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Federal Budget 2023

nabtrade's Gemma Dale breaks down the 2023 Federal Budget and what it means for you.

Important information: Any advice and information in this publication is of a general nature only. Any general tax information provided in this publication is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of an individual’s liabilities, obligations or claim entitlements that arises, or could arise, under taxation law, and we recommend that you consult a registered tax agent. WealthHub Securities Ltd.  is not a registered tax agent.

Welcome to nabtrade’s breakdown of Federal Budget 2023. Tonight the Labor Government has announced a slender surplus, the first in more than a decade, and a range of measures primarily aimed at lowering the cost of living or improving welfare for those in difficult circumstances.

 

Personal taxation

No changes were announced to personal taxation apart from the annual indexation of the Medicare Levy threshold, which ensures that low income individuals continue to be exempt from paying the Medicare levy. This takes the family threshold above $40,000 for the first time, to $40,939 plus $3,760 for each dependent child, and the seniors threshold to $53,406, while the single threshold increases to $24,276.

 

Current

Proposed

Single

$23,365

$24,276

Single, senior or pensioner

$36,925

$38,365

Family

$39,402

$40,939

Family, senior or pensioner

$51,401

$53,406

 

Cost of Living Measures

As previously announced, low income households will receive relief in the form of a deduction of up to $500 from their power bills from 1 July 2023. Eligible small businesses will receive a deduction of up to $650.

Those on JobSeeker will receive an increase in their payments of $40 a fortnight from 20 Sept this year, while those over 55 on JobSeeker will receive an increase of $92.10 a fortnight, which is currently reserved for those over 60.

Also in September, eligible single parents will receive the single rate of Parenting Payment until their youngest child turns 14, which is currently only available until that child is 8 years old. The current base rate of Parenting Payment (Single) is $922.10 per fortnight, compared to the JobSeeker Payment base rate of $745.20 per fortnight.

Single parents moving to Parenting Payment (Single) will also benefit from more generous earning arrangements compared to JobSeeker. Eligible single parents with one child will be able to earn an extra $569.10 per fortnight, plus an extra $24.60 per additional child, before their payment stops.

The maximum rates of Commonwealth Rent Assistance will also increase by 15 per cent, a measure that will assist a wide range of social security recipients.

 

Home ownership

As previously announced, 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 also be eligible for the Home Guarantee Scheme. This is the scheme that allows aspiring home owners to buy a home with a deposit as low as 5% without paying lenders mortgage insurance.

For existing homeowners, an extensive range of energy saving initiatives such as electrification, energy saving appliances and solar panels will be eligible for low rate loans.

 

Family support

From 1 July this year, Parental Leave Pay and Dad and Partner Pay will combine into a single 20-week payment. A new family income test of $350,000 per annum will see nearly 3,000 additional parents become eligible for the entitlement each year. The Government has also committed to increase Paid Parental Leave to 26 weeks by 2026.

 

Superannuation

At the other end of the scale, very high superannuation balances will attract a higher rate of tax from 1 July 2025. Earnings on balances exceeding $3 million will pay tax  on earnings at a rate of 30 per cent, 15% higher than the current rate of 15%. Earnings on balances below $3 million will continue to be taxed at the concessional rate of 15 per cent. Defined benefit interests will be appropriately valued and will have earnings taxed under this measure in a similar way to other interests to ensure commensurate treatment.

Also in superannuation, employers will be required to pay superannuation contributions at the same time as wages from 1 July 2026, in a measure designed to increase compliance with superannuation legislation.

 

Investing Considerations

For investors, the two big categories were interestingly those also getting attention offshore – huge investments in renewable energy and decarbonisation, and the implementation of a global and domestic minimum tax rate of 15%, which has been an OECD focus to reduce incentives for international tax arbitrage.  

It’s worth noting that all these measures will need to be drafted and passed through both houses of parliament before taking effect. If you’d like to find out how tonight’s Budget could affect your business or your industry, go to nab.com.au/federalbudget.

 

Analysis as at 9 May 2023. This information has been provided by WealthHub Securities Ltd and a wholly owned subsidiary of National Australia Bank Limited ABN 12 004 044 937 AFSL 230686 (NAB). Whilst all reasonable care has been taken by WealthHub Securities in reviewing this material, this content does not represent the view or opinions of WealthHub Securities. Any statements as to past performance do not represent future performance. Any advice contained in the Information has been prepared by WealthHub Securities without taking into account your objectives, financial situation or needs. Before acting on any such advice, we recommend that you consider whether it is appropriate for your circumstances. 


About the Author
Gemma Dale , nabtrade

Gemma Dale is Director of SMSF and Investor Behaviour at nabtrade. She is the host of the Your Wealth podcast, a fortnightly podcast for investors, featuring insights and updates from markets and finance experts across a range of topics. She provides regular market and finance commentary on ausbiz and in other media including AFR, the Australian, ABC and commercial tv and radio. Gemma was previously the Head of SMSF Solutions for nab, and the Head of Technical Services for MLC, where she led a team of specialists providing advice to advisers and their clients on SMSF, super, tax, social security and aged care.