2023/2024 Full Detailed Federal Budget Report
The Federal Treasurer, Dr Jim Chalmers, handed down the 2023-24 Federal Budget at 7:30 pm (AEST) on 9 May 2023.
The Budget forecasts the underlying cash balance to be in surplus by $4.2 billion in 2022–23, the first surplus since 2007–08, followed by a forecast deficit of $13.9 billion in 2023–24.
There were expectations of further tax measures, however, the Government has been handed a fortunate position of increased tax receipts. Since the October Budget, tax receipts have been revised up by $42.0 billion in 2023–24 and $134.8 billion over the 5 years from 2022–23 to 2026–27.
The Budget papers state that in the near term, the upgrade to tax receipts primarily reflects higher company tax and personal income tax, underpinned by higher commodity prices, a pick-up in wages growth, strong employment growth and high participation. However, the strong near-term upgrade to tax receipts is expected to moderate after 2023–24 as commodity prices are assumed to return to conservative long-run levels and conditions in the labour market ease.
Dr Chalmers has said “fixing the mess” would take more than two budgets and more than one term of government. Based on these comments and the lack of revenue measures in this budget, this may be a hint that Labor would seek a tax rise agenda for the next election or look to pare back the stage three income tax cuts.
The tax, superannuation and social security highlights are set out below and our detailed analysis attached.
Business
- The instant asset write-off threshold for small businesses applying the simplified depreciation rules will be $20,000 for the 2023–24 income year.
- An additional 20% deduction will be available for small and medium business expenditure supporting electrification and energy efficiency.
- FBT exemption for eligible plug-in hybrid electric cars will end from 1 April 2025.
- An increased capital works deduction rate and reduced withholding on managed investment trust (MIT) payments will apply to new build-to-rent projects.
- The Location Offset rebate and the Qualifying Australian Production Expenditure thresholds will be increased to boost investment in film production in Australia.
- Deductible gift recipients list to be updated.
Individuals
- Income support payment base rates will be increased by $40 per fortnight.
- The minimum age for which older people qualify for the higher JobSeeker Payment rate will be reduced from 60 to 55 years.
- The workforce participation incentive measures to support pensioners who want to work without impacting their pension payments will be extended for another 6 months to 31 December 2023.
- Eligibility for Parenting Payment (Single) will be extended to support single principal carers with a youngest child under 14 years of age.
- Housing measures will be introduced to increase support for social and affordable housing and improve access for home buyers.
- The maximum rates of the Commonwealth Rent Assistance (CRA) allowances will be increased by 15% to help address rental affordability challenges for CRA recipients.
Multinationals
- Australia will implement key aspects of the Pillar Two solution of the OECD/G20 BEPS Project, meaning certain large multinationals will be subject to a 15% minimum tax in the jurisdictions in which they operate.
- The scope of the general anti-avoidance rules in Pt IVA of ITAA 1936 will be expanded from 1 July 2024.
Superannuation
- As previously announced, superannuation earnings tax concessions will be reduced for individuals with total superannuation balances in excess of $3 million from 1 July 2025.
- Employers will be required to pay their employees’ superannuation guarantee entitlements at the same time as they pay their salary and wages from 1 July 2026.
- The Budget did not announce a further extension to 2023-24 of the temporary 50% reduction in the minimum annual payment amounts for superannuation pensions and annuities. As a result, the 50% reduction in the minimum pension drawdowns, which has applied for the 2019-20 to 2022-23 income years, is set to end on 30 June 2023.
- Superannuation trustees and members will need to start planning for the additional cash flow requirements to satisfy the minimum annual payment amounts for 2023-24 in relation to their pensions.
- The non-arm’s length income (NALI) provisions will be amended to provide greater certainty to taxpayers.
Tax administration
- Funding will be provided to the ATO over 4 years to lower the tax-related administrative burden for small and medium businesses, cut paperwork and reduce time small businesses spend doing taxes.
- Reduction in GDP adjustment factor for pay as you go and GST instalments.
- Funding to improve the administration of student loans.
- Additional funding will be provided to address the growth of businesses’ tax and superannuation liabilities, and a temporary lodgement penalty amnesty program will be provided to small businesses.
- The Personal Income Tax Compliance Program will be extended for 2 years from 1 July 2025 and its scope expanded from 1 July 2023.
GST and other indirect taxes
- Funding for GST compliance will be extended for a further 4 years to address emerging risks to GST revenue.
- The Heavy Vehicle Road User Charge rate will increase 6% per year from 2023–24 to 2025–26.
The full Budget papers are available at www.budget.gov.au and the Treasury ministers’ media releases are available at ministers.treasury.gov.au.