The October Federal Budget delivered by Treasurer Jim Chalmers contains some important updates and measures for both businesses and individuals to be aware of.
At a top level, the economy continues to repair itself due to elevated commodity prices, adding an unexpected $164.1 billion of revenue for the Federal Government over the next four years. Furthermore, real GDP in 2022-23 is now expected to be 3.25%, an upwards revision from the previously predicted 3%.
While these positive developments mean that short-term revenue increases will outweigh spending, they aren’t expected to last. Commodity prices are predicted to eventually normalise while inflation and interest rates are expected to remain elevated. As such, real GDP growth is forecast to more than halve from 3.25% in 2022-23 to 1.5% in 2023-24.
Taxation
For individuals, there were no major changes to personal income tax rates; however, the ATO will be provided with an additional $80.3 million to target specific areas of non-compliance, including overclaiming of deductions.
The taxation of cryptocurrency as an asset rather than a currency was officially enshrined in law, meaning investors will need to pay capital gains tax when they sell, assuming they made a profit.
Additionally, there was no indication from the Government that they would seek to amend the already legislated Stage 3 tax cuts.
For businesses, there was a strong focus on multinational tax avoidance and integrity. As part of the multinational tax integrity package, from 1 July 2023, multinationals will be required to provide additional information to tax authorities, including the number of subsidiaries and what tax jurisdiction they operate within.
Further, the tax treatment of off-market share buy-backs will be aligned with on-market share buy-backs, and deductions will also be denied for certain cross-border royalty payments made to low and no-tax jurisdictions, commencing 1 July 2023.
Superannuation
The eligibility age for downsizer contributions to superannuation will be reduced from 60 to 55, enabling eligible Australians to make a one-off post-tax contribution to their superannuation of up to $300,000 from the proceeds of selling their home. These contributions do not count towards non-concessional contribution caps.
Workforce
An additional $4.7 billion will be provided over four years to support cheaper childcare, with Child Care Subsidy rates lifting from 85% to 90% for eligible families earning less than $530,000. A further $531.6 million will be spent on expanding paid parental leave by six weeks. This is expected to benefit 180,000 or more families; importantly, both parents will be able to share this leave.
Additionally, Australia’s immigration program is set for review, which should help to alleviate skills shortages and productivity issues.
Collectively, these measures have been introduced to bolster workforce participation and remove barriers for families and working parents.
Housing
The Treasurer announced that the Government aims to build one million new houses over five years from 2024 and will establish a Regional First Home Buyers Guarantee to support eligible citizens and permanent residents who live in regional locations.
Additional support measures for Australian Defence Force personnel were also announced, including an expansion of the Defence Home Ownership Assistance Scheme, set up to assist personnel and veterans purchase their own homes.
Health
The Government will spend an additional $6.4 billion on Medicare and announced $1.4 billion in support for cheaper medicines included on the Pharmaceutical Benefits Scheme (PBS), effective from 1 January 2023.
Electric Vehicles
A $345 million electric car discount will exempt eligible battery, hydrogen fuel cell and plug-in hybrids from fringe benefits tax and import tariffs, significantly reducing their costs.
Small Business
Small Business wasn’t a major feature of the Budget; however, the Government did commit $15 million of funding for SME mental health support and debt counselling. Additionally, a new grant program will offer $62.6 million in funding to projects designed to boost energy efficiency, lower emissions, or smooth out power demand.
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