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The Federal Government unveiled its annual budget on 9 May. The images of tradies in hi-vis were replaced by images of health workers, carers and the aged as the budget focus turned to helping with the cost of living, with support for low-income earners while also allocating funding to health and education with the support for small businesses more about headlines than substance.

Small Business Support

The accelerated depreciation provisions come to an end on 30 June 2023. For small businesses with a turnover <$10m, for FY24 we’re returning to a $20,000 instant asset write-off.

Small businesses with an annual turnover of less than $50 million will be able to claim a bonus tax discount of 20% for spending that supports electrification or more efficient energy use. The ‘Energy Incentive’ will apply to expenses such as electrified heating and cooling, induction cooktops, more efficient white goods, and installing batteries and heat pumps. The maximum claimable amount is $20,000, which means eligible spending of up to $100,000. We’re still waiting on legislation from the announcement in March 2022 on Skills and Training and IT investment boost so we’ll wait to see the reality rather than reacting to the headlines. The deduction sounds large, however after tax results in a cost saving of ~6% which is not bad, but not enough to change investment priorities.

Superannuation

Super guarantee rate increases to 11% from 1 July 2023 as had previously been announced.

Starting in July 2026, employers will be required to pay super at payday instead of quarterly. This change is expected to increase the amount of money workers receive due to compounding interest, and make it more challenging for businesses to avoid paying super. We’re happy with this change – it smooths cashflow and reduces the risk of late super. If you are thinking about it, we’d suggest to get started now.

From the 2025 financial year, future earnings on super balances exceeding $3 million will be taxed at a rate of 30%. There are some curly issues around potentially taxing unrealised gains, however this is yet to be resolved.

ATO compliance

The ATO have been given an extra $150m a year in funding to crackdown on tax avoidance and GST compliance. Expect more ATO reviews and a focus on trying to cut down on unreported cash jobs.

Aged Care Workers

Australia’s aged care workers, including registered nurses and home care professionals, are set to receive a pay increase of 15%, in the government’s $11.3 billion package. The pay increase will come into effect from July, with some workers receiving a pay rise of up to $10,000 per year. The low pay rates in the sector have contributed to a shortage of workers.

The pay increase will result in a rise of over $10,000 per year for a registered nurse and over $7,500 for an enrolled nurse. In addition to this, the federal government will redirect some of its aged care spending, with a projected decrease in payments of $2.2 billion over the next three years on residential aged care due to a growing preference for older people to remain in their homes.

Child care

The government’s $4.7 billion childcare subsidy changes will be implemented from July 1st. These changes will mainly benefit families with children in childcare and a household income below $530,000 (yes, $530,000 so we think this is the most generous means tested concession we have seen!). For families earning less than $80,000, the subsidy for their first child will increase to 90%, while those earning more than $80,000 will see a gradual decrease in their subsidy based on their income. Some families may witness an increase in their subsidy by up to 20%.

Energy bills

The government will be providing up to $500 in energy bill relief to pensioners, veterans, concession cardholders, and those receiving government support payments. In addition, small businesses will receive up to $650 to offset price increases for 2023 and 2024. This is expected to benefit approximately 5.5 million households, with rebates of up to $350 available for Western Australia and up to $500 for other states as they face higher price increases. Additionally, a separate fund will be established to provide low-interest loans to homeowners for making their homes more energy-efficient.

General Practitioners

The government is tripling the bulk-billing incentive for GPs for the most common consultations with children under 16, pensioners, and other Commonwealth concession cardholders. This move is aimed at encouraging more people to see their GP rather than ending up in the hospital system. The increased bulk-billing incentive will enable GPs to bulk-bill around 11.6 million eligible Australians, eliminating out-of-pocket expenses. The incentive will be higher in regional and rural areas, and will cost the government $3.5 billion over five years.

In addition, the government plans to establish eight new Medicare Urgent Care Clinics with extended operating hours. The clinics will bulk-bill and provide urgent care services to patients who need it. Does eight clinics Australia wide sound enough to you? We’re keeping an eye out for the media reports where these clinics are unable to be staffed or quietly close down in a couple of years time…

Home Owners

A new scheme will launch to provide low-interest loans to households that wish to enhance their energy efficiency. The program intends to offer 110,000 loans to households, motivating them to invest in more energy-efficient appliances or to improve energy efficiency through other means, such as adding solar panels or installing double-glazed windows.

Heavy Vehicle Road User Charge

The heavy vehicle road user charge will increase by 6% annually for the next three years, reaching 32.4 cents per litre of diesel by 2025-26, up from 27.2 cents.

Medication

Starting in September, the cost of hundreds of medications listed on the Pharmaceutical Benefits Scheme will be reduced by almost half. This will be done by allowing people with chronic illnesses to purchase two months’ worth of medicine with a single prescription, saving them a co-payment fee each time. The initial list of 100 medications includes some of the most commonly used medicines for conditions such as type 2 diabetes, depression, heart failure, asthma, and high cholesterol. In total, 320 medications will benefit from this program, with the final batch to be included by September of next year. Great idea – should have been done earlier.

Single Parents

The government has decided to raise the cut-off age for the single parenting payment from 8 to 14 years old. This decision will mostly reverse a previous cut made more than a decade ago during the Gillard and Howard governments. Before this change, single parents were required to apply for JobSeeker once their youngest dependent child reached 8 years of age. With this change, parents will receive an additional $176.90 per fortnight if they are on the base rate, resulting in a total of $922.10 per fortnight. The increase in the cut-off age will benefit around 57,000 parents, mostly women.

NDIS

The budget has allocated a significant amount of funding to the National Disability Insurance Scheme (NDIS), which is one of the fastest-growing areas of spending.

While the NDIS will continue to expand in the coming years, the federal government aims to control its growth. Starting from mid-2026, the government plans to cap the annual growth of the scheme at 8 percent.

Young people

Income support payments for young people will increase by $40 per fortnight for both Austudy and Youth Allowance to help with rising living costs. Additionally, Commonwealth Rent Assistance will see a 15% increase in the maximum rate, costing the government approximately $700 million per year.

The government has allocated $127.3 million over the next four years to create 4,000 additional Commonwealth-supported places at universities, particularly for courses related to the nuclear-powered submarine program, including STEM and management disciplines.

Agriculture

The government has allocated an additional $1 billion over four years to enhance biosecurity, which includes greater regulation, surveillance, and international engagement.

To partially offset the cost of the measure, a “biosecurity protection levy” will be imposed on Australian producers of agricultural, forestry, and fishery products from the middle of next year.

Got a question?

If you have any questions about how this budget affects you, please get in touch.