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As expected, the 2023-2024 Federal Budget has placed a strong emphasis on the cost of living with no real surprises outside of the announcements made over the past week. There were some slight changes to Superannuation, concessions that apply to Small to Medium sized businesses. As well as Aged Care, Social Security and Housing changes that you should be aware of. As with every Budget, it is important to remember these changes are proposed and are not yet Law.
More targeted Superannuation Concessions ($3m Cap):
As expected, and in line with a pre-Budget announcement, the Government intends to reduce the tax concessions available to individuals with a total superannuation balance (TSB) above $3 million. If passed, this measure will bring the tax rate to 30%, up from 15%, for earnings (including unrealised gains) that relate to the proportion of an individual’s Superannuation balance that is greater than $3 million and in the accumulation phase.
The tax rate would increase from 0% to 15% for those balances supporting a retirement phase income stream. Balances below the proposed $3 million threshold will continue to be taxed at 15% for benefits held in the accumulation phase or 0% if held in a retirement phase pension account.
The $3 million threshold will not be indexed over time and this measure is forecast to impact around 80,000 individuals in its first year of operation.
Increased Payment Frequency for Super Guarantee Contributions
Currently, employers are required to pay superannuation guarantee (SG) on a quarterly basis. From 1 July 2026, employers will instead be required to pay their employee’s SG at the same time as their salary and wages. The Government have stated that this proposed change will ensure employees have greater visibility over whether their entitlements have been paid and will enable the ATO to recover unpaid superannuation.
Amendments to the Non-Arm’s Length Income (NALI) provisions (for SMSFs)
The previous Coalition Government had announced changes that brought certain non-arm’s length expenditure incurred by a superannuation fund within the non-arm’s length income (NALI) measures that impose a penalty tax (at the highest marginal tax rate) on superannuation funds.
In this Budget, the Government has announced that:
– the level of income subject to penalty taxation will be limited to two times the general expense of the fund (although it is not yet clear how this amount will be calculated), and
– the NALI provisions will only apply to self managed super funds and small APRA funds.
Small to Medium sized Businesses
Changes to the Instant Asset Write-off Threshold
Currently, businesses with turnover of less then $500 million per annum are eligible to claim an instant asset write off of new equipment up to the value of $150,000. This is being reduced both in terms of the turnover eligibility and offset amount. From 1 July 2023, only businesses with less than $10 million in turnover will be eligible and will be limited to a $20,000 write-off.
Changes to the frequency of Super Guarantee Contributions for Employees
As above, the Government will increase the payment frequency for Superannuation Guarantee contributions. Rather then making these payments Quarterly, from 1 July 2026, you’ll be required to pay the SG at the same time as their Salary and Wages.
Energy Efficiency Tax Deductions
Businesses with a turnover of up to $50 million, will be incentivized to make their businesses more energy efficient. Businesses that make steps towards electrifying their cooling and heating systems, installing batteries and heat pumps, and upgrading fridges and other appliances will be rewarded with a maximum bonus tax deduction of $20,000. Eligible assets or upgrades will need to be first used or installed ready between 1st July 2023 and 30th June 2024. This does not include Electric Vehicles.
Aged Care, Social Security and Housing
Cost of Living Relief and Social Security Rate Increases
The Government will partner with States and Territories to provide targeted and temporary relief on power bills to eligible households and small businesses that are customers of electricity retailers. The Federal Government will fund up to a total of $1.5 billion contingent on the relevant State or Territory matching the funding on a dollar-for-dollar basis. A one-off credit will be provided directly to eligible recipients’ electricity bills from 1 July 2023.
The Government has also announced increases to working age payments (including JobSeeker, Parenting Payment and Youth Allowance to name a few.
The maximum basic payment rate of working age and student payments will increase by $40 per fortnight from 20 September 2023 in addition to the normal indexation that applies on this date.
Aged Care Regulatory Reform
The Government will provide additional funding of $309.9 million over 5 years from 2022-23 to implement the recommendations from the Royal Commission into Aged Care Quality and Safety, strengthening the regulation of the aged care sector and to improve the health and safety of older Australians receiving aged care. Funding includes:
– $139.9 million over 4 years from 2023-24 to enhance the Star Rating system to improve the accountability and transparency of aged care providers
– $72.3 million in 2023-24 to support the development and implementation of a new Aged Care Regulatory Framework to support the new Age Care Act, due to commence from 1 July 2024
– $59.5 million over 5 years from 2022-23 to fund the infrastructure to establish a national worker screening and registration scheme from 1 July 2024
– $25.3 million in 2023-24 to ensure the Aged Care Quality and Safety Commission is properly resourced to deliver its audit and compliance program in 2023-24
– $12.9 million over two years from 2023-24 to improve food and nutrition in aged care.
The Government will consider future funding for this measure when the longer-term legislative arrangements under the new Aged Care Act are developed.
The Government will provide $11.3 billion over 4 years from 1 July 2023 to deliver a 15% pay increase for aged care workers across Australia.