With the 2023 Federal Budget being handed down on Tuesday night, here’s a quick overview of what the proposed measures and packages will mean for you.
Changes to tax concessions on super balances over $3 million
In the lead-up to Budget night, it was suggested a new measure would be introduced where Australians with a superannuation balance above $3 million would have their concessional rate doubled from 2025.
To understand the implications of this, it’s important to understand that currently, the taxation system is complicated by a variety of factors, summarised in the table below.
It’s also important to remember the current Transfer Balance Cap (or how much you can place into a tax-free account-based pension) is $1,7000,000. (This number may vary, however, depending on your personal circumstances.)
| Taxable income type | Phase | Tax rate |
| Income received | Accumulation/transition to retirement pension | 15% |
| Capital gains held for less than twelve months | Accumulation/transition to retirement pension | 15% |
| Capital gains held for longer than 12 months | Accumulation/transition to retirement pension | 10% |
| Income received; Capital gains held for less than twelve months; and Capital gains held for longer than 12 months |
Account-based pension | 0% |
The key thing to note with the above is that unrealised gains are not taxed until they are sold (in the same way that capital gains tax works on a rental property or shares you own in your own name).
On Budget night, Labor confirmed their proposal that individual super balances above $3m would pay an additional 15% tax on their earnings. The kicker being that this 15% tax will also apply to unrealised gains or assets that had a paper gain that had not been sold yet. This comes with many ramifications and is unlike any other taxation method we have currently. Here’s an example to demonstrate the implications:
Take an individual who has a self-managed super fund, in which a commercial property is held. Their Total Super Balance at the start of the financial year is $4,500,000, by the end of the year their Total Super Balance is $5,000,000 or a $500,000 gain. Assuming no contributions or withdrawals, this is all assessable under the new rulings. The proportion of earnings corresponding to funds above $3 million is calculated using the current Total Super Balance of $5,000,000. Now three-fifths of this gain is under the $3 million cap but the remaining two-fifths or 40% is taxable at an additional 15%.
Under current rules, regardless of if the fund is in pension or accumulation phase, there is no tax to pay at all on the unrealised gain given the property hasn’t been sold.
Under the proposed new measures, there would be tax to pay of $500,000 x 15% x 40% or $30,000.
The changes will come into effect after the next election and will not be retrospective but will rather apply to future earnings.The budget delivered no further information around indexation of the cap or whether the calculation method would be revised. Around 80,000 Australians are expected to be impacted by this measure when it comes into force however without indexation this number will grow over time.
Other super-related measures
From 1 July 2026, employers will be required to pay superannuation entitlements at the same time as employees are paid. This measure is aimed towards getting contributions into superannuation sooner and making it easier for individuals to track their contributions.
The COVID pension minimums that had been in place since part way through the 2019/2020 financial year are returning to normal from 1 July 2023.
The government has finalised its work on legislating an objective of superannuation, (the purpose here is to have a yardstick to proof-test future rules to). The proposed objective is:
“To preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way”.
No changes were made to current legislation regarding the superannuation guarantee (SG) rate. This will rise from 10.5% to 11% on 1 July 2023, and will continue to increase by 0.5% each year until it reaches 12% on 1 July 2025.
Stage three tax cuts
As expected, while the Government is under pressure to wind back the stage three tax cuts that come into effect next year, no changes were made to the legislation already in place around these cuts.
These tax cuts will see a reduction in personal income tax for many Australians as outlined below:
| Income | Personal income tax in 2022-2023 | Personal income tax in 2024-2025 | Difference in tax |
| $18,200 | Nil | Nil | Nil |
| $50,000 | $6,717 | $6,592 | $125 |
| $100,000 | $22,967 | $21,592 | $1,375 |
| $150,000 | $40,567 | $36,592 | $3,975 |
| $200,000 | $60,667 | $51,592 | $9,075 |
| $250,000 | $83,167 | $74,092 | $9,075 |
Expanded eligibility for the Home Guarantee Scheme (HGS)
When it comes to eligibility requirements for the HGS, the Government has tweaked the definition of the word “couple” – changing it from those who are married, or in de facto relationship, to “any two eligible individuals” from July 1.
This change allows friends and family to team up to buy a first home and gives more people the ability to achieve the dream of home ownership.
Increase in welfare payments
The Government has proposed from 20 September 2023 to increase the following payments by $40 per fortnight:
- JobSeeker Payment (other than certain single principal carers of a dependent child exempted from mutual obligations)
- Youth Allowance
- Parenting Payment (Partnered);
- Austudy and ABSTUDY
- Disability Support Pension (Youth)
- Special Benefit
- Farm Household Allowance
Relevant payment rates will also be indexed on 20 September 2023.
The Government will also extend the existing higher JobSeeker Payment rate for singles aged 60 and over and who have been on the payment for nine or more continuous months to those aged 55 and over.
Energy bill relief
Eligible households will receive up to $500 in energy bill reductions via their state and territory governments between 1 July 2023 and 30 June 2024.
Eligible individuals include:
- Pensioner Concession Card holders
- Health Care Card holders (including the Low Income Health Care Card)
- DVA Gold Card holders
- Commonwealth Seniors Health Card holders
- Those on a Carer Allowance
Eligible businesses will receive up to $650 in energy bill relief.
Greater access to Medicare bulk billing and cheaper medicine
The government is proposing a $3.5bn spend to triple the bulk-billing incentive that GPs receive. This will help GPs provide free, bulk-billed consultations to around 11.6m pensioners, concession card holders and those under 16.
A separate proposal will see patients able to buy two months’ supply of common medications at once and at the same price they previously paid for one. This will halve the number of times patients need to visit the GP and pharmacist – saving each patient, on average, $180 per year.
Cost of living relief
In addition to the welfare payment increases and energy bill relief measures noted above, the government is also proposing to spend:
- $9bn in additional childcare subsidies
- $1.9bn to extend sole parent payments until children turn 14
Got questions about the Federal Budget?
As always, HPH Solutions is here to support you, our clients, with any questions you might have. Simply contact your advisor if you’re unsure about the implications of the Budget for your personal circumstances and want to chat about it.