NOT YET LEGISLATED
It is important to note that any announcements made by the Government are not guaranteed to become Law. These announcements need to pass Parliament first, and it’s possible that the Government may need to alter their announced changes in order for them to get through Parliament.
Do not make firm decisions until these have passed Parliament and have become Law.
BUDGET POSITION
The highlight is that for the 2023/24 year, it is expected that the Government will deliver a surplus of $9.3 billion, which will be the second surplus delivered by this Government. This has been boosted by unexpected tax windfalls coming from higher than expected commoddoty prices (such as on our Iron ore exports), which is estimated to have raised / will raise an additional $341 billion of tax revenue from 2023 to 2027.
$341 billion of extra tax revenue and we have very little to show for it… no surpluses of note, no debt reduction, no big infrastructure, no huge medical spending and breakthroughs, and worse of all… expected deficits for the next 10 years (specifically $120 billion over the next 4 years).
The Government is spruiking that it’s a fiscally responsible Government, but it’s hard to see it. If you spend more than you earn (particularly when you have a massive unexpected tax windfall), you’re generally not fiscally responsible.
Overall, it seems that most economists agree that the budget fails to deliver on its promises and fails to address the issue we have of spending more than we earn – and ultimately, this will add to inflationary pressures, increase the risk of interest rate rises (or delay interest rate cuts), increase the risk of falling into a recession, and worst of all, increase the burden on our children and grand-children.
THE NITTY-GRITTY
Click on the below headings to expand each one and read more detail.
As previously announced, the “revised” stage 3 tax cuts will come into effect on 1 July 2024. The changes to the tax rates are:
- The 19% tax rate will come down to 16% ($18,200 to $45,000)
- The 32.5% tax rate will come down to 30% ($45,000 to $135,000)
- The 37% tax rate will start at $135,000 instead of $190,000
- The 45% tax rate will start at $190,000 instead of $180,000
All households will be eligible for a $300 energy bill rebate, and some businesses will be eligible for $325 rebates.
Detail on how this will be administered is lacking at this stage, as are details on which businesses will be eligible or ineligible.
The instant asset write-off that has been in place for the past 4 or 5 years stopped on 30 June 2023. There was legislation in Parliament to expect this until 30 June 2024, but this budget proposes to expand it further to 30 June 2025. We note that it will apply to businesses with a turnover of $10mil or less.
Interestingly, this is being spruiked as great cash relief for small businesses, however over the next 4 years it is expected to put only $290 million in the hands of 4 million small businesses… a grand total of $72.50 each.
The reason for this is that the instant asset write-off isn’t really a tax break, it’s just bringing the full tax deduction into the current year (and resulting in you paying more tax in later years). If you think of a car for example, normally a business claims the cost of a car over 8 years and gets it’s tax savings spread over 8 years. The instant asset write-off brings it all into the first year (which is great), but means you pay more tax in the next 7 years. It also has the unexpected side effect of making the sale of the car fully taxable (because it has been fully depreciated) – something most business owners don’t consider when they are trading in their car.
People with HELP and other study debts will know that their debt is indexed with CPI each year. When CPI is 2%, everyone accepts that this is fine, but when CPI gets much closer to double figures, people with these debts are unhappy.
Indexing will continue, but it will instead be done at the lower of the CPI and Wage Price Index, and this will be backdated to 1 July 2023.
As previously announced, the deeming rate (the assumed income rate) that Centrelink applies to assets will be frozen and not rise with CPI. This means that it is easier for pensioners to pass the income test that applies to their Centrelink payments.
The maximum rate of Centrelink Rent Assistance payment will rise by 10%.
The Government will give the ATO money to focus on short-term rental properties to ensure that income from these properties is reported on tax returns correctly.
Students in key industries (nursing, teaching, etc) will be eligible for a payment of up to $319.50 per week while on placement – designed to help combat the additional cost these student have while getting on-the-job training.
Currently, single parents and those over 55 that have been receiving the JobSeeker payment for 9 months have been eligible for an increased rate of JobSeeker. This will be expanded to single people with the capacity to work up to 14 hours per week.
Currently, when you receive Paid Parental Leave from the Government, no superannuation is paid to your super fund. This is because you are not working for your employer, so they are not liable to pay super for you.
To assist those taking Government funded Paid Parental Leave, the Government will pay superannuation on these payments from 1 July 2025.
As previously announced, the threshold at which the Medicare Levy will kick-in will increase to $26,000 for single people (up from $24,276) from 1 July 2024. Similar increases apply to the family thresholds and senior thresholds.
Small businesses that trade with the Government will get paid quicker.
Chances are you won’t hear much about this, but for us it’s a big one. There are 457 tarrifs that the Government are going to abolish, cutting red-tape for businesses. These tarrifs apply to things like whitegoods.
From a dollar point of view, it has a minimal impact, but the cost to businesses of red-tape is much more than people think – and any measures that help improve the efficiency of businesses is a big winner in our eyes.
The Government is going to continue to invest in digital ID infrastructure, with the goal of everyone having a digital ID that can be easily verified by businesses and Government departments when needed.
The Government is persisting with its imossible goal of adding 1.2 million homes in a short period of time. Realising that it will fall short, the Government will force universities to build student accommodation to house international students – which will no doubt add to the cost of going to uni.
