Height Capital 2023-24 Budget Recap – The Highlights
On Tuesday night, Treasurer Jim Chalmers and the Labor Government handed down the 2023-24 budget, delivering a $4.2 billion budget surplus, which is the first federal budget surplus in 15 years.
A key objective was to support the population through a challenging cost of living environment without contributing significantly to inflationary pressures that have caused this situation.
Here are some of our key takeaways:
*It is important to remember that the budget is a forecast, and the below points are not yet law*
Personal Taxation:
Marginal Tax Rates:
- There were no announcements made regarding the legislated stage 3 personal income tax cuts, so we assume they remain on track to be implemented.
Medicare Levy thresholds:
- The income limits when the Medicare Levy applies for singles, families and seniors and pensioners will be increased retrospectively for the 2022-23 financial year.
*SAPTO: Senior and Pensioners Tax Offset
Superannuation:
Superannuation Tax Concession Reduction:
- The Government is going ahead with their previously announced plan to increase the superannuation tax rate for individuals with total superannuation balances greater than $3 million from the 1st of July 2025.
- Earnings attributed to balances above the $3 million threshold will be taxed at a rate of 30 per cent, rather than the current rate of 15 per cent.
- Earnings below the $3 million threshold will continue to be taxed at the current 15 per cent rate for accumulation accounts or 0 per cent for pension phase accounts.
Superannuation Guarantee (SG) Payment Rate:
- Effective 1 July 2023, the SG rate will increase from 10.5% to 11%.
- As already legislated, the SG rate is set to increase in 0.5% of gradual increments each year until it reaches 12% on 1 July 2025.
Superannuation Guarantee Payment Frequency:
- From the 1st of July 2026, employers will be required to pay their employees’ superannuation guarantee entitlements on the day they pay their salary and wages.
- Currently, superannuation guarantee payments are only required to be made quarterly.
- This will allow employees to have greater visibility over the payment of their superannuation and will support better retirement outcomes for employees
- The changes will also make it easier for the Australian Taxation Office to recover unpaid superannuation.
Minimum Pension Income Drawdowns
The temporary COVID reduced minimum factors will be repealed as anticipated. Current minimums will revert back to their original amounts, effectively doubling the current rates.
If you are currently drawing the minimum pension from a platform account, your regular payment will be updated automatically as of July 2023. We will work with clients with SMSFs and their accountants to ensure any additional pension drawdown requirements continue to be met.
*at start of financial year
Indexation of General Transfer Balance Cap:
From 1 July 2023, the general transfer balance cap (TBC) indexes from $1.7 million to $1.9 million as a result of an increase to the Consumer Price Index.
For individuals who has not yet commenced a pension account, the fully indexed cap of $1.9 million will become available for them. For those who have commenced a pension to a value less than their personal Transfer Balance Cap, any unused portion will receive an indexation benefit.
For those who have already commenced a pension to the full value of their personal transfer balance cap, no increase will be available, and they will continue to be ineligible to add additional funds to the pension environment.
SMSFs
Non-arm’s Length Income (NALI):
- The government has proposed to amend the non-arm’s length income (NALI) rules that apply to expenditure by superannuation funds.
- The changes include:
- Limiting income of self-managed superannuation funds that are taxable as NALI to twice the level of a general expense. This has been amended from five times the level as Treasury suggested in February.
SMSF income taxable as NALI will exclude contributions.
Small Business:
Small Business Support – $20,000 instant asset write-off:
From 1 July 2023 until 30 June 2024, eligible small businesses with aggregated turnover of less than $10 million will be able to immediately deduct the full cost of eligible assets costing less than $20,000.
Small Business Energy Incentive:
Small and medium businesses will be incentivised to save on energy bills through the electrification of assets and improvement to energy efficiency. Business with aggregated annual turnover of less than $50 million, will be able to deduct an additional 20% of the cost of eligible depreciating assets that support electrification and more efficient use of energy. Note: The final criteria for eligibility is yet to be finalised.
How can Height Capital help?
If you have any questions or would like further clarification regarding any of the above measures outlined in the 2023-24 Federal Budget, please give us a call on 1300 935 339. We can arrange a time to discuss your queries in more detail.