After fifteen years of deficits, the 2023 budget handed down by Jim Chalmers on Tuesday 9 May delivered a surplus of $4.2b – largely a result of strong commodity prices and tax revenue due to the low unemployment rate. However, the surplus is likely to be short-lived with a return to deficit predicted in the ensuing years (-$13.9b estimated for 2023/24). Of this budget surplus, 82% of the extra revenue will be retained to reduce Government debt, the key initiatives of the Budget are outlined below.
Power Bills
Subsidised utility relief addresses the rising household energy costs with a maximum rebate of $500 per household (the amount will differ in each state). These rebates will be available to those on government benefits, and they have been designed to minimise the impact on inflation.
There will also be low-cost loans for energy efficiency home solutions – which includes solar panels and double glazing.
Medical
The government has identified issues with healthcare, the NDIS and Medicare and the centrepiece to their budget is to triple the bulk billing incentives – this will allow GPs to provide free consultations to 11.6m eligible Australians (pensioners and children). They are also increasing the low-income Medicare levy threshold from 1 July.
The budget will also fund 8 urgent care clinics and take measures to reduce wait times, increase staff and consultation times, and lower costs.
From 1 January 2024, medications will be less expensive as the maximum co-payment under the Pharmaceutical Benefits Scheme (PBS) will reduce from $42.50 to $30. The government will also spend $2.2b on new PBS medications and from September this year patients will be able to get 2 months of medication doses per prescription.
The National Disability Insurance Scheme (NDIS) will receive additional funding in a bid to increase staff and fight fraud. There are currently 585,000 people on the NDIS and it is anticipated to reach 1m by 2032. With its costs rising by around $5b per annum, sustainable change will be required.
Small Business
Small businesses with an annual turnover of less than $10 million will be able to immediately deduct eligible assets costing less than $20,000 from July 1, 2023.
Businesses with annual turnover of less than $50 million will be able to claim an additional 20% deduction on spending that supports more efficient energy usage. Eligible assets or upgrades will need to be first used, or installed ready for use, between 1 July 2023 and 30 June 2024.
A business taxation amnesty will be available to those with a turnover of less than $10m per annum.
Superannuation
Increase in payment frequency
Beginning July 1, 2026, firms must pay their employees' SG entitlements on the same day as they pay salary and wages in an effort to crack down on non-compliant employers and ensure that Australians' super balances are where they should be. The tax office has acknowledged the former quarterly payment schedule exposes workers to being short-changed on their super payments, with an estimated $3.4 billion in super payments not being made in 2019–2021.
Revised concessions
The government will restrict the tax breaks provided to people with super balances over $3 million as of 1 July 2025. Around 80,000 Australians will be affected by the decision, and their concessional tax rate on earnings will rise from 15% to 30% for profits equal to the part of their total super balance that is larger than $3 million. This adjustment is meant to make sure that large superannuation concessions are more effectively targeted and long-lasting.
Housing
For first home buyers, there will be an expansion of the eligibility for the First Home Buyers Guarantee which will allow two borrowers jointly applying beyond the previous scope of spouse or partner.
Low-cost loans will be provided to Community Housing Providers and incentives will be offered to the private sector to build and rent out homes.
Additional funding will be provided to the states and territories to help combat the homeless epidemic.
Renewable Energy and Sustainability
With a focus on green energy, over $2b will be allocated to a hydrogen program. The goal over the next 7 years is to reduce emissions by 43% (and net zero emissions by 2050) and to make Australia a world-leading hydrogen producer and exporter.
Aged Care Staff
Aged care workers will receive a 15% pay rise, the largest ever industry increase. Nurses will receive a $10,000 per annum pay rise.
Veterans
Funding will be provided to clear the backlog regarding veteran claims and to provide support in case management and mental health.
Childcare
The Paid Parental Leave Scheme will provide an extra 2 weeks of parental leave and, for families who earn up to $530,000 per annum, childcare costs will reduce from 1 July.
Increased Income Support
Base rates of Jobseeker, Youth Allowance, Austudy and other income support payments will increase from $693.10 per fortnight to $733.10 per fortnight – a $40 per fortnight increase.
The Single Parent Pension (SPP) will now be cut off when the youngest child turns 14 as opposed to 8 years of age, which is the current cut off. These parents will continue to receive the higher support, with a current base rate of $922.10 per fortnight. With these changes, eligible single parents currently on JobSeeker will receive an increase to payments of $176.90 per fortnight.
Eligibility for the higher single Jobseeker payment will be extended from those who are 60 years of age or more to those over 55 years of age who have been on the payment for more than nine months.
The Rent Assistance rate will increase by 15% - up to $31 per fortnight. The Parents Next program will be abolished.
Disadvantaged Communities
There will be a focus on local outcomes by boosting the funding for community organisations and place-based partnerships, as well as a $250m Central Australia package.
Revenue Raising Measures
The Treasurer cited “modest but meaningful measures”, including:
- ending the low and middle income tax offset
- increase to 30% tax on superannuation for those with a balance greater than $3m
- 15% global and domestic minimum tax for large multinational companies (if they are paying less tax in other jurisdictions)
- changes to the Petroleum Resource Rent Tax (PRRT)
- raising tax on tobacco by 5% per annum for the next 3 years
- passenger movement charge increase from $60 to $70
- increasing visa charges for those entering the country.
This budget is good for those on less than $160,000 per annum and should ease the current costs of living. The middle-class benefits more from the stage 3 tax cuts which are due to come into effect in 2024/25. Net debt in 2022/23 is $548.6b rising to $702.9b in 2026/27 and given that the tax to GDP ratio rises over time, the economy has to grow faster to maintain this budget discipline.
DisclaimerThis information has been provided by Fiducian Financial Services Pty Ltd (ABN 46 094 765 134, AFSL 231103) of Level 4, 1 York Street, Sydney, NSW 2000. Any advice provided is general information only and does not take into account your objectives, financial situation or needs. It is not intended to be, nor does it, constitute financial, legal or tax advice. Do not rely on this information without first seeking professional advice based on your own personal circumstances, objectives, financial situation or needs.