What the Latest Federal Budget means for you.
The 2023-24 Federal Australian Budget announcement titled "Stronger foundations for a better future" acknowledges the challenging economic environment and uncertain global outlook.
The budget aims to provide targeted cost-of-living relief for those in need, invest in sustainable growth drivers, and sustainably fund services relied on by Australians. The budget is also forecast to achieve a surplus in 2022-23 and lower deficits and debt across the forward years.
Key areas of focus include:
delivering cost-of-living relief
strengthening Medicare
investing in a stronger and more secure economy
broadening opportunity
strengthening the Budget and funding our priorities.
In the official outline, which you can find here, the budget intends to “strike the right balance between dealing with immediate challenges and setting Australia up for the future.”
What does that mean for you? Here is a breakdown of key updates from Students to Retirees, to Small Businesses and Superannuation.
Young Families
Extension of the single parenting payment, with a $1.9 billion investment, keeping single parents on higher payments for six years by lifting the cutoff age for the youngest child from eight to 14, which will put $176.90 extra in their pockets per fortnight.
A $3.5 billion investment to triple the Medicare bulk billing incentive for GPs, providing greater access to free doctors' consultations for 11.6 million Australians, including all children.
An investment of $18 million for $900,000 grants to build early childhood education and care centers in childcare deserts.
Middle-income Households
A $1 billion investment in low-cost loans to improve energy efficiency in homes, including double-glazing and solar panels, for around 110,000 households.
No extension to the Low and Middle Income Tax Offsets, resulting in workers receiving up to $1500 less at tax return time this financial year.
The government predicts that its budget will decrease inflation by 0.75 of a percentage point and expects wages to surpass inflation in the next financial year.
The eligibility for the First Home Guarantee and Regional First Home Buyer Guarantee is being extended to any two borrowers jointly applying for a loan, beyond a spouse or de facto couple.
Welfare Recipients
A $4.9 billion investment in lifting the base rate of JobSeeker and other income support payments by $40 per fortnight for a single person, taking the fortnightly rate of JobSeeker from $693.10 to $733.10 starting from September 20.
The higher base rate of JobSeeker for over 60s will be extended to over 55s, benefiting 52,000 Australians aged 55-59, with an increased payment of $92.10 a fortnight, more than half of whom are women.
A $2.7 billion investment in a 15% increase to the rate of Commonwealth Rent Assistance, providing up to an additional $31 a fortnight for approximately 1.1 million eligible households.
A combined federal and state funding of $3 billion for energy bill relief, with a deduction of up to $500 from power bills for more than 5 million households receiving welfare support over the next financial year.
Students/Young people
The government is proposing to offer 300,000 fee-free TAFE places from 2024 to 2026 for critical and emerging industries, subject to agreement with state and territories.
Students on Youth Allowance, Abstudy, and Austudy will receive a $40 per fortnight increase in their support payments. Additionally, they will benefit from the increased rate of Commonwealth Rent Assistance, which will provide an average of $24 more a fortnight for those paying over the maximum threshold.
University HECS loan indexation will rise to 7.1% in June, adding to the debt burden students will have to repay.
$8.6 million has been allocated to ensure that one in ten workers on a major federally-funded project is a trainee or apprentice.
High Income Earners
From July 1, 2025, earnings on superannuation balances over $3 million will be taxed at an increased rate of 30 per cent, up from 15 per cent.
The Passenger Movement Charge will increase from $60 to $70 for international trips from July 1 next year, bringing in a net $505 million in additional tax revenue.
The stage three tax cuts, which remove the 37 per cent marginal tax rate for earnings over $150,000 and reduce the 32.5 per cent rate to 30 per cent for earnings between $45,000 and $200,000, will proceed as planned from July 1, 2024.
After the 11th rate hike in 12 Reserve Bank board meetings, investors and mortgage holders are under increasing pressure.
Retirees
The RBA's cash rate increase could benefit those with large savings accounts, provided their banks pass on the increase. The current cash rate is 3.85%.
People can save up to $180 per year by purchasing two months' worth of medicines at a pharmacy for over 300 different medications.
Small Business
Small businesses with an annual turnover under $10 million can benefit from a $20,000 instant asset write-off for assets installed and used in the 2023-24 financial year.
Small and medium-sized businesses can share in $310 million in tax relief through the new Small Business Energy Incentive, with a 20% deduction for the cost of eligible depreciating assets to support upgrading to more efficient electrical goods.
$23.4 million in funding is available to help 15,000 businesses build resilience to cyber threats.
One million small businesses can benefit from power bill rebates through the Energy Bill Relief Fund. NSW businesses will receive $650 in bill relief from July 1, while Victorian businesses will save $325.
The GDP Adjustment Factor, used by the ATO to calculate PAYG and GST Instalments based on the previous year's tax return information, has been reduced to 6% for the 2023-24 income year, which is half the 12% rate that would have been applied under the statutory formula.
Budget aims to help small businesses by reducing paperwork burden. Accountants can lodge multiple Single Touch Payroll forms on behalf of clients from July 2024, and tax refunds will be faster and safer. Small businesses will have up to four years to amend their income tax returns starting July 2025, and $9 million over 4 years will be provided for tax clinics. ATO independent review process will be expanded to small businesses being audited with $12.8 million over 3 years from July 2024 for an 18-month trial.
Small businesses with group-wide turnover of less than $10 million will be given a temporary lodgment penalty amnesty. This will remit failure-to-lodge penalties for outstanding tax statements lodged from 1 June 2023 to 31 December 2023 that were originally due from 1 December 2019 to 29 February 2022. The aim is to encourage small businesses to re-engage with the ATO.
Superannuation
Starting July 1, 2026, employers must pay employee superannuation alongside wages. This applies to all employers, but there will be a three-year lead-in period for adjusting systems. While superannuation has always been part of employee remuneration, the efficiency of modern payroll systems, such as Single Touch Payroll, makes this change feasible. Employers must manage their cashflow as this change brings forward superannuation payments.
The ATO will receive additional resources to detect unpaid employer superannuation obligations earlier, and they will be given enhanced targets for the recovery of all such unpaid superannuation for employees.
Individuals with a Total Superannuation Balance (TSB) of more than $3 million on any subsequent 30 June will be subject to an additional 15% tax on the "earnings" from 1 July 2025. Earnings will be calculated using a formula, including any unrealized gains and losses. The additional tax can be paid personally or deducted from the superannuation fund, and the $3 million threshold applies to all ages.
From 1 July 2023, self-managed superannuation funds (SMSFs) or small APRA-regulated funds with six or fewer members will face an effective tax rate of 90% under the non-arm's length income (NALI) provisions for certain expenses that are not at arm's length terms.
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