On 9 May 2023, the Australian Government released its budget for the year, outlining its spending priorities and policies for the upcoming fiscal year. The budget includes a range of measures to support families, businesses, workers and drive economic growth. Some key insights include budget measures for small businesses, family payments, aged care, healthcare, housing, investments and taxes.
Support for small businesses
The Australian Federal Budget 2023-2024 has announced support for small businesses by extending the instant asset write-off scheme.
The scheme allows businesses with an annual turnover of up to $50 million to instantly deduct the cost of eligible assets purchased for their business. The threshold for eligible assets has been increased to $20,000, and the scheme has been extended until June 2024. This extension is expected to benefit around 3.5 million businesses, providing them with cash flow relief and the ability to invest in their business.
The budget has allotted an extra $2 billion to support the digital transformation of small and medium-sized businesses over the next four years. This strategic investment aims to enhance productivity and boost competitiveness, enabling businesses to thrive in the ever-evolving digital economy.
Energy bill relief
The budget announcement includes a $500 million energy bill relief package to reduce energy bills for low-income households and small businesses struggling with high electricity and gas costs.
The budget incorporates direct payments to eligible households to relieve those struggling with high energy bills. The budget also includes grants to small businesses for energy-efficient upgrades and investments in community renewable energy projects. This effort is to help reduce Australia’s greenhouse gas emissions.
Updates on single-parent homes eligibility.
The latest federal budget announcement highlights an increase in the cut-off age for single-parenting payments (SPP) from eight to 14 years old.
This change is expected to benefit approximately 11,000 single parents and will come into effect from July 2023.
Single parents who meet the eligibility criteria and receive JobSeeker payments will also benefit from the changes. They will receive an increase of $176.90 per fortnight.
Great news for single parents that work; If you have two kids and earn up to $251.80, you can still get the full payment of $922.10 every two weeks. If you have one child, you can earn up to $2646.95 before the payment cuts out, slightly more than the current scheme.
This will cost $1.9 billion over five years, but supporting hardworking single parents is worth it.
Reducing medicine cost
There are also measures to support the pharmaceutical industry and improve patient access to medicines. Starting 1 September 2023, more than 300 Pharmaceutical Benefits Scheme (PBS) medicines will be eligible for increased maximum dispensing quantities.
This allows patients with stable chronic health conditions to receive two months’ worth of their medication, reducing the number of visits to a pharmacy and GP each year.
This is expected to save patients $1.6 billion in out-of-pocket costs over four years, with general patients saving up to $180 per year per medicine and concession card holders up to $43.80 per year per medicine.
There is also a dedicated budget of $79.5 million over four years to double the Regional Pharmacy Maintenance Allowance. This will support the continued operation of around 1,093 community pharmacies in regional and rural Australia.
Additionally, pharmacists will receive $114.1 million over four years to deliver vaccines to eligible patients under the National Immunisation Program. These measures aim to reduce patient costs while supporting the pharmaceutical industry’s sustainability.
More affordable health costs
To improve the accessibility and affordability of medical services, the Government is committing $3.5 billion over 5 years towards strengthening the foundations of Medicare. As part of this budget, the bulk billing incentives for joint consultations for children under 16, pensioners, and other Commonwealth concession card holders will be tripled. These incentives will apply to face-to-face, telehealth, and videoconference consultations.
There is also a $358.5 million allocation for Medicare Urgent Care Clinics. These clinics will be open for longer hours and bulk bill, providing urgent care to people who need it.
Better housing options ahead
There is also a series of measures to address the housing affordability crisis, including the most significant increase in Commonwealth Rent Assistance over three decades.
The maximum rates of rent assistance will increase by 15% over five years, benefiting approximately 1.1 million households. The Government is working to improve the housing supply by building one million new homes from 2024 through the National Housing Accord. New incentives are being offered to encourage investment in build-to-rent projects, including reducing withholding tax rates and increasing capital works tax deduction rates.
The National Housing Finance and Investment Corporation’s liability cap will also be increased by $2 billion to support lending to community housing providers so they can build more affordable housing projects.
Updated eligibility criteria for Home Guarantee schemes.
The Government is stretching the eligibility criteria for the First Home Guarantee and Regional First Home Guarantee schemes.
The changes will allow two eligible borrowers to apply for the Home Guarantee Scheme. This includes non-first home buyers and Australian Permanent Residents who last owned property in Australia for the past 10 years. With this new update, buyers can purchase a property with a low deposit (as low as 5%) without paying lenders’ mortgage insurance.
The Government is also offering low-rate loans to existing homeowners who invest in energy-saving initiatives, such as electrification, energy-efficient appliances, and solar panels.
Lower property taxes for foreign investors
Australia’s Federal Budget has halved the withholding tax rate for foreign institutional investors in the country’s build-to-rent (BTR) sector from 30% to 15%, thereby making it equal to the tax rate for other commercial real estate investments.
There is also an increased capital works tax reduction rate for BTR projects with at least 50 apartments from 2.5% to 4%. BTR investors believe it will help attract capital and create more quality rental apartments to address the country’s growing housing shortage. Other stakeholders also see it as a way to “equalise” the investment landscape and improve investment certainty.
No changes in Stage Three personal income tax cuts
The Stage 3 personal income tax cuts, which will take effect on 1 July 2024 and cut the 32.5% marginal tax rate to 30% for a single tax bracket between $45,000 and $200,000, remain unchanged in the budget.
As a result, from 1 July 2024, there will be three personal income tax rates – 19%, 30%, and 45%, with the middle tax bracket more closely aligned to corporate tax rates. The 37% tax bracket will be eliminated at this time. The changes mean that an estimated 94% of Australian taxpayers will face a 30% or lower marginal tax rate.
Wages growth forecast
According to forecasts, wages will be significantly increased in the coming years. In 2023-24, it is predicted that wage growth will rise to 4 %, which can be attributed to the Government’s efforts to increase wages for lower-paid workers.
This move is expected to positively impact the economy as a whole, as increased wages can lead to higher levels of consumption and investment, which can drive economic growth. Additionally, wage growth is anticipated to continue to rise in 2024-25, although at a slightly slower rate of 3.25%.
The 2023-24 Australian Federal Budget includes various measures to support families, businesses, and workers. These measures are also tailored to address critical issues such as small business support, energy bill relief, single-parenting payments, reducing medical costs, improving healthcare accessibility, and managing the housing affordability crisis. These measures are expected to provide much-needed relief and support to Australians in various sectors and drive economic growth in the country.