The 2023 Federal Budget focuses on proving cost of living relief through lower power bills, higher welfare payments, and more support for small businesses and housing.
Following is a summary of some of the major proposals and how they may affect you and your family.
Cost of living
Energy bill relief: An electricity bill credit of up to $500 will be available in 2023/24 for:
Pensioners and Veterans
Commonwealth Seniors Health Card holders and other concession card holders
Recipients of Carer Allowance and Family Tax Benefit A and B, 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, and other energy efficiency improvements.
More 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%.
The government has not provided any further guidance on how the measure will technically operate in the Budget, other than to reiterate that it will be based on a member’s total super balance
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.
No announcement to extend halving of the pension minimums for another year: The government did not announce any extension of the halving of the account-based pension and term-allocated pension minimum drawdown requirements, which have been in effect since 2019-20. As a result, the minimum drawdown requirements are likely to revert to 100% of the standard minimum from 1 July.
No announcement to freeze the transfer balance cap at its current level: In February 2023, it was confirmed that the Transfer Balance Cap (TBC) would increase by $200,000 to $1.9m on 1 July this year due to indexation. However, since February there has been some industry speculation that the government may freeze the TBC at its current level of $1.7m in the Budget – which did not happen.
While it’s still possible that the government could announce this before the end of the year, the fact it wasn’t announced in the Budget suggests the TBC will increase to $1.9m on 1 July 2023 as expected.
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 (LMITO), which ended on 30 June 2022.
As a reminder, the Stage 3 tax cuts will change the income tax rates and threshold (for resident taxpayers) as follows:
Increasing the Medicare levy low-income thresholds: From 1 July 2022 the government will increase the Medicare levy low-income thresholds for singles, families, seniors, and pensioners from the 2022-23 income year. This is a routine increase and applies retrospectively from the beginning of the financial year.
The increase in thresholds provides cost of living relief by taking account of recent CPI outcomes so that low-income individuals continue to be exempt from paying the 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.
Changes to eligibility for home buyer guarantee schemes: The government has announced it will expand the eligibility of the Home Guarantee Scheme from 1 July 2023 to:
allow two eligible people to be joint applicants for a guarantee beyond spouses and de facto partners
allow non-first home buyers who have not owned a property in Australia for at least 10 years to access the First Home Guarantee and Regional Home Guarantee
allow a single legal guardian of children to access the Family Home Guarantee
allow Australian permanent residents to access the Scheme.
The Home Guarantee Scheme includes:
The First Home Guarantee – supports eligible first-home buyers to buy their first home sooner, with a deposit of as little as 5%.
The Regional First Home Buyer Guarantee – to support eligible regional first home buyers to buy a home in a regional area.
The Family Home Guarantee – to support eligible single parents with at least one dependent child to buy a home, with a deposit of as little as 2%.
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 of 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.
Temporary changes to the work bonus to incentivise pensioners into the workforce extended: The government will extend the measure to provide age pensioners and veteran pensioners, a once-off credit of $4,000 to their Work Bonus income bank and temporarily increase the maximum income bank until 31 December 2023.
Under this measure, pensioners can earn up to $11,800 before their pension is reduced, supporting pensioners who want to work, or work more hours, to do so without losing their pension.
Note: These changes are proposals only and may or may not be made law.
If you have any questions, please speak with your financial adviser who can help you to understand how these proposed changes could apply to you.
Important information and disclaimer
Sources: www.budget.gov.au, https://www.cfs.com.au/content/dam/colonial-first-state/docs/adviser/firsttech/FirstTech-Budget-Briefing-Paper-2023.pdf
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