The constant chatter earlier this year in relation to a proposed raft of superannuation and tax changes mercifully quietened in the weeks before this year’s Federal Budget. All in all, it was a very low-key Budget in respect to wealth management matters.
Superannuation
From 1 July 2026, employers will be required to pay their employees’ super at the same time they pay their wages, thus enabling employees to track their entitlements to make sure super contributions are being paid on time and in full. By having an employee’s super paid at the same time as their wages, an employee will undoubtably have enhanced retirement benefits due to the compounding benefits of super being paid more frequently.
An investment of $27 million is also being set aside in 2023-24 for the ATO to improve data capabilities, including matching both employers and super fund data at scale. A further $13.2 million will also be available to the ATO to consult and co-design a new ATO compliance system which will proactively identify instances of under or unpaid super in near-real time.
From 1 July 25, under the previously announced “Better Targeted Superannuation Concessions” proposal, 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%.
There was no mention in the Budget papers that the $3 million threshold will be indexed, nor does it address other contentious matters raised during the consultation period such as taxing unrealised gains. (The Budget papers allude to a ‘valuation method’ for defined benefit pensions but details are yet to be released.)
Also note the Transfer Balance Cap threshold will index to $1.9 million on 1 July 2023. Similarly, the Total Super Balance limit will index to $1.9 million on 30 June 2023 due to higher inflationary figures.
There was no mention of the 50% reduction in minimum pension factors continuing beyond this financial year so it is highly likely the minimum percentage factors will return to normal from 1 July 2023.
Small Business
Businesses with annual turnover of less than $50 million will have access to a bonus 20% tax deduction for eligible assets supporting electrification and more efficient use of energy, from 1 July 2023 until 30 June 2024.
Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business. Assets that support electrification include heat pumps, electric heating or cooling systems, batteries, or thermal energy storage.
Eligible small businesses will also be provided with cashflow relief by halving the increase in their quarterly tax instalments for GST and income tax in 2023-24. Instalments will only increase by 6% instead of 12%.
Businesses with a turnover of $10 million per year will be able to temporarily increase the instant asset write-off asset threshold to $20,000 between 1 July 2023 and 30 June 2024.
Home Ownership
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 eligible for the Home Guarantee Scheme.
Welfare Recipients
Expanding access to Parenting Payment (Single) - in September, eligible single parents will receive Parenting Payment (Single) until their youngest child turns 14. The current cut off age is 8 years old. The current base rate of Parenting Payment (Single) is $922.10 per fortnight. This compares to the JobSeeker Payment base rate of $745.20 per fortnight.
- This equates to an additional $176.90 per fortnight payment for a single parent up to when their youngest child reaches 14 years of age.
- Eligible singe parents with one child will be able to earn an extra $569.10 per fortnight, plus an extra $24.60 per additional child before their payment stops.
The base rate payments of JobSeeker, Austudy and Youth Allowance and rent assistance will increase by $40 per fortnight to eligible people.
A higher rate of JobSeeker will also be available to recipients aged 55 years and over who have received the payment for 9 or more continuous months (currently applicable to those 60 and over).
Payments will continue to automatically index to reflect changes in consumer prices.
The maximum rates of Commonwealth Rent Assistance will increase by 15%. This works out to be $31 per head per fortnight.
Aged Care
An interim increase of 15% to modern award wages will be allocated for many aged care workers. As stated in the Budget papers, personal care and support workers earn $34 per hour on average, which is about 25% less than the average worker.
An investment of $166.8 million will also be provided to support older Australians who wish to remain at home for longer, providing an additional 9,500 home care packages.
Increased funding will be made available to deliver aged care services to Aboriginal and Torres Strait Islander Elders, enabling them to remain connected to their communities.
Paid Parental Leave Scheme
From 1 July 2023, Parental Leave Pay and Dad & Partner Pay will combine into a single 20-week payment. A new family income test of $350,000 per annum will be introduced.
The Government is also committed to increasing Paid Parental Leave to 26 weeks by 2026.
Taxation
The planned Stage Three tax cuts are on track to commence on 1 July 2024. This includes raising the upper threshold for the 30% tax rate from $120,000 to $200,000 and removing the 37.5% tax band completely.
Proposed 2024/25 Marginal Tax Rates
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