2023-2024 Federal Budget

Posted 10 May '23

The Highlights

1. Individuals

1.1. Stage 3 Tax Cuts
The Government did not announce any changes to the previously legislated Stage 3 personal income tax cuts, which are set to commence from 1 July 2024.

The tax cuts will reduce the 32.5% marginal tax rate to 30% and remove the 37% tax bracket altogether, resulting in a benefit to those taxpayers earning more than $45,000 per year.

As a result, approximately 94% of Australians will face a marginal tax rate of 30% or less and only three personal income tax rates will apply from 1 July 2024.

1.2 Low and Middle Income Tax Offset (LMITO) and Low Income Tax Offset (LITO)
The Budget did not announce any extension of the LMITO, which means that the offset will no longer be available after the 2021-22 income year. The LMITO provided low- and middle-income taxpayers (with taxable incomes up to $126,000) with a tax offset of up to $1,500.

No extension to the LMITO means individual taxpayer refunds for 2022-2023 may be decreased by up to $1,500 compared to the 2021-22 income year.

No change to the existing LITO which will continue to apply for the 2022-23 income year and beyond. The maximum amount of the LITO is $700. The LITO is reduced at a rate of five cents per dollar between taxable incomes of $37,500 and $45,000 and then at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667.

1.3 Medicare Thresholds
From 1 July 2022, the Medicare levy low-income threshold for singles will increase to $24,276 (up from $23,365). The threshold for each dependent child or student will increase to $3,760 (up from $3,619). For single seniors and pensioners eligible for the Senior Australian Pensioner Tax Offset, the Medicare levy low-income threshold will increase to $38,365 (up from $36,925). The family threshold for seniors and pensioners will increase to $53,406 (up from $51,401), plus an additional $3,760 for each dependent child.

1.4 Income Support Payments
The Government aims to increase the base rate of income support payments, such as JobSeeker and Youth Allowance, by $40 per fortnight to eligible people. Recipients will continue to have their payments indexed to inflation to keep pace with increases in cost of living.

The increase will take effect from September 2023, and will provide much needed relief to the estimated 1.1m Australians who rely on these payments to survive.

1.5 Single Parenting Payments
Single Parenting Payment changes will allow single parents to continue to receive payments until their children are 14 years old. Previously, this ceased when the child reached age eight, at which point parents would be forced back to work or receive Job Seeker Payments which are $176.90 per fortnight less than the Parenting Payment.

1.6 Commonwealth Rental Assistance
The Government has pledged to increase the maximum rates of Commonwealth Rent Assistance by 15% at a cost of $2.7b over five years; the largest increase to Commonwealth Rent Assistance in over three decades. To receive Commonwealth Rent Assistance you must be receiving certain payments like the Age Pension, JobSeeker, Austudy or Family Tax Benefit for example and must be paying rent, fees in a retirement village or board and lodging.

1.7 Energy price plan relief
The Energy Bill Relief Fund will provide targeted energy bill relief to eligible households and small business customers, which includes pensioners, Commonwealth Seniors Health Card holders, Family Tax Benefit A and B recipients and small business customers of electricity retailers. In partnership with the states and territories, the plan is expected to deliver up to $500 in electricity bill relief for eligible households and up to $650 for eligible small businesses.

1.8 30% tax on super earnings above $3m.
From 1 July 2025 An additional tax of 15% on earnings will apply to individuals with a total superannuation balance over $3 million at the end of a financial year from 1 July 2025. The definition of total superannuation balance (TSB) for the new tax uses the current definition and includes amounts in retirement phase pensions.

2. Business

2.1 Instant Asset Write-off
Instant asset write-off threshold of $20,000 from 1 July 2023 until 30 June 2024. Small businesses, with 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. The $20,000 threshold will apply on a per asset basis, so small businesses can instantly write off multiple assets. This measure is estimated to decrease receipts by $290.0 million over the 5 years from 2022–23.

2.2 Electrification of Assets
The Government will allow a bonus tax deduction of 20% up to a total expenditure of $100,000. The additional deduction will be for the electrification of assets and improvements to energy efficiency. The measures will apply to small and medium businesses with turnover of less than $50m. For businesses with turnover less than $10m they will be able to combine the benefit of the IAWO with this concession.

For example, if a primary producer with turnover under $10m was to acquire a solar pump for $15,000, this would be eligible for the IAWO and a bonus deduction of $3,000.

2.3 $20,000 small business incentives for energy efficiencies
Tax deduction for energy upgrades: Tax deduction of up to $20,000 for eligible small and medium sized businesses (turnover <$50 million) investing in energy efficient equipment or electrification of cooling and heating systems. Up to 3.8 million small businesses will be eligible. Eligible assets or upgrades will need to be first used or installed between 1 July 2023 and 30 June 2024. (Full details of eligibility criteria will be finalised after consultation with stakeholders).

3. Jobs, Skills and Migration

3.1 Visa Costs
The cost to apply for many visas will rise by 6 percentage points, meaning it will cost more to apply for already expensive temporary and permanent visas. For some visas, such as working holiday maker and tourist visas, application fees will increase by 21 percentage points.

3.2 International students
International students working in the aged care sector will be exempt from the 48 hour per fortnight work limit until 31 December 2023.

3.3 Visa processing
$75.8 million over two years from 2023–24 to extend the current surge in visa processing resources to improve timeliness of visa processing.

3.3 Age Pension Work Bonus
A further extension until 31 December 2023 to the age and veterans’ pensioners increase of the Work Bonus income bank.

Important: This is not advice. Clients should not act solely on the basis of the material contained in this Newsletter. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. The Newsletter is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.

If you would like to discuss any points raised in the above update or other elements relating to the 2023-2024 Federal Budget not mentioned, please feel free to contact your Accountant at PinnacleHPC Pty Ltd.

Liability limited by a scheme approved under Professional Standards Legislation.