The Australian Federal Government recently announced its budget for the 2023-24 financial year. The budget outlines the government’s plans for spending and revenue, with a focus on supporting economic growth, job creation, and social programs. The budget aims to strike a balance between supporting economic recovery from the COVID-19 pandemic and maintaining fiscal responsibility. The government has outlined a range of measures aimed at supporting businesses, individuals, and families, as well as investing in critical infrastructure and essential services.
Changes affecting Businesses:
Temporary Instant Asset Write-off Extension:
Small businesses with an annual turnover of less than $10 million will soon benefit from an instant asset write-off of $20,000, thanks to cash flow support amounting to over $290 million. Starting July 1, 2023, eligible assets that cost less than $20,000 can be immediately deducted, benefiting up to 3.8 million small businesses.
Energy Efficiency Program:
Small and medium-sized businesses will soon have access to a new tax break aimed at reducing energy costs and promoting the use of efficient electrical goods. The Small Business Energy Incentive, valued at $310 million, will provide tax relief to businesses with an annual turnover of less than $50 million. Eligible businesses will receive a 20% tax deduction bonus for assets that support electrification and energy efficiency from July 1, 2023, until June 30, 2024. The incentive will cover up to $100,000 in total expenditure, with the maximum bonus tax deduction capped at $20,000 per business.
This initiative is expected to support up to 3.8 million small and medium businesses in making investments like upgrading to high-efficiency electrical goods, installing batteries, and electrifying their heating and cooling systems. The move comes in addition to the $62.6 million allocated in the October budget towards energy efficiency grants for small and medium-sized businesses. The government hopes that these measures will help businesses save on energy costs while reducing their carbon footprint.
Small Business Cashflow
To provide cashflow relief to small businesses, the Government is reducing the increase in their quarterly tax instalments for GST and income tax for the 2023-24 financial year. Approximately 2.1 million eligible small businesses will see their instalments increase by only 6 per cent instead of 12 per cent. This move aims to reflect the current economic conditions faced by the sector and strike a balance between improving cashflow and managing tax liabilities. The measure is designed to help small businesses manage their finances more effectively and maintain their operations in the challenging economic environment.
Small business lodgment penalty amnesty
A tax amnesty will be offered to small businesses whose total turnover is below $10 million, in order to incentivize them to resume their tax compliance. The amnesty will waive failure-to-lodge penalties for tax returns that have not yet been lodged and were due between 1 December 2019 and 29 February 2022, provided they are lodged between 1 June 2023 and 31 December 2023.
Starting from 1st July 2026, it will be mandatory for employers to pay their workers’ superannuation contributions along with their regular wages. This is excellent news for the 8.9 million Aussies who will now have better retirement savings due to receiving their Superannuation Guarantee payments more frequently and earlier in their working life. Plus, this move will allow employees to easily keep track of their entitlements and ensure that they are being paid in full and on time. And on top of all that, more frequent super payments will make payroll management for employers much smoother.
Changes affecting Individuals:
Childcare Subsidy Increase:
Starting from 10th July 2023, families with an income below $530,000 will benefit from an enhanced Child Care Subsidy (CCS). The amount of CCS that a family is eligible for is determined by their income level.
The income threshold for receiving the maximum CCS is being raised, meaning that families earning up to $80,000 will be eligible for an increased maximum CCS amount, rising from 85% to 90%.
For those earning over $80,000, the subsidy percentage will start at 90% and decrease by 1% for every $5,000 of income earned by the family. This may result in an increase in the subsidy or no change in the entitlement.
If a family has more than one child under the age of 5, they can still qualify for a higher rate of subsidy for one or more of their children.
Energy bill relief
The Australian Government is taking steps to improve the energy performance of households with a $1.3 billion investment in the Household Energy Upgrades Fund. This initiative will offer low-interest loans and upgrades to social housing to improve energy efficiency.
The Fund will provide $1 billion to the Clean Energy Finance Corporation to offer more than 110,000 low-interest loans for energy-saving home upgrades in partnership with private lenders. Simply upgrading the energy efficiency rating of a home from 1 star out of 10 to 3 stars can result in around a 30% reduction in energy bills. And increasing from 3 to 5 stars can reduce energy bills by another 20%.
The remaining $300 million will be used to collaborate with states and territories to make energy performance upgrades to social housing. Many of these properties have low energy efficiency, resulting in higher energy bills for tenants. The energy investment in social housing is expected to reduce the energy needed by 60,000 social housing properties by one-third and provide tenants with savings on their energy bills.
This investment by the government in household energy upgrades not only helps to reduce energy bills for Australians but also contributes to the country’s overall efforts to reduce greenhouse gas emissions and combat climate change.
Aged Care Reforms:
The Government is supporting aged care workers, by providing funding to increase award wages by 15%. To help older Australians stay in their homes, $166.8 million will be invested in providing 9,500 more home care packages. Aged care services for Aboriginal and Torres Strait Islander Elders will receive $52.1 million, and an interim First Nations Aged Care Commissioner will be appointed with $1.7 million in funding. The Disability Support for Older Australian Program will receive $487 million in ongoing support. The Government is also investing in improving the health and safety of older Australians receiving aged care by providing $81.9 million to develop a new Aged Care Act, $139.9 million to enhance the Star Rating system, and $12.9 million to improve food and nutrition in aged care.
Medicare Bulk Billing:
The Government has announced a $5.7 billion investment over the next 5 years to improve access to healthcare and strengthen Medicare. To achieve this, the bulk billing incentive for common consultations with children under 16, pensioners, and other Commonwealth concession cardholders will be tripled. This will apply to face-to-face, telehealth, and videoconference consultations, making it easier and more affordable for these groups to see a doctor.
The increased bulk billing incentive is expected to benefit approximately 11.6 million eligible Australians, ensuring they receive the medical care they need without having to pay any out-of-pocket costs. Additionally, patients in rural and regional areas will continue to receive a higher bulk billing incentive to support the viability of general practices in those areas.
This investment represents a significant commitment by the Government to improving access to healthcare and making it more affordable for vulnerable and disadvantaged Australians.
Expansion of the Home Guarantee Scheme
The Australian Government’s First Home Load Deposit Scheme (FHLDS) initiative aims to assist eligible first homebuyers by providing a guarantee that allows them to purchase a home with a deposit as low as 5% without having to pay for Lenders Mortgage Insurance. To make it easier for more buyers to qualify, the Federal Government will expand the eligibility criteria for Home Guarantee Scheme programs.
Starting in July 2023, joint applications from friends, siblings, and other family members will be permitted under the First Home Guarantee and the Regional First Home Buyer Guarantee. Currently, these programs are only available to single applicants or those in a marital or de-facto relationship.
Furthermore, non-first-home buyers who have not owned a property in Australia in the past 10 years will be eligible to apply for the First Home Guarantee and the Regional First Home Buyer Guarantee. This will provide support to individuals who are looking to re-enter the property market.
Finally, the Family Home Guarantee will be extended to include single legal guardians of children, such as aunts, uncles, and grandparents.
Build to rent tax breaks
The Australian government is introducing tax incentives to encourage more build-to-rent projects. One of these incentives includes an increase in the depreciation rate from 2.5% to 4% per year for projects that begin after May 9th, 2023.
In addition to this, the government will also be cutting the withholding tax rate for eligible fund payments from managed investment trusts (MIT) that are attributable to residential build-to-rent projects. This withholding tax rate will be reduced from 30% to 15% and will come into effect on July 1st, 2024, for income attributable to newly built build-to-rent projects.
The Australian government has announced changes to superannuation regulations. Starting from 1 July 2025, earnings on superannuation balances over $3 million at the end of a financial year will be taxed at a higher rate of 30%. Superannuation balances below $3 million will continue to attract a 15% tax rate, or nil for assets held in a retirement pension account. An additional 15% tax rate will apply to earnings on the proportion of balances above $3 million. The government estimates that this measure will affect approximately 80,000 individuals, or 0.5% of individuals with a superannuation account, in the 2025-2026 income year.
As the Australian Federal Government announces the budget for the 2023-24 financial year, it is clear that the government is focusing on a range of key priorities. The budget includes measures aimed at boosting economic growth, supporting jobs, and addressing important social and environmental issues. The government’s continued commitment to investing in infrastructure, education, healthcare, and research and development is also evident in the budget. Overall, the 2023-24 budget represents a balanced approach to addressing the needs of the Australian community, while ensuring the long-term sustainability of the country’s finances. While there are challenges ahead, the budget provides a strong foundation for the future prosperity of Australia. For a comprehensive look at the budget and what it means for you, click here to go the the Australian Government budget page. https://budget.gov.au/content/documents.htm