The 2023 Federal Budget Analysis below are proposals only and may not be made law. The information contained below is general advice and should not be used to make decisions regarding your personal situation. Please contact our office on (03)9770-0099 to discuss your personal situation.

Summary

Key proposals include:

• Energy relief will provide savings of up to $500 for eligible households and $650 for eligible businesses.
• Increased payments will be made to eligible income support recipients.
• The instant asset write-off threshold for eligible small businesses will increase to $20,000 in 2023/24.
• Employers will be required to make super contributions for their employees at the same time as they pay salary and wages.
• The additional 15% tax on calculated earnings for super balances exceeding $3m has been confirmed.

Cost of living and housing measures

$500 electricity bill relief

Effective date: 1 July 2023

A credit of up to $500 will apply to electricity bills for eligible households to assist them with the high cost of electricity. The amount of credit will depend on where the person lives, as the Government is negotiating agreements with the States and Territories to contribute to the cost of the scheme. The following individuals will be eligible for the electricity bill credit:

• pensioners
• veterans
• concession card holders including the Commonwealth Seniors Health Card
• recipients of Carer Allowance and Family Tax Benefit A and B, and
• those who are eligible for existing State and Territory electricity concession schemes.

Household energy upgrade

Effective date: Not stated

More than 110,000 low-interest loans will be available for energy-saving home upgrades (eg battery- ready solar power and modern appliances that heat and cool).

Expansion of Home Guarantee Schemes

Effective date: 1 July 2023

The Home Guarantee Schemes will be expanded to allow more individuals to buy a home. This includes the First Home Guarantee, Regional First Home Buyer Guarantee and Family Home Guarantee. Under these schemes, the Federal government acts as guarantor for a portion of a loan, allowing a house to be purchased with a low deposit and no lender’s mortgage insurance.

Siblings, friends, and other family members will be eligible for joint applications under the First Home Guarantee and the Regional First Home Buyer Guarantee. Currently, these guarantees are restricted to married or de facto couples, in addition to singles.

The Family Home Guarantee will expand from single natural or adoptive parents with dependents to single legal guardians of children including aunts, uncles, and grandparents.

The schemes will include:

• non-first home buyers who have not owned a property in Australia in the last 10 years, to support those who’ve lost home ownership due to financial crisis or relationship breakdown, and
• eligible borrowers who are Australian Permanent Residents, in addition to Australian citizens.

Incentive for build-to-rent houses

Effective date: 1 July 2024

The final withholding tax rate is proposed to reduce from 30% to 15% for eligible fund payments from managed investment trusts attributed to newly constructed build‑to‑rent developments. This provides an incentive for foreign investors. Construction must commence after 7.30pm AEST on 9 May 2023 (Budget night).

Furthermore, the capital works tax deduction (depreciation) rate is proposed to increase from 2.5% to 4% per year, increasing the net return for these developments.

Taxation

Small business instant asset write-off

Effective date: 1 July 2023 to 30 June 2024

The instant asset write-off threshold increases to $20,000. Small businesses with aggregated annual turnover below $10 million can immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed between 1 July 2023 and 30 June 2024.

The threshold applies on a per asset basis. Assets valued at $20,000 or more can continue to be placed into a depreciation pool and depreciated at 15% in the first year and 30% thereafter.

Small and medium-sized business energy incentive

Effective date: 1 July 2023 to 30 June 2024

Businesses with an annual turnover of less than $50 million will get an additional 20% tax deduction on spending that supports electrification and more efficient use of energy. Up to $100,000 of this expenditure will be eligible for the additional 20% tax deduction, providing a benefit up to $20,000.

Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024.

This measure will help eligible businesses to:

• convert to electric heating and cooling systems
• upgrade to more efficient fridges and induction cooktops, and
• install batteries and heat pumps

Electricity bill relief for small businesses

Effective date: 1 July 2023

Eligible small businesses will receive a $325 Commonwealth rebate to reduce the cost of their electricity bills. The government is negotiating with the States and Territories to match this contribution, taking total relief to $650.

Increase in the Medicare levy low-income thresholds

Effective date: 1 July 2022

The Medicare levy low-income thresholds will increase as follows:

• The threshold for singles will be increased from $23,365 to $24,276
• The family threshold will be increased from $39,402 to $40,939
• For single seniors and pensioners, the threshold will be increased from $36,926 to $38,365
• The family threshold for seniors and pensioners will be increased from $51,401 to $53,406

For each dependent child or student, thae family income thresholds will increase by a further $3,760 instead of the previous amount of $3,619.

The increase in the 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.

Exempting lump sum payments in arrears from Medicare levy

Effective date: 1 July 2024

Low-income taxpayers will not pay higher amounts of Medicare levy if receiving an eligible lump sum payment (eg a compensation payment or underpaid wages). Taxpayers must be eligible for a reduction in the Medicare levy in the two most recent years to which the lump sum accrues. A lump sum payment in arrears tax offset already exists to reduce tax payable and Medicare levy surcharge. The eligibility criteria for the current tax offset will also apply for the proposed exemption of Medicare levy.

Extending the Personal Income Tax Compliance Program

Already effective

The Government will extend its Personal Income Tax Compliance Program and expand the scope to address emerging areas of risk (eg deductions relating to short-term rental properties to ensure they are genuinely available to rent).

Stage 3 tax cuts

There was no mention of changes to the Stage 3 personal marginal income tax cuts (for resident taxpayers), which have already been legislated to commence from 1 July 2024.

Social Security and Aged Care

Increased JobSeeker Payments

Effective date: 20 September 2023

Income support for working age and student payments will increase by $40 per fortnight. This increase will apply to:

• JobSeeker Payment
• Youth Allowance
• Parenting Payment (Partnered)
• Austudy
• ABSTUDY
• Disability Support Pension (Youth), and
• Special Benefit

This is in addition to the indexation of payments which occurs on 20 September 2023.

The higher single JobSeeker Payment rate for those aged 60 and over who have been on payments for at least nine months, currently $745.20 per fortnight, will be available for recipients aged 55 years and older.

Increase in Commonwealth Rent Assistance

Effective date: 20 September 2023

The maximum Commonwealth Rent Assistance will increase by 15%.

Rent assistance will also index on 20 September 2023 as part of the twice annual review of rates.

Changes to Parenting Payment (Single)

Effective date: 20 September 2023

Parenting Payment for single parents of $922.10 per fortnight can be paid until the youngest child turns 14.

Currently, this payment is paid to eligible single parents if their youngest child is less than eight years old.

Additional funding for aged care

Effective date: 1 July 2023

The Government will provide additional funding to improve in-home aged care services. Among the measures it will fund is the release of 9,500 additional Home Care Packages in 2023/24. The additional Home Care Packages will reduce waiting times for clients, which are over 12 months for Level 3 and Level 4 packages.

A new Age Care Act is due to commence from 1 July 2024.

More affordable health care

Effective date: 1 July 2023

Individuals will be allowed to buy twice as many common medicines for the price of one prescription under changes to the Pharmaceutical Benefits Scheme (PBS) from 1 July 2023. This would allow a patient access to 60 days’ worth of medicine for each prescription. The change could save general patients up to $180 a year per prescription. New medicines will also be included on the PBS list to make these more affordable and easier to access.

GPs will be better incentivised to bulk bill consultations for children under 16, pensioners and other Commonwealth concession card holders.

Superannuation

Payday super

Effective date: 1 July 2026

Employers will be required to pay their employees’ super at the same time as salary and wages, via single touch payroll. This measure will make it easier for employees to monitor their employer’s payments. It’s also expected to reduce employer non-payments that result from superannuation liabilities building up over a quarter. The ATO estimates that $3.4 billion of workers’ super was unpaid in 2019/20.

The ATO will be provided with $40 million in additional funding to improve data matching capabilities, to detect and recover unpaid super payments. The ATO will also have enhanced unpaid superannuation recovery targets.

Non-arm’s length income

The non-arm’s length income (NALI) provisions that result from the underpayment of general expenses for SMSFs and small APRA funds will be limited to twice the level of the general expense that would otherwise have been incurred. In addition, the fund income that is subject to NALI (and taxed at 45%) will exclude taxable contributions.

This is better than the previously announced general expense treatment of applying NALI to five times the general expense under payment. Small funds will still need to carefully monitor any discounts for general expenses, such as the provision of tax and accounting services from a related party.

Large APRA regulated funds will be exempt from the NALI provisions for both general expenses and asset specific expenses.

Better targeted superannuation concessions

Effective date: 1 July 2025

The Government confirmed the previously announced proposal to apply additional 15% tax on calculated earnings where the total super balance exceeds $3 million. This is in addition to the existing super fund tax rate. The ATO’s first assessments will be made for the 2026/27 financial year. This will capture all superannuation funds, including defined benefit funds which will be subject to a valuation process to ensure these are treated in a similar way to other superannuation interests.

Increase in APRA superannuation supervisory levy

Effective date: 1 July 2023

The Government will provide further funding for the superannuation consumer advocate, which will be offset by an increase in the superannuation supervisory levy paid by APRA regulated funds. Details on the increase in the levy have not yet been released.

Important information and disclaimer

The information in this communication is factual in nature. It reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue, and may be subject to change. In some cases, the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Examples are illustrative only and are subject to the assumptions and qualifications disclosed.

This communication is not available for distribution outside Australia and may not be passed on to any third person without the prior written consent of Binghay & Co.

Whilst care has been taken in preparing the content, no liability is accepted for any errors or omissions in this communication, and/or losses or liabilities arising from any reliance on this communication.