Budget 2023/24 – Individuals & Families
On Tuesday, Treasure Jim Chalmers handed down the 2023/24 federal budget, announcing a $4.2 billion surplus, the first since the 2007/08 budget. Despite the announcement of a surplus in the budget, it is one which is considered to be modest, and a once-off, with deficits forecast for the next several years.
Although there were no direct tax changes in this budget for individuals, some of these measures introduced may be interesing for you and your family, many of which were announced before Budget night.
No changes announced to stage 3 tax cuts
Despite pressures to rein in the stage 3 tax cuts announced in the 2018/19 Budget, there has been no decision to wind back or tinker with these tax cuts.
From 1 July 2024, workers who earn between $45,001 and $200,000 will be taxed at a rate of 30% on their annual income within this band, replacing the two higher rates of 32.5% and 37%, as legislated by the previous government.
Concessional superannuation tax rate
The Australian government plans to reduce tax concessions available to those with a superannuation balance exceeding $3 million starting from 1 July 2025. Individuals whose total superannuation balance is below $3 million will remain unaffected.
Those who exceed this threshold will be subject to an additional 15% tax on their ‘Earnings’ within super. The term ‘Earnings’ refers to the difference in the superannuation balance at the start and end of the financial year, adjusted for withdrawals and contributions. Negative ‘Earnings’ can be carried forward to offset against future ‘Earnings’. This effectively increases the income tax rate for earnings on super balances over this threshold to 30%.
Starting 1 July 2026, businesses will be obligated to pay their employees’ superannuation entitlements concurrently with their salary and wages, rather than every quarter as is currently the case. The Superannuation Guarantee charge will be revamped to accommodate this new payment frequency, and the updated design will be reviewed in the 2024-25 budget.
In order to enhance the system’s effectiveness, the ATO will be given an extra $40.2 million in funding to enable them to detect unpaid superannuation contributions sooner, and the Government will establish improved recovery targets for the ATO.
Although it is not a tax relief, there is a cost-of-living relief for household bill payers in the form of power bill credits. A $1.5b package as part of a deal between the states and the Commonwealth will see more than five million eligible households receive relief applied directly to their power bills in the form of credits. Amounts will vary by state.
First Home Guarantee Program
Again, this is not a tax related measure, but it may help you or your family members work towards owning a home, which is the primary financial objective of many of us. From 1 July 2023 eligibility for the First Home Guarantee and Regional First Home Guarantee will be expanded to any 2 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 be also be eligible for the Home Guarantee Scheme in addition to the other two schemes. Eligible home buyers with deposits as low as 5% (or even 2% for the Family Home Scheme) may qualify for a home loan without paying Lenders Mortgage Insurance (LMI).
If you would like to understand how these changes impact you and your family please feel free to give us a call.