Federal Budget Wrap - May 2023

Federal Budget Wrap - May 2023


With the release of the Federal Budget, some of our Verse Financial Advisers cover some key topics in the video above. The topics they discuss include;

  • Key metric forecasts
  • Tax
  • Changes to the Child Care Subsidy
  • Social Security
  • First Homes
  • Superannuation

Summary

  • The budget presented in October 2022 forecast a deficit of $36.9 billion for this financial year, 2022-23. Tuesday’s budget now predicts a surplus of $4.2 billion, which will be the first time the budget has been ‘in the black’ for 15 years.
  • This has partly been achieved through increased income from exports and increased personal income tax due to low unemployment.
  • Other tax revenue increases included a $3.3 billion jump in the tobacco excise, a $2.4 billion increase to the Petroleum Resources Rent Tax and another $370 million from multinationals.  
  • $3.5 billion has been allocated to Medicare incentives to lift the rate of bulk-billing, and $3 billion in one-off energy bill discounts.
  • The budget also included a significant clean energy package with $1 billion in low-cost loans to help households install low-energy appliances and other technology.

Here's a rundown of some of the key points:

Forecasts

  • Inflation is forecasted to be 3.25% for 2023/24 and 2.75% for 2024/25.
  • Economic growth will slow from 3.25% this year to 1.5% next year due to high interest rates and a slowing global economy.
  • Wages growth is forecasted to be 4% this year.

Tax

  • Stage three tax cuts remain unchanged and are currently scheduled to start 1 July 2024.
  • Low and Middle income tax offset has not been extended.
  • The instant asset write off for small business with a turnover of less than $10 million will be extended but reduced to a threshold of $20,000

Stage three is scheduled to apply from the 2024–25 income year. It will provide further tax cuts by abolishing the 37% marginal tax rate entirely and lowering the 32.5% marginal tax rate to 30%, so that the marginal tax rate on taxable income between $45,000 and $200,000 will be 30%.

Child Care Subsidy

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.
  • Crack down on fraud and non-compliance.
  • Invest $33.7 million to increase subsidised Early Childhood Education and Care (ECEC) to a minimum of 36 hours per fortnight for families with First Nations children.

These measures will take effect from July 2023.

Social Security

  • An additional $40 per fortnight for Job Seeker payments, Youth Allowance, Parenting Payment (Partnered), Austudy, ABSTUDY, Disability Support Pension (Youth), and Special Benefit.
  • Extra JobSeeker assistance for those aged 55 and over.
  • Single parenting payment extended to age 14 (currently 8 years old).
  • Rent assistance will increase by 15% for eligible participants.

First Homes

  • The first home guarantee 5% deposit and government guarantee loan has been extended.
  • All will now see the eligibility criteria expanded, included changing the definition of a 'couple' to now simply be any two eligible participants rather than a married couple or de facto relationship.
  • Siblings and friends will be able to use the government’s first home buyer programs together under changes designed to boost participation.
  • People who have not owned a house in the past 10 years will also be able to access the scheme.

Super

  • The Superannuation Guarantee will increase to 11% for July 1 2023.
  • Businesses will be required to pay workers their superannuation contributions every payday, from July 1, 2026. Previously, employers were only required to make contributions on a quarterly basis.
  • Labor will tax earnings from superannuation balances over $3 million at 30%, up from 15% starting in 2025. This decision to double the tax on earnings from the component of superannuation accounts over $3 million will raise $2.3 billion in 2027-28 alone, its first full year of operation.
  • The pension payment reduction that was put in place during COVID will not be extended, meaning pension payments will revert back to their previous minimums.



If you feel like you'd like to talk with your Verse Adviser about the Federal Budget and any potential impact on your personal strategy, feel free to get in touch and we'll make time to chat.

The information provided is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

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