2023 Federal Budget

As expected, Labor’s second Budget was filled with measures aimed at easing the cost of living over the coming years, addressing the challenges of a slowing economy, and bolstering the healthcare system. There were a number of changes to superannuation, taxation, social security, aged care, housing and other measures that may be of interest to AGS clients.

Please note that these proposals are not yet legislated, and as always, the team at AGS Financial Group are well placed to advise you on your strategic options as these proposals progress.

Key elements of the budget include:


$3m total super balance tax

The government has announced it will reduce the tax concessions available to individuals with a total super balance exceeding $3 million, from 1 July 2025. Individuals with a total super balance of less than $3 million will not be affected.

This reform is intended to ensure generous super concessions are better targeted and sustainable. It will bring the headline tax rate to 30 per cent, up from 15 per cent, for earnings corresponding to the proportion of an individual’s total super balance that is greater than $3 million. This rate remains lower than the top marginal tax rate of 45 per cent. Earnings relating to assets below the $3 million threshold will continue to be taxed at 15 per cent or zero per cent if held in a retirement pension account.

Interests in defined benefit schemes will be appropriately valued and will have earnings taxed under this measure in a similar way to other interests.

Super payments on payday
From 1 July 2026, employers will be required to pay their employees’ SG entitlements on the same day that they pay salary and wages. Currently, employers are only required to pay their employees’ SG on a quarterly basis. By increasing the payment frequency of superannuation to align with the payment of salary and wages, this measure will both ensure employees have greater visibility over whether their entitlements have been paid, and better enable the ATO to recover unpaid superannuation. Increased frequency of payment will also support better retirement outcomes.

Personal Taxation

No announcement to change legislated ‘stage 3’ tax cuts
No change was announced to the previously legislated tax cuts, including ‘Stage 3’, which are to become effective from 1 July 2024.

Personal tax rates and thresholds
(excluding 2% Medicare levy)

Marginal tax rate (%) Thresholds – income range 2023/24 ($) Marginal tax rate (%) Thresholds – income range 2024/25 ($)
0 0 – 18,200 0 0 – 18,200
19 18,201 – 45,000 19 18,201 – 45,000
32.5 45,001 – 120,000 30 45,001 – 200,000
37 120,001 – 180,000
45 > 180,000 45 > 200,000

Exempting lump sum payments in arrears from the Medicare levy
Currently, a lump sum in arrears payment representing income accrued in previous financial years is taxable in the year the payment is received, potentially resulting in higher taxable income that’s subject to Medicare Levy.
The government has announced it will exempt eligible lump sum payments in arrears from the Medicare levy from 1 July 2024.

This measure will ensure low-income taxpayers do not pay higher amounts of the Medicare levy as a result of receiving an eligible lump sum payment, for example as compensation for underpaid wages.

Increasing the Medicare levy low-income thresholds
The government will increase the Medicare levy low-income thresholds for singles, families, seniors and pensioners from the 2022-23 income year. This is a routine increase and applies retrospectively from the beginning of the financial year.


Small Business Support – $20,000 instant asset write-off
A temporary extension of the instant asset write-off threshold of $20,000, from 1 July 2023 until 30 June 2024. Small businesses with aggregated annual turnover of less than $10 million, will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2024.
The $20,000 threshold will apply on a per asset basis, so small businesses can instantly write off multiple assets.

Small Business Energy Incentive
The Government has extended support for small and medium businesses to save on energy bills through incentivising the electrification of assets and improvements to energy efficiency.
Small and medium businesses (those with aggregated annual turnover of less than $50 million), will be able to deduct an additional 20 per cent of the cost of eligible depreciating assets that support electrification and more efficient use of energy.
A range of depreciating assets, as well as upgrades to existing assets, will be eligible for the Small Business Energy Incentive. These will include assets that upgrade to more efficient electrical goods such as energy efficient fridges, assets that support electrification such as heat pumps and electric heating or cooling systems, and demand management assets such as batteries or thermal energy storage.

Small Business PAYG and GST instalment uplift factor: 6% for 2022-23
The government has announced it will amend the tax law to set the GDP adjustment factor for pay as you go (PAYG) and GST instalments at 6 per cent for the 2023–24 income year, a reduction from 12 per cent under the statutory formula.
The reduced factor will provide cash flow support to small businesses and other PAYG instalment taxpayers.

Small Business: Reducing the Time Spent Complying with Tax Obligations
There will be additional ATO funding and a range of measures to lower the tax-related administrative burden for small businesses.

Cost of Living, Social Security & Aged Care

Energy price relief plan
The government has announced it will provide funding, and partner with state and territory governments, to reduce the impact of rising energy prices on Australian households and small businesses by providing targeted energy bill relief.
The government says this will deliver up to $500 in electricity bill relief for eligible households and up to $650 for eligible small businesses.

JobSeeker, Austudy and Youth Allowance
The Budget increases the base rate for JobSeeker, Austudy and Youth Allowance by $40 per fortnight.
The Budget also lowers the eligibility age threshold for a higher JobSeeker rate for older people on JobSeeker from 60 to 55 years. Around 52,000 eligible recipients will receive an increase in their base rate of payment of $92.10 per fortnight. Payments will also continue to be automatically indexed for inflation.

Increased Rent Assistance
The government will provide additional funding to increase the maximum rates of the Commonwealth Rent Assistance (CRA) allowances by 15 per cent to help address rental affordability challenges for CRA recipients. For single people, the maximum rate of rent assistance increases from $157.20pf to $180.80pf.

Aged care regulatory reform
The government has committed to additional measures and funding to improve the delivery of aged care services and respond to the Final Report of the Royal Commission into Aged Care Quality and Safety. This includes increased funding for regulation, worker screening, improved food & nutrition, on-site care & nursing, and increased pay for aged care workers.

Contact us for Advice and Assistance
Naturally, as these measures become law, we are on hand to assist you with understanding and responding to the changes. As always, please contact us should you require any advice or assistance with your plans.

Published : 10 May 2023

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