The Budget
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Budget 2023
Treasurer Jim Chalmers announced the much awaited and debated federal budget last night.
The first Budget surplus since 2007-08 was delivered on higher tax receipts from resource companies and the strong labour market. With inflation still front of mind, the spending initiatives were muted and focused on lower income households. On one hand, the Government needs to assist with cost-of-living difficulties, whilst not adding to inflation, a tough balancing act.
This week we’ll explore some of the more pertinent topics addressed last night. As always, we invite your feedback on what you’d like to read about and topics that you’d most like us to cover.
Effects on the market
GDP is expected to slow to 1.5% in 2024 and 2.25% in 2025, with this budget more focused on cost of living than promoting growth. This may be the last surplus for a while, as interest payments, NDIS costs, increasing Medicare costs and Stage three tax cuts impact the bottom line.
Superannuation
Superannuation balances over $3 million will have earnings taxed at 30 per cent, up from 15 per cent, starting in 2025.
Unrealised capital gains, at this stage, will still be included in the calculation, see our note here
Indexation of the $3 million hasn’t been addressed, so we’d assume this isn’t part of the future plans, however draft legislation should provide explanations.
No other real changes, which in a seemingly ever-changing environment, is a positive.
Cost of living
Energy rebates of up $500 will go to 5.5 million eligible households on government payments, and 1 million small businesses from the federal and state governments.
Low-income households and renters will benefit from an electrification package, created to boost energy efficiency and insulate households from price shocks in energy markets.
Business owners
Small businesses will be able to immediately deduct the full cost of eligible assets costing less than $20,000 installed between 1 July 2023 and 30 June 2024. This is on a per asset basis, so an instant write-off on multiple assets.
Help for small businesses to manage their tax instalments and improve cash flow.
Health
$2.2 billion package designed to fix primary healthcare services, take pressure off the hospital system, and begin the Medicare reform process.
Smokers and vapers will be ‘discouraged’ with campaigns and higher excise.
The planned pay rise for aged care workers, which was set to cost $11.3 billion over the forward estimates period will now be $14.1 billion.
Tax
Changes to the Petroleum Resource Rent Tax (PRRT) means that every gas project will pay a small amount of PRRT once it has been producing for seven years. This is effectively a bring forward of a small amount of PRRT, not an increase. The deductions which are capped can be carried forward and uplifted – so will reduce future PRRT bills.
No changes are expected to the stage three personal income tax cuts. Labor is pressured to wind back the legislated cuts, set to cost more than $20 billion a year from July 1, 2024.
Welfare
Increase the base rate of working age and student payments by $40 per fortnight. This increase applies to the JobSeeker Payment, Youth Allowance, Parenting Payment (Partnered), Austudy, ABSTUDY, Disability Support Pension (Youth), and Special Benefit. It will commence on 20 September 2023.
Single parents will get extra welfare until their youngest child turns 14, up from the current cut-off of eight. That will mean an extra $176.90 a fortnight compared to the jobseeker payment.
Infrastructure and housing
Build-to-Rent Developments will have more generous depreciation and lower withholding tax rates to encourage investment and construction in the sector. This should benefit Lendlease (LLC) and Mirvac Group (MGR).