Federal Budget 23-24

Treasurer Dr Jim Chalmers has unveiled the Federal Government’s budget, forecasting a modest $4.2 billion surplus for the 2022-23 financial year and putting cost-of-living relief for the most vulnerable at the top of the agenda. The centrepiece of the Albanese Government’s second budget is a $15 billion package of welfare increases, bulk-billing incentives, and energy bill discounts in a budget it says is responsible while inflation remains the primary economic challenge.

The information in this document is factual information and is not financial advice. The information is objectively ascertainable information and is not tailored to your personal circumstances. You should obtain financial advice before making a decision in relation to this information. All examples are provided for illustrative purposes only.

The Small Business Energy Incentive
The Small Business Energy Incentive will provide businesses with annual turnover of less than $50 million a bonus 20 percent deduction on expenditure that supports electrification and more efficient use of energy. Eligible investments may include electrifying heating and cooling systems, upgrading to efficient fridges and induction cooktops, and installing batteries and heat pumps.
Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024. Eligible expenditure will be capped at $100,000, with the maximum bonus deduction being $20,000 per business. As an example, a Hospitality business that replaces its cooktops and fridges with eligible, efficient appliances for a cost of $25,000 will be entitled to a tax deduction of $30,000 (meaning a bonus of $5000.).

Incentives to invest in build-to-rent accommodation
The Government will offer some modest tax incentives to increase the supply of rental housing by changing arrangements for investments in build-to-rent accommodation. The capital works deduction rate will increase from 2.5 percent to 4 percent per year for eligible new build-to-rent projects where construction commences after 9 May, 2023. This incentive allows for the construction costs to be depreciated over 25 years as opposed to 40 years. For example, this measure accelerates the deduction by $1,500 per year, per $100,000 in construction costs

Instant Asset Write Off
For the 2023-2024 income year eligible small businesses with a turnover of less than $10 million will be able to immediately depreciate the cost of an asset less than $20,000. The previous temporary full expensing deduction for businesses with a turnover of less than $5 billion, continues to be available until 30 June, 2023. Please note, under both measures the asset is required to be installed ready for use by 30 June of the relevant income year.

Improving small business cash flow
Eligible small businesses will receive cashflow relief by halving the increase in their quarterly tax instalments for GST and income tax in 2023-2024 income year. Instalments will only increase by 6 percent instead of the scheduled 12 percent increase, which better reflects the economic conditions currently faced by small businesses.

Improving the equity and sustainability of the superannuation system
The government confirmed previous announcements to increase the tax paid on superannuation balances above $3 million. From 1 July 2025, earnings on balances exceeding $3 million will attract an increased concessional tax rate of 30%. Earnings on balances below $3 million will continue to be taxed at the concessional rate of 15% on benefits in accumulation phase and tax free in retirement income phase.

Aligning super and wage payments for all employees
From 1 July 2026, employers will be required to pay their employees' super at the same time they pay their wages. More frequent super payments should make employers’ payroll management smoother with fewer liabilities building up on their books, however cash flow management may need to be reviewed to ensure funds are available to make the required payments.

Strengthening Medicare Package
The Government is investing $5.7 billion over five years from 2022-23 to strengthen Medicare and make it cheaper and easier to see a doctor. The Strengthening Medicare package includes the largest investment in bulk billing incentives ever.

The bulk billing incentive, paid to GPs who do not charge a gap to patients, will be tripled for the most common consultations with children under the age of 16, pensioners and other Commonwealth concession card holders. This includes face-to-face, telehealth and videoconference consultations.

The higher bulk billing incentive will support GPs to bulk bill eligible Australians. This will support eligible patients to receive the care they need, without any out-of-pocket costs. The bulk billing incentive will continue to be higher for patients in regional and rural areas to support the ongoing viability of general practices in these communities.

The tripling of the bulk billing incentive applies to:

• all face-to-face and telehealth general practices services between 6 and 20 minutes long
• all other face-to-face general practice consultations
• longer telehealth and general practice consultations where a patient is registered with their regular practice through MyMedicare.

Scam Watch
$86.5 million over four years will be directed to fighting scams and online fraud.
That includes $58 million for the creation of a National Anti-Scam Centre within the consumer watchdog within the next three years, and $17.6 million for the Australian Securities and Investments Commission to take down phishing websites.

Bottom Line
The Budget is estimated to result in a surplus for the first time in 15 years due to a $41 billion turnaround in Australia's fiscal fortunes. Treasurer Dr Jim Chalmers forecast a modest $4.2 billion surplus for the 2022-23 financial year, however it is expected to return to deficit next year with deficits over the forward estimates expected to be $143 billion lower than those forecast in October.

Real GDP growth is forecast to slow to 1.5 percent in 2023–24, before recovering in 2024–25. More jobs are being created and the unemployment rate is expected to stay low by historical standards.
Inflation in Australia is now past its peak, has begun to moderate, and is expected to return to target in 2024–25. But price pressures will continue to weigh on households and our economy for longer than we would like.

The Government is delivering targeted cost-of-living relief that will directly reduce price pressures and the CPI by 0.75 of a percentage point in 2023–24. Nominal wage growth has picked up and is expected to build to 4 percent in 2023–24, its fastest pace since 2009. The lift in wage growth has been supported by the Fair Work Commission determination on the minimum wage and will be further assisted by the Aged Care Work Value Case.

If you have questions about any of the measures in this article, please ring your adviser in Accounting & Business Advisory or your representative Financial Planner from Hood Sweeney Securities (AFSL 220897, ABN 40 081 455 165), on 1300 764 200, or email info@hoodsweeney.com.au and we will be in touch.