Federal Budget Overview 2023

The second Budget of the Albanese Government aims to hold the line on fiscal discipline while acknowledging the pain that many Australian households now face with the mounting cost of living pressures.

BUSINESS

Super To Be Paid On Payday

From 1 July 2026, the government will require superannuation guarantee contributions to be paid by employers at the same time as their employees’ salaries and wages.

Currently, employers pay super guarantee contributions on a quarterly basis. The proposed measure will mean employers must align their super guarantee contributions payments with their payday. Depending on the employer’s payroll frequency, this could mean 52 times a year(for weekly payrolls).

Further, the ATO will receive additional resourcing to detect unpaid super payments earlier.

Temporary Increase Of The Instant Asset Write-Off

The current temporary full expensing incentives are set to expire on 30 June 2023, reverting the Instant Asset Write-off threshold back to the legislative threshold of $1,000. The government has announced a temporary increase of the Instant Asset Write-off threshold for another year.

Small businesses with an aggregated annual turnover of less than $10 million will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2024.

Small Business Energy Incentive

Under this program, businesses with an annual turnover of less than $50 million will be able to access an additional 20% deduction on spending that supports electrification and more efficient use of energy.

Total expenditures up to $100,000 will be eligible for this incentive, with the maximum additional tax deduction being $20,000 per business. Eligible assets or upgrades must be first used or installed and ready for use between 1 July 2023 and 30 June 2024.

Tax Liability Lodgement Taskforce & Amnesty Program

The tax office will receive additional funding over a four-year period to engage with businesses to address outstanding tax liabilities. With the additional funding, the ATO will target taxpayers who have high-value debts greater than $100,000 and aged debts older than two years where the taxpayer is either a public or multinational group with an aggregated turnover of greater than $10 million, or privately owned groups or individuals controlling more than $5 million of net wealth.

The government has also announced a lodgment penalty amnesty program for small businesses with a turnover of less than $10 million to re-engage with the ATO regarding their overdue lodgements. Under this program, the ATO will remit failure-to-lodge penalties associated with outstanding tax statements lodged in the period from 1 June 2023 to 31 December 2023.

Personal Income Tax Compliance Program

From 1 July 2023, the scope of the Personal Income Tax Compliance Program will be extended and expanded. The funding of this program will allow the Government to undertake compliance activities and detect tax avoidance, notably deductions relating to short-term rental properties.

Extension To GST Compliance Program

The ATO will receive $588.8 million in funding from the Federal Government for four years from 1 July 2023 to promote GST compliance. The funding will assist the ATO to ensure businesses are accurately reporting and remitting GST as part of their tax obligations and not overclaiming GST refunds.

Fringe Benefit Tax Rules For Electric Vehicles

The Treasury Laws Amendment (Electric Car Discount) Bill 2022 received Royal Assent on 12 December 2022. This bill provides an exemption from Fringe Benefits Tax for fringe benefits relating to electric cars. From 1 April 2025, this exemption will be sunset for plug-in hybrid electric cars. Arrangements involving plug-in hybrid electric cars entered into between 1 July 2022 to 31 March 2025 will remain eligible for the electric car discount.

Build-To-Rent Projects

The Treasurer has proposed increasing the capital works depreciation rate from 2.5% to 4% for eligible new build-to-rent projects where construction commences after 9 May 2023.

SUPERANNUATION

High Tax Rate for Balances Over $3 Million

Increased taxation on fund earnings for individuals with Total Superannuation Balances above $3 million from July 2025 has been confirmed in the budget last night. The guidance available shows it will bring the headline tax rate to 30 per cent, up from 15 per cent, for earnings corresponding to the proportion of an individual’s total superannuation balance that is greater than $3 million. This rate remains lower than the top marginal tax rate of 45 per cent. Earnings relating to assets below the $3 million threshold will continue to be taxed at 15 per cent or zero per cent if held in a retirement pension account.

The measure is still being worked out by the ATO given the complexities in reporting changes for APRA-regulated funds.

Pension Draw-down Minimums

The income stream minimum draw-down rate 50% reduction will cease as scheduled from 1 July 2023, this has been in place for the past few years to allow retirees to better manage their affairs in light of the pandemic. The minimum pension requirement for the financial year is based on the balance of the income stream as at 1 July each year. From 1 July 2023, the drawn-down rates will be for persons aged:

• 65-74 5%

• 75-79 6%

• 80-84 7%

• 85-89 9%

• 90 – 94 11%

• 95+ 14%.

Non Arms Length - SMSF

There was an amendment to the Non-Arms length rules for SMSFs, this is aimed to reduce the potential for the higher tax to be levied on all the fund’s income when a Non-Arms Length expense is incurred in the financial year. This will now exclude superannuation contributions and limit the assessable income to double the general expenses incurred by the fund.

OTHER

Franking Credit & Capital Raising

The previously announced Franking Credit reform that was aimed to prevent and retroactively reverse the benefits of franked dividends paid out using raised capital outside the normal operation of the business dividend cycle has been adjusted to remove the look-back clause to December 2016 and will now be in effect from the announcement date of 5 September 2022. This is a big win for superannuation funds and individuals by reducing the need to adjust prior year returns.

Additional Medicare Support

A $3.5 billion increase in funding to the Medicare system, aims to increase incentives for bulk billing appointments for persons under the age of 16, pensioners, and other concession card holders.

There was also confirmation of the 2-month scripts issuance for stable, chronic health conditions; aimed at reducing the pressure on individuals.

Energy Price Relief Plan

The plan will deliver up to $500 in a one-off payment for eligible households and $650 for eligible small businesses. This program will involve the States & Territories, hence the amount of relief will be dependent on your circumstances. More information is expected about eligibility soon.

There will be $1 billion available for 110,000 low-interest loans to households wishing to upgrade the energy efficiencies in their household. This will be administered by the Clean Energy Finance Corporation in connection with private lenders.

Home Guarantee Scheme

The Home Guarantee Scheme will now allow the inclusion of joint applications for friends, siblings, and other family members and buyers who have previously owned a home may be allowed to apply as long as their last ownership was at least 10 years ago. The Family Home Guarantee will now be extended to include single legal guardians of children such as aunts, uncles, and grandparents.

Increasing the Medicare Levy Low-Income Thresholds

The Treasurer has announced an increase in the Medicare levy low-income threshold from 1 July 2022.

The thresholds where taxpayers do not pay the Medicare levy will increase as follows:

• Singles – from $23,365 to $24,276

• Families – from $39,402 to $40,939. For each dependent child or student, the family income threshold will increase by a further $3,760 an increase from the previous amount of $3,619.

• Single seniors and pensioners – from $36,925 to $38,365

• Family seniors and pensioners – from $51,401 to $53,406

Further, the government has announced that taxpayers who receive lump sums of income in arrears from their employers such as where their wages were previously underpaid will no longer need to pay Medicare levy on those amounts, where they would otherwise be low-income earners based on the above thresholds. The amendment will apply from 1 July 2024.

Working Age Payments

The government will increase the base rate of working age and student payments by $40 per fortnight to JobSeeker and other allowance payments commencing on 20 September 2023. It will also extend eligibility for the existing higher single JobSeeker payment rate for recipients aged 60 years and older to recipients aged 55 years and older.

Childcare

The Australian Government will spend $4.5 billion to deliver more affordable child care including increasing Child Care Subsidy (CCS) rates from July 2023.

The Australian Parliament passed legislation on 23 November 2022 that will:

• lift the maximum CCS rate to 90% for families earning $80,000 or less.

• increase CCS rates for around 96% of families with a child in care earning under $530,000.

• increase transparency in the sector by requiring large providers to report revenue and profits and commercial leasing information.

• crackdown on fraud and non-compliance.

From all of us at Luka Group, we hope our summary has assisted you in understanding the budget and how it may impact your circumstances.