The 2023/24 Federal Budget

On Tuesday, May 9, 2023, Australia’s treasurer delivered the federal budget, outlining the government’s plans to address key issues affecting the Australian public. The budget focuses on providing cost-of-living relief, strengthening Medicare, and fostering economic growth. After years of deficits, this year’s budget is expected to return a surplus of $4 billion, thanks to increased revenue from personal tax collections resulting from robust job and wage growth. Let’s delve into the key measures announced.

The federal budget for 2023 brings good news for various segments of the Australian population including:

• Low and middle-income households: The budget allocates $14.6 billion over four years to provide cost-of-living support to predominantly low to middle-income households.
• Pensioners and single parents: Measures have been implemented to increase support for pensioners and single parents, costing $1.9 billion over five years.
• Medicine users and general practitioners (GPs): An additional $3.5 billion will be allocated to Medicare over five years to enhance access to GPs, lower medicine costs, and provide better healthcare services.
• Aged care workers and recipients: The budget includes a 15% pay rise for aged care workers, amounting to $14.1 billion over four years. This increase in spending aims to improve the quality of aged care services.
• Low-income renters: To address housing affordability, the budget offers subsidies to move from gas to electric appliances, benefiting low-income renters.
• Jobseeker recipients: The budget introduces a modest increase in Jobseeker payments, with additional support for individuals over 55 years of age.
• Small businesses: Small businesses can take advantage of a $20,000 instant asset write-off, stimulating economic growth and investment.
• Build-to-rent sector: Tax changes are implemented to boost build-to-rent housing and improve housing affordability.
• Skilled migrants: The budget allocates measures to support skilled migrants and foster their integration into the workforce.
• Environment: Investments totaling $2 billion are dedicated to the hydrogen industry and incentives for developers to construct environmentally friendly houses, promoting renewable energy and sustainability.
• Employees: From 1 July 2026, employers will be required to pay their employees super at the same time they pay their wages. This will enable employees to track their entitlements to ensure they are being paid on time and in full. Additionally, this will allow for quicker payment of superannuation guarantee payments and a longer period of time to compound.

While the budget brings several positive outcomes, there are also some sectors that face disadvantages.

• Gas producers: Certain measures within the budget impact gas producers, potentially leading to a reduction in their profitability.
• Vapers and smokers: The budget includes a crackdown on vaping and aims to reduce smoking, which may affect those who engage in these activities.
• Some prospective NDIS recipients: The budget introduces measures to slow down the growth of the National Disability Insurance Scheme (NDIS), potentially affecting some prospective recipients.
• Consultants to the public sector: The budget may impact consultants working with the public sector, potentially leading to changes in their roles or demand for their services.
• High balance super members: The budget introduces a 30% tax on superannuation fund earnings for balances exceeding $3 million. The 30% tax will only apply on the balance over $3million and not the entire balance. This will apply from 1 July 2025.

2022-23 Federal Budget

Despite a backdrop of the ongoing Covid 19 pandemic, the war in Europe, and a looming Australian federal election, the 2022-23 Federal Budget held few big surprises.  Most of the announcements related to tax relief and providing a post-pandemic economic recovery via stimulus payments.

It is important to remember that these are yet to be legislated, although we expect most of them to be accepted by the parliament. Please contact us if you have any questions or would like to know how any of these announcements may impact your personal situation.

The following provides a basic summary of some of the announcements made:

Superannuation

Temporarily extending the minimum pension drawdown relief
Proposed effective date: 1 July 2022

The temporary reduction to the minimum income drawdown requirement for superannuation pensions will be further extended until 30 June 2023. This will allow people to minimise the need to sell down assets given ongoing market volatility. It applies to account-based, transition to retirement, and term-allocated superannuation pensions.

Tax

Temporarily cutting fuel excise
Proposed effective date: 30 March 2022

Fuel excise will temporarily be cut by half, or 22.1 cents per litre, to save families an estimated $30 a week.

Increasing the Low and Middle-Income Tax Offset (LMITO)
Proposed effective date: 1 July 2021

The LMITO will be increased to up to $1,500 for the 2021-22 financial year. All eligible LMITO recipients will benefit from the full $420 increase, referred to as the Cost of Living Tax Offset.  The benefit is based on your taxable income as follows:

• Below $37,000 will be $675 (currently $255).
• Between $37,000 and $48,000, the offset will increase at the rate of 7.5 cents per $1 above $37,000 to a maximum of $1,500 (currently $1,080).
• Between $48,000 and $90,000 are eligible for the maximum LMITO benefit of $1,500 (currently $1,080).
• Between $90,000 and $126,000 the offset phases out at a rate of 3 cents per $1.
• Above $126,000 it is not available

Increasing the Medicare levy low-income thresholds
Proposed effective date: 1 July 2021

Low-income taxpayers will generally continue to be exempt from paying the Medicare levy. The threshold for:

• Singles will be increased to $23,365
• Families will be increased to $39,402
• Single seniors and pensioners will be increased to $36,925
• Families (seniors and pensioners) will be increased to $51,401.

Social security & Aged Care

Introducing a one-off cost of living payment
Proposed effective date: 28 April 2022 onwards

A one-off tax-free payment of $250 to Australians who receive qualifying social security payments or hold eligible concession cards, including:

• Age Pension
• Disability Support Pension
• Carer Payment
• Carer Allowance Jobseeker Payment
• Pensioner Concession Cardholders
• Commonwealth Seniors Health Card holders.

Enhancing the Paid Parental Leave scheme
Proposed effective date: 1 July 2023

The Government plans to create a single scheme of up to 20 weeks, fully flexible and shareable for working parents within two years of their child’s birth or adoption. Single parents will also benefit from the extended 20-week entitlement. The income test will also be broadened. Parents who don’t meet the individual income threshold (currently $151,350) can still qualify for payment if they meet a family income threshold of $350,000 a year.

Lowering the Pharmaceutical Benefits Scheme (PBS) threshold
Effective date: 1 July 2022

The Government will reduce the PBS safety net thresholds to support people who have a high demand for prescription medicines due to their health needs. This means approximately 12 fewer scripts for concessional patients and 2 fewer scripts for general patients a year.

Housing affordability

Expanding the Home Guarantee Scheme
Proposed effective date: 1 July 2022 or 1 October 2022 depending on the specific scheme

The Home Guarantee Scheme allows first home buyers to build or purchase a newly built home with a low deposit, replacing the need for commercial lenders’ mortgage insurance.

The Government is expanding the scheme to make available:

• 35,000 guarantees each year (up from the current 10,000) from 1 July 2022 under the First Home Guarantee, to support eligible first home buyers to build or purchase a newly built home with a deposit as low as 5%.
• 10,000 guarantees each year from 1 October 2022 to 30 June 2025 under a new Regional Home Guarantee, to support eligible homebuyers (including non-first home buyers and permanent residents), to purchase or construct a new home in regional areas with a deposit as low as 5%.
• 5,000 guarantees each year from 1 July 2022 to 30 June 2025 to expand the Family Home Guarantee. This program enables eligible single parents with dependants to enter or re-enter the housing market with a deposit as little as 2%.