Despite an uncertain global economic climate, the Budget forecasts the underlying cash balance to be in surplus by $4.2 billion in 2022–23, the first surplus since 2007–08, followed by a forecast deficit of $13.9 billion in 2023–24.
Putting forward a “responsible budget” for uncertain economic times, the Treasurer has described the tax measures as “modest, but meaningful”, including changes to the Petroleum Resources Rent Tax and confirmation of a 1 January 2024 implementation of the BEPS Pillar Two global minimum tax rules.
A range of measures provide cost-of-living relief to individuals such as increased and expanded JobSeeker payments and better access to affordable housing. No changes were announced to the Stage 3 personal income tax cuts legislated to commence in 2024–25.
As part of the measures introduced for small business, a temporary $20,000 threshold for the small business instant asset write-off will apply for one year, following the end of the temporary full expensing rules. Several tax measures of the former Coalition government have also been amended or dropped, including the patent box tax incentive measures.
The full Budget papers are available at budget.gov.au and the Treasury ministers’ media releases are available at ministers.treasury.gov.au. The tax, superannuation and social security highlights are set out below.
In his Budget Speech Treasurer Jim Chalmers said, “In all our decisions, we seek to strike a considered, methodical balance. Between spending restraint to keep the pressure off inflation, while doing what we can to help people struggling to make ends meet.
“Making sure vital services like Medicare and the National Disability Insurance Scheme are secure, reliable and sustainable.
“Our economic growth is expected to slow from 3 ¼ per cent in 2022–23 to 1 ½ per cent the year after, before recovering to 2 ¼ per cent in the next. Despite this, our economy will continue to create jobs and unemployment is expected to remain low by historical standards – 4 ¼ per cent in 2023–24, 4 ½ the year after.”
“In this environment, inflation remains our primary economic challenge – It drives rate rises; it erodes real wages – Which is why this Budget is carefully calibrated to alleviate inflationary pressures, not add to them.
“Our policies to ease the pressure on households will take ¾ of a percentage point off inflation in 2023–24 – Which is expected to fall from 6 per cent this year to 3 ¼ per cent next year – Returning to the RBA’s target band in 2024–25.”
In his Speech the Treasurer also said, “We are now forecasting a small surplus in 2022–23 – which would be the first in 15 years. We expect that to be followed by a deficit of $13.9 billion in 2023–24. And, lower deficits across the forward years compared to recent Budgets – Leading to a $125.9 billion improvement over 5 years – And a much lower public debt burden.”
“This Budget builds stronger foundations for a better future by:
- Delivering cost-of-living relief
- Strengthening Medicare
- Investing in a stronger and more secure economy
- Broadening opportunity
- Strengthening the Budget and funding our priorities
“This Budget strikes the right balance between dealing with immediate challenges and setting Australia up for the future.”
Summary of tax, superannuation, and social security highlights
- The instant asset write-off threshold for small businesses applying the simplified depreciation rules will be $20,000 for the 2023–24 income year.
- An additional 20% deduction will be available for small and medium business expenditure supporting electrification and energy efficiency.
- FBT exemption for eligible plug-in hybrid electric cars will end from 1 April 2025.
- An increased capital works deduction rate and reduced withholding on managed investment trust (MIT) payments will apply to new build-to-rent projects.
- The clean building managed investment trust (MIT) withholding tax concession will be extended from 1 July 2025 to eligible data centres and warehouses, where construction commences after 7:30 pm (AEST) on 9 May 2023.
- The start date of a measure to prevent franked distributions funded by certain capital raisings announced in the 2016–17 Mid-Year Economic and Fiscal Outlook has been postponed from 19 December 2016 to 15 September 2022.
- The patent box regime announced in the Coalition government's 2021–22 Budget, and expanded in the 2022–23 Budget, will not proceed.
- The introduction of tradeable biodiversity stewardship certificates issued under the Agriculture Biodiversity Stewardship Market scheme will be delayed to 1 July 2024.
- The Location Offset rebate and the Qualifying Australian Production Expenditure thresholds will be increased to boost investment in film production in Australia.
- Deductible gift recipients list to be updated.
- Income support payment base rates will be increased by $40 per fortnight.
- The minimum age for which older people qualify for the higher JobSeeker Payment rate will be reduced from 60 to 55 years.
- The workforce participation incentive measures to support pensioners who want to work without impacting their pension payments will be extended for another 6 months to 31 December 2023.
- Eligibility for Parenting Payment (Single) will be extended to support single principal carers with a youngest child under 14 years of age.
- Housing measures will be introduced to increase support for social and affordable housing and improve access for home buyers.
- The maximum rates of the Commonwealth Rent Assistance (CRA) allowances will be increased by 15% to help address rental affordability challenges for CRA recipients.
- CPI indexed Medicare levy low-income threshold amounts for singles, families, and seniors and pensioners for the 2022–23 year announced.
- Eligible lump sum payments in arrears will be exempt from the Medicare levy from 1 July 2024.
- Australia will implement key aspects of the Pillar Two solution of the OECD/G20 BEPS Project, meaning certain large multinationals will be subject to a 15% minimum tax in the jurisdictions in which they operate.
- The scope of the general anti-avoidance rules in Pt IVA of ITAA 1936 will be expanded from 1 July 2024.
- Changes will be made to petroleum resource rent tax (PRRT), including the introduction of a cap on deductible expenditure at 90% of assessable income for projects that produce liquefied natural gas from 1 July 2023.
- The meaning of “exploration for petroleum” in the petroleum resource rent tax legislation will be amended to reflect the government's intent and ATO guidance.
- Taxation legislation will be amended to realign the taxation law with the reissued AASB 17: Insurance contracts effective for income years beginning from 1 January 2023.
- Superannuation earnings tax concessions will be reduced for individuals with total superannuation balances in excess of $3 million from 1 July 2025.
- Employers will be required to pay their employees’ superannuation guarantee entitlements at the same time as they pay their salary and wages from 1 July 2026.
- The non-arm’s length income (NALI) provisions will be amended to provide greater certainty to taxpayers.
- Funding will be provided to the ATO over 4 years to lower the tax-related administrative burden for small and medium businesses, cut paperwork and reduce time small businesses spend doing taxes.
- Reduction in GDP adjustment factor for pay as you go and GST instalments.
- Funding to improve the administration of student loans.
- Additional funding will be provided to address the growth of businesses’ tax and superannuation liabilities, and a temporary lodgment penalty amnesty program will be provided to small businesses.
- The Personal Income Tax Compliance Program will be extended for 2 years from 1 July 2025 and its scope expanded from 1 July 2023.
GST and other indirect taxes
- Funding for GST compliance will be extended for a further 4 years to address emerging risks to GST revenue.
- The Heavy Vehicle Road User Charge rate will increase 6% per year from 2023–24 to 2025–26.
- Indirect Tax Concession Scheme: diplomatic and consular concessions extended.
- The start date for streamlining of excise administration measures announced in the Coalition government’s 2022–23 Budget will be amended.
- Tobacco excise and excise-equivalent customs duty will be increased by 5% per year for 3 years from 1 September 2023, in addition to ordinary indexation.
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