Treasurer Jim Chalmers delivered his second budget for the Labor Government.
The Treasurer’s second budget since Labor took office, it is heavily targeted at addressing the rising cost of living and boosting welfare, all while still aiming for balance, trying to avoid contributing to inflationary pressures, and to continue to foster economic growth and a return to real wage growth for the Australian public.
Surprise Budget surplus
We believe most were surprised with the reported budget surplus. The first in 15 years and a $40bn turnaround from October 2022 forecasts.
How did we end up in surplus?
The surplus was driven by a surge in the corporate and individual tax take. High commodity prices, inflation, and high employment have all pushed up corporate and individual tax receipts. But the gains can’t be relied on long term. The Budget is expected to deliver a deficit of $13.9 billion in 2023-24, and a $35.1bn deficit in 2024-25.
The “Carefully Calibrated” Budget
Jim Chalmers has said this budget has been carefully calibrated to not further stoke the fires of inflation – a tactic the majority of Australians would appreciate and agree with.
Many of the budget announcements aimed towards delivering cost of living relief with social initiatives dominating the budget. These include:
- Energy bill relief for some households and small business
- Encouraging doctors to offer bulk billing by tripling the incentive for children under 16, pensioners and other Commonwealth card holders
- Increases to commonwealth rent assistance
- Increases to JobSeeker and other income support payments
- Expanding access to the single parenting payment
Individual tax cuts
The legislated stage 3 tax cuts legislated to take effect on 1 July 2024 remain in place.
Stage 3 radically simplifies the tax brackets by collapsing the 32.5% and 37% rates into a single 30% rate for those earning between $45,001 and $200,000.
Budget announcements for business
We were very happy to see the $20k Small Business instant asset write-off reinstated. This will help so many small businesses as it allows assets purchased to be fully deductible in the same tax year as they’re purchased.
The $20k small business incentives for energy efficiency is another initiative for business to take advantage of. This provides an additional deduction of 20% of the cost of eligible depreciating assets that support electrification and more efficient use of energy.
More information can be found in the Tresurers Media Release – Small Business Energy Relief
Areas of concern for business are those who continue to be non-compliant and attract the attention of the ATO.
- Businesses who attempt to dodge super guarantee liabilities
- Those who actively dodge their tax obligations
- Those who are not or under reporting their FBT
What was not in the Budget for business?
There was no mention of the loss carry back rules for companies, suggesting that these rules will expire on 30 June 2023, along with the temporary full expensing rules. The loss carry back rules allow eligible companies to apply tax losses against taxable profits made in certain previous income years, rather than carrying them forward to future years.
There is no mention of the simplification of Division 7A. Division 7A captures situations where shareholders access company profits in the form of loans, payments or the forgiveness of debts. The 2016-17 Federal Budget proposed changes to reduce the compliance burden of Division 7A. These changes were initially meant to apply from 1 July 2018, but this issue remains in limbo. Learn more à What is a Div 7a Loan.
The Budget also doesn’t refer to either the Skills and Training Boost or the Technology Investment Boost. These measures were announced by the previous Government, and with no announcement by Labor, we can assume has this one has been taken off the table.
Budget announcements for SMSF
There was a small win for the SMSF sector with an amendment to the Non-Arm’s Length Income (NALI) provisions.
The provisions, which apply to expenditure incurred by superannuation funds by limiting income of self-managed superannuation funds will now be twice the level of a general expense rather than five times the level as was first suggested in the initial consultation with Treasury in February.
30% tax on super earnings above $3m has been confirmed
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.
More information on both of these topics can be found on pg. 10 of the Budget Guide downloadable from this article.
For a comprehensive guide on everything announced in the 2023-24 Budget can be downloaded. Written by our friends at The Knowledgeshop, this guide covers everything for individuals and families, business and employers, superannuation and investors, and an economic outlook.
Questions have been made around the mid-term forecasts and how the government will pay for this over the mid-long term.
Critics have questioned whether Labor have been too lenient, and that more courage is needed than simply slugging gas companies and smokers – both of which will experience tax hikes throughout the year.
How can Walsh Accountants help?
If you have any concerns as to how these budget announcements will affect you, your business, or your superannuation, our team is here to help.
Please do not hesitate to contact us for a discussion with one of our accounting team which is specific to your personal circumstance.