Budget 2023-24: What’s in it for you
Please remember however that some of the initiatives are still in a proposal stage and need to be approved by the parliament.
On 9 May 2023 a new government budget was delivered with the main purpose of providing the relieve of the cost of living by introducing an energy relief plan for eligible households as well as businesses.
But let’s go over some details of the new budget from the perspective of your financial and retirement planning and what impact if any, this budget might have on your future financial outcomes.
Please remember however that some of those initiatives are still in a stage of proposal and need to be approved by the government.
I will go over the budget in the following order:
1. Personal income tax
2. Superannuation
3. Retirement income
4. Social Security
5. Aged Care
6. My take on the budget – benefits and negatives for you.
1. Personal income tax
From 1st July 2024 the stage 3 of income tax is being implemented, with no changes being introduced to the planned “Simplified tax system” originally introduced by the previous government.
The tax-free threshold remains unchanged
The first tax rate of 19% up to $45,000 annual income is also unchanged
The next tax rate is being reduced from 32.5% down to 30% for income above $45,000 up to $200,000. This is the major change and income tax reduction
The rate of 37% is being removed.
And the final tax rate of 45% applies to income above 200,000.
Additional impact:
- Low- & Middle-income tax offset (LMITO) is being removed.
- Low Income tax offset continues to be up to $700 as introduced in 2020.
Income tax changes are mainly assisting high income earners and not at all introducing any changes to people who earn income below $45,000. Removal of LMITO will impact many low- and middle-income earners and increase of Low Income Tax Offset (LITO) from $445 up to $700 will not provide any relief.
2. Superannuation
Fortunately, not many changes have been introduced (sometimes no news is good news) with the main new measures being as follows:
- Increased frequency of the Superannuation Guarantee
Currently employers are required to pay the SG contributions on quarterly basis. Some employers do pay more often, but others delay SG contributions to that quarterly system. From 1st July 2026 SG contributions will be required to be paid at the same time as your wages.
This is a positive measure as it will provide simplicity to the system, reduce the possibility of mistakes such as overpayments of concessional contributions as a salary sacrifice arrangement and will generally improve retirement outcomes.
The criticist could be: why wait so long? Why not start this change from 1st July 2025? Businesses don’t need two years to be ready with their payroll changes and many people could benefit much earlier.
If you wish to understand the benefits of salary sacrifice, there are couple of articles to read: Salary Sacrifice – tips, traps and benefits and Concessional contributions to super – Salary Sacrifice
You can also read full explanation about SG contributions and how to benefits from this system: Concessional contributions to super SG
- The second change is the introduction of the very controversial idea of additional 15% tax for all superannuation accounts with balances over $3mil. I am not going into a great deal of explanations about this measure as I explained it in the article: Extra new tax for the Wealthy
All I can say at this point is that if this is you or if this is going be you lateron in the future, then please plan correctly, there are other financial structures available and worth considering and could be much more appealing than adding additional extra funds to superannuation and paying 30% tax.
- And the next measure of the budget is superannuation SG rate is increasing to 11%. This is a planned annual increase by 0.5% annually, until SG reaches the rate of 12% in 2025.
3. Retirement Income
Due to covid market turbulence as well as the following couple of years till now, retirees were able to half their minimum prescribed incomes paid by income streams such as account based pensions.
From 1st July 2023 this reduction will no longer be available, and as per attached table you can see the minimum level of income you will have to draw based on your age.
4. Social Security
- Increased Rental Assistance – there is an increase of 15% rental assistance allowance to help address rental affordability
- Payments such as JobSeeker, Austudy or Youth Allowance will be increased by $40 per fortnight. Opposition however is not happy with this recommendation saying that it is not going far enough in its assistance and further allowances to earn more income should be considered. Commencement of this increase is planned for 20 September 2023.
- Higher single JobSeeker payment rate for people 55 and over, which is an increase from the current age of 60. Requirement is however that you have to be on the JobSeeker payments for a period of 9 months.
- Work bonus – a once-off credit of $4,000 is being added to your Work Bonus allowing pensioners to earn up to $11,800 before Pension reduction. This is a temporary increase until 31 December 2023
5. Aged Care
Main changes are of a regulatory nature and additional funding for the industry, however increase of pays for Aged Care Workers is most welcomed.
6. My take on the budget
This is one of the un-exciting budgets, that does not really assist enough for those most vulnerable and in need of real financial help.
Those that are benefiting the least are the middle-income earners, and that’s majority of us. There is really nothing in the budget that assists that group of people.
For now, the government stayed away from major issues that at some point in the future will be on the card all over again such as:
- Negative gearing
- CGT discounts
- Main residence exemption
- Franking credits
- Major super changes
By: Katherine Isbrandt CFP®
Money Strategist & Retirement Planner
Principal of About Retirement
