a result of both changes.
Increasing Rent Assistance:
The maximum rates of Rent Assistance will increase by 15% on 20 September 2023. This will provide recipients with up to $31 extra per fortnight.
Increase to Home Care packages:
As part of a package to improve the in-home aged care system, the Government will increase the number of Home Care packages by 9,500 in 2023-24. This may help reduce the wait time for individuals who are waiting for a package to be assigned to them.
Personal Taxation
No changes to personal income tax:
The Budget did not contain any measures announcing changes to personal income tax. This includes:
- no changes to the Stage 3 tax cuts which will take effect from 1 July 2024, and
- no extension of the Low and Middle Income Tax Offset, which ended 30 June 2022.
As a reminder, the stage 3 tax cuts will change the income tax rates and thresholds (for resident taxpayers) as follows:
Increasing the Medicare levy low-income thresholds:
The Government will increase the Medicare levy low-income thresholds for singles, families and seniors or pensioners from 1 July 2022. This means low-income earners will be able to earn more income before being liable to pay Medicare levy.
Small business taxation
Small Business Energy Incentive:
Small businesses with an annual turnover of less than $50 million may receive an additional 20% deduction on spending that supports electrification and more efficient use of energy.
Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business. Eligible assets or upgrades will need to be first used or installed and ready for use between 1 July 2023 and 30 June 2024.
Examples of eligible assets include electrifying heating and cooling systems, upgrading to more efficient fridges and induction cooktops, and installing batteries and heat pumps.
$20,000 instant asset write-off:
Small businesses with an annual turnover of less than $10 million will also be eligible to immediately deduct the full cost of eligible assets costing less than $20,000 for assets that are first used or installed ready for use between 1 July 2023 and 30 June 2024.
Small businesses can instantly write off multiple assets as the $20,000 threshold will apply on a per asset basis.
Housing
Changes to eligibility for home buyer guarantee schemes:
From 1 July 2023, joint applications may be made by friends, siblings and other family members under the First Home Guarantee and the Regional First Home Buyer Guarantee. Non-first home buyers who have not owned a property in Australia in the last ten years will also be eligible.
Eligibility for the Family Home Guarantee is also expanding to include eligible borrowers who are single legal guardians of children such as aunts, uncles and grandparents.
The number of guarantees available and other eligibility criteria are unchanged.
Supporting you through the changes
Depending on your circumstances, the Budget proposals could have an impact on your financial situation and your financial plans for the future.
If you have any concerns, or would like to discuss your financial strategy, please don’t hesitate to get in touch with us on (08) 8312 0000 to arrange an appointment.
i RBA says inflation has passed its peak
ii https://www.rba.gov.au/publications/smp/2023/feb/economic-outlook.html