Federal Budget 2023 and what it means for Mulcahy & Co clients

The 2023 Federal Budget was announced on Tuesday 9 May 2023, with a focus on cost-of-living relief and modernising our economy. Below is a summary of the key aspects of the budget and how they will affect Mulcahy & Co clients.

Changes for Individuals

There have been no changes made to the individual tax rates for the 2023/2024 income year. All rates will remain unchanged.

Minor personal tax changes

Although no changes to the headline personal tax rates themselves were announced, some minor changes surfaced that may impact personal tax positions for some Australians.

These include: Increases in the Medicare Levy low-income thresholds for singles, families and pensioners from 1 July 2022.

• For singles the threshold will be increased from $23,365 to $24,276

• For families the threshold will be increased from $39,402 to $40,939

• For single seniors and pensioners the threshold will be increased from $36,925 to $38,365

• For family seniors and pensioners the threshold will be increased from $51,401 to $53,406

• For each dependent child or student, the family income thresholds will increase by a further $3,760 instead of the previous amount of $3,619

From 1 July 2024, the Government will also exempt eligible lump sum payments in arrears from the Medicare levy for low-income taxpayers. This measure aims to ensure the low-income taxpayers do not pay higher amounts of the Medicare levy as a result of receiving an eligible lump sum payment, for example, as compensation for underpaid wages.

Cost of living relief measures for individuals

A range of other measures were announced to provide cost of living relief to individuals including:

• A $40 per fortnight increase to various income support payments such as JobSeeker, Youth Allowance, Parent Payment (Partnered), and Austudy.

• Reducing the minimum age for which older people qualify for the higher JobSeeker Payment rate from 60 to 55 years. Eligible recipients will receive an increase in their base rate payment of $92.10 per fortnight.

• A 6 month extension to 31 December 2023 to the workforce participation incentive measures to support pensioners who want to enter the workforce, or work more hours, without impacting their pension payments. Under this measure, pensioners can earn up to $11,800 before their pension is reduced.

Home ownership

As previously announced, eligibility for the First Home Guarantee and Regional First Home Guarantee will be expanded to any two eligible borrowers beyond married and de facto couples, and non-first home buyers who have not owned a property in Australia in the preceding 10 years. Australian Permanent Residents, in addition to Australian citizens, will also be eligible for the Home Guarantee Scheme. This is the scheme that allows aspiring home owners to buy a home with a deposit as low as 5% without paying lenders mortgage insurance.

For existing homeowners, an extensive range of energy saving initiatives such as electrification, energy saving appliances and solar panels will be eligible for low rate loans.

Family support

From 1 July this year, Parental Leave Pay and Dad and Partner Pay will combine into a single 20-week payment. A new family income test of $350,000 per annum will see nearly 3,000 additional parents become eligible for the entitlement each year. The Government has also committed to increase Paid Parental Leave to 26 weeks by 2026.

Changes for Agriculture and Primary Producers

Broad-based biosecurity levy introduced

The Budget introduces a new biosecurity levy on all agricultural, forestry and fishery products from 1 July 2024, providing much needed financial support to the Department of Agriculture, Fisheries and Forestry.

The plan is to add 10% on top of the 2020-21 agricultural produce levies. For example, where the total levies per tonne of rice is $6, the additional biosecurity levy is anticipated to add $0.60 per tonne. The levy not commencing until 1st July 2024 ensures there is time to plan and negotiate new arrangements.

For producers, some of these increases based on levy rates as of 1 July 2020, are as follows:

• A cattle (grass fed) producer will pay an extra 50 cents per head (cattle and livestock producers charge)

• A cotton producer will pay an extra 22.5 cents per 227kg bale (cotton levy)

• An egg producer will pay an extra 3.25 cents per chick (eggs promotion levy)

Australian Carbon Credit Units (ACCU)

$18.1m has been allocated over two years to implement priority reforms to the operation of the Australian Carbon Credit Unit (ACCU) scheme as part of the Government’s initial response to the Independent Review of Australian Carbon Credit Units.

Heavy Vehicles

With the agricultural sector relying on the movement of produce by road, there will be some impact for the transportation costs incurred in these road movements. The Heavy Vehicle Road User Charge rate will be increasing from a rate of 27.2 cents per litre in 2023-24 to 32.4 cents per litre in 2025-26.

Changes for Superannuation

Extra Tax on Super Account Balances Above $3 million

The Budget confirmed the Government’s intention to apply an additional 15% tax on total superannuation balances above $3 million from 1 July 2025. If your super member balance is less than $3 million, then this won’t affect you. If it is more than $3 million from 1 July 2025, then your super will be taxed 30% on its earnings, up from the current rate of 15%.

Super Payable by Employers on Pay Day

Currently, employers must make employee superannuation payments quarterly.

From 1 July 2026, employers will be required to pay their employee’s superannuation at the same time as they pay their salary and wages. While this won’t begin for 3 years, you need to be aware of this and factor this into your future cashflow planning.

Prepared for you by the professionals at Mulcahy & Co.

This information does not constitute financial advice. Please seek individualised advice on all matters mentioned here from a Mulcahy & Co qualified expert.

May 2023.