A not so super budget
Treasurer Jim Chalmers has pledged billions in new spending to help lower income families navigate the cost-of-living crisis as he handed down his second budget on Tuesday night.
Long-awaited healthcare reforms were also unveiled as Dr Chalmers sought to begin fixing Australia’s struggling public healthcare system.
Winners included the public broadcasters, which received more than $7 billion in new funding, alongside workers across the care economy.
Here’s what was in the 2023-24 federal budget for you:
Budget outlook and key forecasts
Since the October 2022 mini-budget, the Commonwealth Government has enjoyed a receipts tailwind provided by a strong labour market and elevated commodity prices. These have combined to now deliver a surprise expected cash surplus of $4.2 billion for the 2022-23 financial year, followed by a deficit of $13.9 billion for 2023-24.
The outlook for inflation is unfortunately less rosy, with the Consumer Price Index (CPI) forecast to stay at a stubbornly high 6% for 2022-23, falling to 3.25% for 2023-24. Inflation is now not forecast to fall back into the RBA’s preferred 2% to 3% per year band before 2024-25.
With real wages forecast to fall 2.25% this financial year, this budget’s focus is very much on alleviating cost-of-living pressures, with many of the key budget measures aimed at providing assistance to counteract the effects of rising household living costs.
The following are the key announcements contained within the Budget papers that affect superannuation and retirees as well as announcements on cost-of-living pressures.
Confirmation of higher tax on balances of $3 million or more
The Budget confirms the announcement first made on 28 February this year, that tax concessions available to individuals with a total superannuation balance (TSB) exceeding $3 million will be reduced from 1 July 2025.
This ‘Better Targeted Superannuation Concessions’ measure will bring the headline tax rate for impacted individuals to 30%, up from 15%, for earnings corresponding to the proportion of an individual’s TSB that is greater than $3 million.
The budget papers indicate that the additional tax will impact some 80,000 individuals in 2025-26,
or approximately 0.5% of individuals with a superannuation account.
Those who may be impacted by this proposed new tax may need to start considering the totality of their retirement planning options, including the use of non-superannuation vehicles such as family trusts.
End of reduced minimum pension drawdown rate
As was scheduled, the government will allow the temporary halving of the minimum account-based pension (ABP) drawdown rates to lapse on 30 June, reverting to pre-COVID levels from 1 July 2023.
The minimum drawdown percentages were reduced by 50% in the 2020 Budget to allow retirees to better manage their affairs in light of the pandemic, but the normalisation of financial conditions since has negated the need for this relief measure to continue.
Retirees, particularly those running account-based pensions in their SMSFs may need to revisit their investment strategies to ensure that there are sufficient cashflows, or liquid assets, to facilitate the higher drawings for the 2023-24 financial year.
Paying Super Guarantee with wages
Another budget measure that was widely telegraphed prior is confirmation that from 1 July 2026, employers will be required to pay their employees’ SG liabilities on the same day that they pay salary and wages.
Increased frequency of SG payment will assist in improving retirement outcomes, both by these concessional contributions being in the system sooner and by the greater visibility employees will have over their SG contributions.
1 July 2026 has been selected as the commencement date to allow the ATO, payroll service providers and superannuation funds time to make necessary system changes, and for employers to adjust their cashflow management practices.
Relief from rising energy bills
As announced in the days leading up to the Budget, the government is setting aside $14.6 billon over the next four years to help alleviate cost-of-living pressures that have continued to escalate over the past year.
Acknowledging the impact of the ongoing conflict in Ukraine on household energy bills, the government has announced an ‘Energy Price Relief Plan’ that will deliver up to $500 in a one-off electricity bill relief measure for eligible households, and up to $650 for eligible small businesses. It is expected that up to 5 million households may be eligible for this energy bill relief, together with 1 million small businesses.
As this program involves the state and territory governments, the amount of relief received will be dependent on your circumstances, where you live and the pricing arrangements of that particular state or territory.
In addition, the government will inject $1 billion, via the Clean Energy Finance Corporation, to facilitate some 110,000 low-interest loans (in partnership with private lenders) to households wishing to upgrade the energy efficiency of their homes.
