Federal Budget 2023-24
The overarching goal of the 2023 Federal Budget is clear – to ease cost-of-living pressures and help those most disadvantaged. Targeting a range of areas and industries to provide welcome cuts to healthcare, housing and energy costs, there will also be boosts to welfare payments for single parents and the unemployed.
Spending has been kept under control to deliver a forecast $4.2 billion budget surplus – the first in 15 years. While modest, a range of tax and superannuation related measures will impact individuals and businesses.
The Treasurer sums up his second budget as “a plan for security, for prosperity, for growth”.
Easing the cost of living
The government’s $14.6 billion package of cost cuts is aimed at helping some of those most affected by rising costs and covers energy bills, health and medical services, and welfare payments.
There will be energy bill relief to around five million households and one million small businesses. From July 2023, eligible households will receive up to $500 and eligible small businesses up to $650.
The government will also introduce several energy-saving programs for households including low-interest loans and funds for upgrades to social housing, as well as access to better information on reducing energy bills.
Health and medical
An extra $3.5 billion will be spent to incentivise doctors to bulk bill Concession Card holders and children under 16. The incentive is expected to help around 11.6 million people.
The cost of medicines will also likely change for many who suffer chronic health conditions. From 1 September 2023, some patients will be eligible for two months’ worth of prescribed medicine at a time, instead of one month’s worth. It’s expected this change will cut the number of visits to GPs and pharmacies, and the government estimates at least six million people will see their bills for medicines reduced by half.
The government is also providing $2.2 billion over five years for new and amended listings to the Pharmaceutical Benefits Scheme including treatment for cystic fibrosis.
Meanwhile, to improve access to care and reduce the strain on hospitals, a further $358.5 million will be spent to open eight Urgent Care Clinics, which will bulk bill and remain open for longer hours.
Income support payments including JobSeeker, Austudy and Youth Allowance will rise by $40 a fortnight following a concerted campaign by lobby groups in the months leading up to the Budget.
Recognising the extra challenges faced by older people looking for work, those over age 55 and out of work for at least nine continuous months will now receive the higher rate JobSeeker payment currently paid to those over 60. Around 52,000 people will receive the increase of $92.10 a fortnight.
From September 2023, eligible single parents will receive the Parenting Payment until their youngest child turns 14 (currently up to 8 years old). Those receiving the payment will also benefit from more generous earning arrangements than JobSeeker. Eligible single parents with one child can earn an extra $569.10 per fortnight, plus an extra $24.60 per additional child, before their payment stops.
While rents continue to climb sharply around the country, the government has provided only limited assistance to renters. Those receiving Commonwealth Rent Assistance will see a 15 per cent increase in their payments from 20 September 2023.
Eligibility for the Home Guarantee Scheme will be expanded beyond first home buyers to include any two eligible borrowers (they don’t have to be married or de facto) and non-first home buyers who have not owned a property in Australia in the preceding 10 years.
Longer-term housing initiatives include new tax incentives to encourage the construction of more build-to-rent developments. As a result, the government claims an extra 150,000 rental properties could be delivered in ten years.
There is also a focus on providing more affordable housing by supporting additional lending to community housing providers for social and affordable housing projects.
Aged care and early childhood workforce
Over $11 billion has been allocated to support an interim 15 per cent increase in award wages for aged care workers. More than 250,000 workers are expected to benefit from this.
There will also be more investment towards supporting and enhancing the development of early childhood education and care workers.
An additional 9,500 Home Care Packages are to be released in 2023-24 as well as new aged care assessment arrangements from July 2024.
Support for families
Childcare will become cheaper for many from July 2023, when the government subsidy will increase to 90 per cent for families on a combined income of $80,000 or less. For families earning over $80,000, the subsidy rate will taper down by 1 percentage point for every additional $5,000 of family income until the subsidy reaches 0 per cent for families earning $530,000.
A more flexible and generous Paid Parental Leave scheme will also be introduced from 1 July 2023. Parental Leave Pay and Dad and Partner Pay will combine into a single 20‑week payment. A new family income test of $350,000 per annum will see nearly 3,000 additional parents become eligible for the entitlement each year.
The Government has committed to increase Paid Parental Leave to 26 weeks by 2026.
Measures specifically in support of women include spending to increase female participation in male-dominated trades. National targets will be set for women apprentices and trainees working on major government-funded construction and information and communications technology projects. Over the next four years, more investment will also be made towards improving women’s safety and ending violence against women.
There were no surprises from an individual tax perspective. The already legislated Stage 3 tax cuts will take effect from 1 July 2024. This will effectively remove the current 37% tax bracket, meaning all taxpayers earning between $45,000 and $200,000 will pay a marginal tax rate of 30% (plus Medicare Levy). The top marginal tax bracket of 45% (plus Medicare Levy) will apply to income over $200,000 – this is currently $180,000.
Small and medium businesses with an annual turnover of less than $50 million will have access to a bonus 20% tax deduction for spending that supports “electrification” and more efficient use of energy under the Small Business Energy Incentive.
As expected, superannuation remains in the government’s sights and employers and individuals with larger balances will be affected.
While superannuation contribution caps remain unchanged, the total superannuation balance cap and general transfer balance cap are both set to increase from $1.7 million to $1.9 million from 1 July 2023. This will open an opportunity for some individuals to further boost their super and potentially get more into the tax free retirement phase.
This may coincide well with the end of reduced minimum pension drawdown rates, which will see retirees having to increase their drawdowns from their account-based pensions. The minimum drawdown percentages were reduced by 50% in the 2020 Budget to allow retirees to better manage their super in light of the pandemic. However, this temporary measure is set to expire on 30 June 2023.
The additional tax on super balances over $3 million is proposed to take effect from 1 July 2025. This change will effectively double the tax rate from 15% to 30% on earnings that apply to superannuation balances over $3 million. The earnings include unrealised capital gains, impacting certain SMSF trustees who own property or equities with significant gains. Importantly, the $3 million will include defined benefit accounts but given their complexity, there are further details to iron out.
In addition to the already legislated increase in the minimum superannuation guarantee (SG) rate from 10.5 per cent to 11 per cent from 1 July 2023, the Government has announced that from 1 July 2026, employers will be required to pay their employees’ SG entitlements at the same time as their salary and wages.
The stormy global economic outlook will keep Australia on its toes for the next two years or so but with more immediate cost-of-living pressures, some relief may soon be seen by those who need it most.
If you have any questions about how the Budget measures may impact you, please contact your adviser.
Information in this article as been sourced from:
- The Budget Speech 2023-24 (https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/speeches/budget-speech-2023-24)
- Federal Budget support documents (https://budget.gov.au/)
It is important to note that the policies outlined in this publication are yet to be passed as legislation and therefore may be subject to change.
This communication was prepared by Evans and Partners Pty Ltd (ABN 85 125 338 785, AFSL 318075) (“Evans and Partners”) a wholly owned subsidiaries of E&P Financial Group Limited (ABN 54 60 9913 457) (E&P Financial Group) and related bodies corporate.
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