Federal Budget Review 2023-24

The 2023 Federal Budget focuses on providing cost of living relief through lower power bills, higher welfare payments, and more support for small businesses and housing.

Note: These changes are proposals only and may not be made law.

Key announcements

• Cost of living support
• Taxation
• Social security
• Housing

Taxation:

• Concessions for small businesses
• No mention of Stage 3 tax cuts due to commence 01/07/2024

Social Security:

• Extended support for JobSeekers, students, single parents and renters

Superannuation:

• Pay day super
• $3m super cap

Cost of living:

• Energy bill relief
• Pharmaceuticals and GP visits
• Support for home buyers

Cost of living

Support for eligible households and small businesses.

The Government is partnering with state and territory governments to deliver up to $3 billion of electricity bill relief for eligible households and small businesses. From July 2023, this plan will deliver up to $500 in electricity bill relief for eligible households and up to $650 for eligible small businesses.

Up to $500 relief for eligible households:

• Amount will depend on where you live
• Pensioners, Commonwealth Seniors Health Card holders, recipients of Carer Allowance and Family Tax Benefit

Household energy upgrade:

• Low-interest loan for energy saving home upgrades (eg battery-ready solar power and modern heating and cooling appliances)

Small businesses – energy bill relief:

• Up to $650 in energy bill concessions

Other relief measures

Support with Pharmaceutical costs:

• Can buy 2 months’ worth of scripts for the price of one
• Will save general patients $180 per year, per prescription

The Government will support more than 300 Pharmaceutical Benefits Scheme medicines to be dispensed in greater amounts, phased in from 1 September 2023. Some patients will be able to get 2 months’ worth of the medicine they need for a stable, chronic health condition, cutting the number of visits to a pharmacy and GP each year and saving $1.6 billion in out-of-pocket costs over 4 years.

General patients will be able to save up to $180 a year per medicine if prescribed for 60 days, and concession card holders up to $43.80 a year per medicine.

For at least 6 million Australians this will cut the cost of medicines by up to half and will come on top of the $12.50 decrease in the PBS co-payment for general scripts that came in on 1 January 2023.

Bulk billing GP services:

• Greater incentives to be provided to GPs to increase incentive to bulk bill

In this Budget, the Government is investing $5.7 billion over 5 years from 2022—23 to strengthen Medicare and make it cheaper and easier to see a doctor.

The Strengthening Medicare package includes the largest investment in bulk billing incentives ever. The Government is tripling the incentive paid to GPs to bulk bill consultations for families with children under 16 years, pensioners and Commonwealth concession card holders, at a cost of $3.5 billion. This will support 11.6 million Australians to access a GP with no out-of-pocket costs.

The bulk billing incentive applies to:

• All face-to-face and telehealth general practices services between 6 and 20 minutes long
• All other face-to-face general practice consultations
• Longer telehealth and general practice consultations where a patient is
• Registered with their regular practice through MyMedicare.

Taxation

Small business energy incentive. Support with energy expenditure.

Available to small and medium businesses:

• Annual revenue < $50 million
• What can be purchased?
  • Energy efficient equipment, eg solar panels, electric vehicle charging stations
• Effective date:
• Used or installed ready for use 1 July 2023 – 30 June 2024

The Government is introducing a new tax break – the Small Business Energy Incentive – to help small and medium businesses electrify and save on their energy bills. This incentive will provide $310 million in tax relief and support up to 3.8 million businesses make investments like electrifying their heating and cooling systems, installing batteries and upgrading to high-efficiency electrical goods.

Businesses with annual turnover of less than $50 million will have access to a bonus 20 per cent tax deduction for eligible assets supporting electrification and more efficient use of energy, from 1 July 2023 until 30 June 2024. Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business.

Small business taxation

Up to 3.8 million small businesses with annual turnover of less than $10 million will be able to immediately deduct eligible assets costing less than $20,000 from 1 July 2023 until 30 June 2024.

Threshold to increase to $20,000:

• Applies per asset

Eligibility:

• Turnover below $10 million

Opportunity:

• Can immediately deduct the full cost of eligible assets costing less than $20,000
• First used or installed between 1 July 2023 and 30 June 2024

Superannuation

Payday Super: changes to timing of contributions.

• Commencement date: 1 July 2026
• Requirement: Employer must make super contributions at same time as salary and wages
• Benefits? More frequent contributions – potentially more at retirement
• Easier for employee to track contributions: Ease of payroll management

Aligning the payment of super and wages for all employees – from 1 July 2026, employers will be required to pay their employees’ super at the same time they pay their wages. This will enable employees to track their entitlements to ensure they are being paid on time and in full.

Around 8.9 million Australians will benefit from higher retirement savings from receiving their Superannuation Guarantee contributions earlier and more frequently throughout their working life. More frequent super payments will make employers’ payroll management smoother with fewer liabilities building up on their books.

$3m cap: changes to taxation of earnings

• Taxation of earnings: Earnings above $3 million taxed additional 15%
• Total super balance: Used to determine liability
• Earnings: Not actual account earnings, but based on changes to account balance, contributions and withdrawals

Superannuation concessions will be fairer and more targeted with lower tax concessions available to individuals with balances exceeding $3 million. Also, the Government is ensuring that multinationals pay their fair share of tax by implementing a global minimum tax and a domestic minimum tax.

Social Security

• Rent assistance to increase by 15%
• Working age and student payments:
• $40 increase per fortnight for payments including JobSeeker, Parenting Payment, Youth Allowance, Austudy
• 55+ JobSeeker (single)
• Will be entitled to the higher rate of payment, currently paid to those 60+*
  • *And on benefits for at least 9 months
• Support for single parents:
  • Extended eligibility for Parenting Payment (single) until youngest child is 14 (increasing from age 8)
• Changes apply from 20 September 2023

The Government is providing additional income support to low-income households who rent. They are increasing the maximum rates of Commonwealth Rent Assistance by 15 percent at a cost of $2.7 billion over 5 years, the largest increase to Commonwealth Rent Assistance in over 3 decades.

Around 1.1 million households receiving Commonwealth Rent Assistance will be better off.

Housing

Supporting home buyers: making it easier to save for a deposit

• Home Guarantee Scheme
  • Government Guarantee of up to:
    • 98% (Family Home Guarantee), and
    • 95% (First Home Guarantee)
• First Home Buyer and Regional First Home Buyer Guarantee Support Scheme

This scheme will help more Australians into home ownership sooner by expanding the eligibility criteria of the Home Guarantee Scheme. Eligibility for the First Home Guarantee and Regional First Home Guarantee will be expanded to any 2 eligible borrowers beyond married and de facto couples, and non-first home buyers who have not owned a property in Australia in the preceding 10 years.

Australian Permanent Residents, in addition to Australian citizens, will be eligible for the Home Guarantee Scheme.

Changes to support home buyers from 1 July 2023

First (and Regional) Home Guarantee:

• Will be able to purchase home jointly with friends, family and siblings (currently only single applicants or spouse)
• Extended to non-first home buyers – cannot have owned property in last 10 years

Family Home Guarantee:

• Extended from single natural or adoptive parents with dependents to other single legal guardians (E.g., aunts, uncles and grand parents

Residency:

• All schemes extended to permanent residents (currently Australia citizens only)

Support for home buyers: some eligibility conditions

Income limits:

• Taxable income* $125,000 (single) or $200,000 (couples)

Intentions:

• Must intend to occupy the home

First and Family Home Guarantee

Property Price Caps:

Area	Price cap (AU$)e
NSW – capital city	$900,000
VIC- capital city	$800,000
QLD- capital city	$700,000
WA – capital city	$600,000
SA – capital city	$600,000
TAS – capital city	$600,000
ACT	$750,000

Watch the video highlights

Where to from here?

For more information and support:

• Process: wait for changes to become law
• Advice: it will be important to seek financial advice, and you may also need advice from a registered tax agent
• Home buyers: visit The National Housing Finance and Investment Corporation
• More information: Federal Government Budget 2023-24

Call Elliot Watson Financial Planning on 02 4038 1623 and make an appointment to speak to an adviser today to discuss how the proposed federal budget changes could impact you.

Sources: Australian Government Budget 2023-24 and IOOF. 

The information within, including tax, does not consider your personal circumstances and is general advice only. It has been prepared without taking into account any of your individual objectives, financial solutions or needs. Before acting on this information you should consider its appropriateness, having regard to your own objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser.

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