Federal budget update | May 2023

Treasurer Jim Chalmers handed down the Federal Budget on Tuesday 9 May 2023…while there were very few surprises, with most announcements having been released in the weeks prior, it’s worthwhile taking a closer look at how it may have an impact from a wealth and monetary perspective. 

Superannuation

Higher tax on balances of $3 million+
The nation’s biggest account holders need to consider their circumstances, as the government doubles the tax rate for super accounts over $3 million. Commencing from 1 July 2025, future earnings on super balances over $3 million will attract an additional 15% tax, raising the maximum tax rate in super for those affected to 30%. Those who think they may be impacted should start considering their retirement planning options.

After-tax contributions
There were no amendments to the already legislated processes for determining how much can be contributed to super as an after-tax contribution, and how much could potentially be transferred into a superannuation income stream upon retirement. From 1 July 2023, the general threshold applying to these opportunities will index from its existing $1.7 million threshold to the higher threshold of $1.9 million.

So if you’re looking to top up your nest egg with after-tax (non-concessional) contributions, the increase is great, but the system is complex and you need to understand the complexities to devise an appropriate strategy.

Temporary reduction in minimum draw down amounts
If you’re already in receipt of a superannuation income stream, the minimum payment required under legislation has been halved for the last few years, meaning less had to be drawn from super. At this stage the Government has not announced any further extension of these reduced payment rates.

Taxpayers

Changing tax brackets
There were amendments to the planned third tranche of tax cuts legislated to come into effect next year from 1 July 2024. This stage-three tax cut will abolish the 37% tax bracket, lower the 32.5% bracket to 30% and raise the threshold for the top tax bracket from $180,001 to $200,001. This means that taxpayers with more than $45,000 of taxable income will have a reduced tax liability from 1 July 2024.

Salary packaging motor vehicles
For those looking to salary package a motor vehicle as part of their employment, it was decided that the exemption from fringe benefits tax for some electric vehicles, announced in the October 2022 Federal Budget, will only continue for those vehicles packaged before 1 April 2025.

Homeowners and households

First Home Guarantee and Regional First Home Guarantee
Eligibility for the First Home Guarantee and Regional First Home Guarantee will be expanded to any two eligible borrowers beyond married and de facto couples, along with non-first home buyers who have not owned a property in Australia in the preceding ten years. In addition to Australian citizens, Australian Permanent Residents will be eligible for the Home Guarantee Scheme.

Improve energy efficiency with a low interest loan
Low-interest loans will be available to households seeking to improve their energy efficiency. 110,000 loans will be on offer, encouraging households to invest in more efficient appliances or otherwise improve their energy efficiency through actions such as double-glazing windows or adding solar panels.

Relief on energy bills
The Government is partnering with state and territory governments to deliver up to $3 billion of electricity bill relief for eligible households and small businesses. From July 2023, the ‘Energy Price Relief Plan’ will deliver up to $500 in a one-off electricity bill relief for eligible households and up to $650 for eligible small businesses.The amount of relief received will be dependent on your circumstances, where you live and the pricing arrangements of that particular state or territory.

Summary

It’s important to remember that – while Budget changes make for great headlines – most Budget night announcements are simply statements of intended change and are not yet law, so there may well be a host of other considerations that could impact your personal situation, along with opportunities that shouldn’t be missed if you’re seeking to maximise your wealth on retirement!
And that’s why – should you have any questions – reach out and have a chat to one of our expert Financial Advisors to find out more.

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