The 23/24 Federal Budget has been released and thanks to strong commodity prices it looks better than would have been expected a year ago. Some of the key areas addressed in the budget were cost-of-living, social security payments, investment in Government services and attempting to alleviate inflationary pressures, though time will judge its impact on inflation.
There is a small and brief return to surplus in this budget, though this will be confirmed in a few months time when the actual numbers are in. However, the budget is then forecast to go back into deficit until 2026/27 at least. Net debt is expected to be over $700 billion by that financial year.
Always with forecasts, be they investing or economic, they need to be taken with a grain of salt when they look beyond a quarter or half year. In the final budget before the election last year, the forecast for inflation was a peak of 4.25%, before falling to 3% in June this year. Inflation is currently more than double that figure, but the budget forecasts a fall to 3.25% next year.
On that topic it pays to remember Scott Morrison’s “we brought the budget back to surplus next year”. It was impossible to have a surplus in a future that hadn’t occurred. What occurred in that next year was Covid. A dark cloud or a rainbow might appear, so it’s best to never claim credit for something that hasn’t happened.
Cost of Living
An electricity bill credit of up to $500 will be available in 2023/24 for Pensioners, Commonwealth Seniors Health Card holders and other concession card holders, Recipients of Carer Allowance and Family Tax Benefit A and B, Veterans, and those eligible for existing State and Territory electricity concession schemes.
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.
Low-cost loans will be available for energy-saving home upgrades, such as battery-ready solar panels, more modern appliances, and other energy efficiency improvements.
Superannuation
We already knew about the 15% tax increase on earnings above $3 million, which was announced earlier in the year.
Businesses will also be required to pay superannuation at the same time workers are paid. The benefit for investors is those contributions should compound faster. The previous pay deadline was quarterly, being 28 days after the quarter end. This change is to be implemented from 2026.
July 2023 will also see the end to the 50% reduction in annual minimum drawdowns for those over 65 now drawing on their superannuation.
Housing
Another one that filtered out pre budget was a change to eligibility for the home buyer guarantee. From 1 July 2023, it’s now available to more joint applicants e.g. friends, siblings and other family members under the First Home Guarantee and the Regional First Home Buyer Guarantee. Non-first home buyers who have not owned a property in the last ten years will also be eligible. The Family Home Guarantee is also expanding to include eligible borrowers who are single legal guardians of children such as aunts, uncles, and grandparents.
Social Security
Increase to income support payments: The fortnightly rate of JobSeeker, Austudy and Youth Allowance will be increased by $40 in September 2023. Eligibility for the higher rate of JobSeeker that is available to recipients aged 60+, and who have received the payment for 9 or more continuous months, will be expanded to those aged 55+. This payment will increase $92.10 per fortnight.
The maximum rates of Rent Assistance will increase by 15% in September 2023. This will provide recipients up to $31 extra per fortnight.
Tax
No major new tax changes were announced.
Stage 3 tax cuts will take effect from 1 July 2024, and there is no extension of the Low and Middle Income Tax Offset, which ended 30 June 2022.
The Government will increase the Medicare levy thresholds for singles, families and seniors or pensioners from 1 July 2022. This means low-income earners will be able to earn more income before paying the Medicare levy.
Aged Care
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.
The Government will also fund a wage increase for aged care workers, allocating $11.3 billion to provide an interim increase of 15 per cent to award wages for many aged care workers.
Small Business
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 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.
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.
Immigration
Unlikely to be widely acknowledged was net overseas migration for the 22/23 year increasing to 400,000 from 235,000 in the October 22 budget. With 2023/24 forecast to increase to 315,000 from 235,000. Adding people to the population has GDP benefits, but they also require somewhere to live. Dwelling approvals were falling into 2020 and there was only a brief spike in approvals during 2021, which came due to home builder incentives. Dwelling approvals are now back to near decade lows.
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