The Budget – No Surprises Here?
11 May 2023
Australians watched with great anticipation as Treasurer Jim Chalmers stood centre stage to deliver the Federal Budget this week.
The Treasurer acknowledged our pressing concerns ‘inflation is driving interest rate rises and eroding real wages’ and admitted to the elephant in the room. The reality is these uncertain economic times are not expected to pass us by anytime soon.
Mr Chalmers confirmed that the next two years will be the weakest for global growth in over two decades. Whether we are using the words ‘Global Financial Crisis’ or ‘recession’ makes little difference when we many of us are facing financial pressures we have never experienced.
With economic growth expected to fall from 3.25% to 1.5% next year, there has never been a better time to, as the Treasurer puts it, ‘deliver for those most in need’.
Social Security and Healthcare
Under the Cost of Living Package, households who are receiving social security benefits, including Age Pension, Disability Support Pension and Family Tax Benefits will receive $400 off electricity bills, with eligible small businesses benefiting from a $650 decrease to their bill.
There will be a $40 payment increase per fortnight for recipients of Job Seeker, Austudy and Youth Allowance. Recipients aged 55 and over on Job Seeker will be entitled to increased benefits, which were previously only available after age 60.
$2.2 billion will be invested in increasing access to medicines under the Pharmaceutical Benefits Scheme.
Eight more urgent care facilities will be built to improve access to medical care for those in remote areas and growing suburbs. Additional funding will be provided to extend the provision of essential services at pharmacies, including increasing access to vaccinations.
The Medicare bulk billing incentive will be tripled to encourage medical practitioners to provide bulk billed services to vulnerable patients, such as pensioners and those with a disability.
To reduce the impact of the rental crisis, the maximum rate of Rent Assistance will be increased by 15% and 1 million homes will be built over five years from 2024 under the $10 billion Housing Australian Future Fund.
National Disability Insurance Scheme and Aged Care
$36 billion in funding will be directed towards Aged Care initiatives in 2023/24, including increasing award wages for 250,000 Aged Care workers by 15% and increasing access to Home Care Packages.
States and Territories will cooperate with the Federal Government to ensure that NDIS is sustainable and serving its purpose to support those who need it most.
Superannuation and Pension
Employers are currently required to pay super guarantee contributions for their employees on a quarterly basis. The Budget proposes that this be changed so that compulsory super contributions are paid when the employee receives their usual pay, whether that be weekly, fortnightly, or monthly. The rate will continue to increase in 0.5% instalments until it reaches 12% on 1 July 2025.
There has been no announcement regarding extending the Covid minimum pension payment provisions, which have recently allowed those in receipt of Transition to Retirement and Account Based Pensions to half their pension payments.
This indicates that those on the minimum pension payment will be required to return to the standard minimum based on their age, as of 30 June 2023.
There has been no announcement on any changes to the previously proposed Stage 3 personal income tax reductions, therefore it is expected that the current 32% Marginal Tax Rate bracket will reduce to 30% and apply to those earning up to $200,000 from the 2024/25 financial year. The Medicare Levy Exemption threshold will also increase as planned next year.
The Low to Middle Income Tax Offset offered last financial year has not been extended.
How the Budget initiatives will be funded
Currently superannuation held in accumulation phase is taxed at 15%. The Government proposes that those with a balance of over $3 million will be taxed an additional 15% on any funds over that amount from 1 July 2025.
Tax will be raised by 5% on tobacco products for the next three years and tax compliance programs will be extended to ensure that over due tax obligations are recouped.
A minimum global and domestic tax of 15% will be imposed on large multinational companies.
I have heard and read the same statement many times since the 9th of May Budget. ‘There are no surprises’.
I agree, the Budget gave us no major surprises. It confirmed that yes, times are tough, but we do have a way forward. That way forward will become obvious over time as we start to see economic growth increase and inflation decrease slowly. This will be assisted by a significant Government investment in education and training, renewable energy and digital technology, to name a few.
We can feel a sense of security that our banking system has remained comparatively strong and stable, following recent turmoil in the sector in the United States. We are told that we can expect wage growth and continued low unemployment rates and it appears that we may look forward to lower debt under the Labor government.
As always, it is difficult to cover all the information contained in the various Budget Papers in one short article, but what we are seeing is largely positive.
If you have questions on how the Budget announcements will impact on you and your family, give us a call on 08 6245 9245.