2023 Australian Federal Budget
Treasurer Jim Chalmers has delivered a responsible Budget, consolidating on the Goverment's ‘mini-budget’ position in October of last year. A continued focus on providing cost of living relief, targeted investments intended to accelerate Australia’s green energy transition, support to the aged care and health sectors and increased defence spending are balanced by additional revenue and savings from stronger than forecast employment growth, higher corporate tax receipts and other measures.
As expected, there were no major new superannuation measures announced in the Budget, but the Budget did confirm the recently announced Payday Super initiative and the proposed new earnings tax on super balances over $3 million. Contrary to some speculation, there were no moves to reduce contribution caps or to stop the $200,000 indexation increase in the Transfer Balance Cap which is due to take effect from 1 July 2023.
Key changes:
- Confirmation of the proposed additional earnings tax on super balances over $3 million
- Confirmation of the Payday Super initiative, which would require employers to pay their employees' super contributions at the same time as their salary and wages from 1 July 2026
- Welcome news on proposed amendments to the problematic non-arm’s length income (NALI) tax provisions relating to fund expenditure
- An unexpected review of Defined Benefit notional contributions methodology
- Following the Fair Work Commission’s earlier decision to provide an increase of 15% to award wages for aged care workers, the Government has committed in this Budget to fund this increase in full, costing $11.3 billion over four years from 1 July 2023
- A range of funding initiatives allowing more older people to continue to live in their homes and to extend the Disability Support for Older Australians Program
- The Government has consolidated prior improvements seen in October’s ‘mini-budget’ with improved revenues balanced against continued assistance to offset cost of living pressures, support to accelerate the green energy transition, support for the aged care and health care sectors and further commitments to defence spending.
- With no significant risks to current inflationary trends from the Budget, despite modest wage pressures forecast, there will be little concern from the Reserve Bank of Australia (RBA) to reconsider monetary policy settings. As a result, capital markets will look past this Budget and focus on the potential impacts of persistently high US inflation and other global growth dynamics as the next key drivers of risk sentiment for now.
- Implications to workers and the workforces are not significant and there is still not enough being done to power the economy beyond the short-term.
- However, there are some bright spots: cheaper childcare bringing in more parents to participate, efforts to close the gender pay gap, and culturally diverse participation in foundation and apprenticeship skilling.
- Migration will also make it easier to attract overseas skilled workers to add additional labour in the market, though this will take time to trickle through.
- $3.5 billion to triple the bulk billing incentive benefits for consultations for Commonwealth concession card holders and patients aged under 16 years of age
- $556.2 million over the next five years, along with $36.0 million ongoing, to strengthen Australia’s mental health and suicide prevention system
- Allowing many medicines to be dispensed in greater amounts, cutting the number of visits to a pharmacy and GP each year and saving $1.6 billion in out-of-pocket costs over 4 years
- Additional funding of $358.5 million over 5 years from 2022–23 to deliver Medicare Urgent Care Clinics