The 2023-24 Australian Federal Budget was handed down last night by Treasurer Jim Chalmers. The big news of the night is that the Budget is returning to surplus, its first since the mining boom of 2007-08. The budget is set to place a strong emphasis on cost-of-living support and establishing a stronger economy, with more spending in aged care and a slowing of growth in the National Disability Insurance Scheme (NDIS).

The Treasurer is confident that this years’ budget will not add to inflationary pressures on the economy and will effectively ‘thread the needle’ between providing support and not increasing consumer spending too much (i.e., increasing inflation).

The Treasurer outlined the Government’s expectation for inflation to remain elevated for the interim period, and then reduce to the target band of 2% – 3% in the 2024-25 year. Unemployment will also remain low, peaking at 4.5% over the same period.

Here are a few key points from last night’s Budget that may impact you and your family. Or to hear my thoughts on camera you can watch my budget review HERE

Superannuation – $3 million cap

The Government has confirmed its intent to increase the tax payable on superannuation balances in excess of $3 million. This will come into effect in the 2025-26 year and will result in a tax of 30% on earnings attributable to superannuation balances above $3m. The current tax rate is 15%. This measure is expected to generate an additional $2.3 billion per year and will impact around 80,000 people.

As always, the devil is in the detail and we await further guidance from the Government as to how this measure will be applied – whether it will be indexed or whether or not an individual can withdraw their superannuation balance above $3m, even if they haven’t reached an age where this is usually possible.

Superannuation – changes to payment frequency

The other change to the superannuation system is that employers will soon be required to make an employee’s superannuation guarantee (SG) contribution on the same day they are paid salary and wages. At the moment, employers are only required to make this payment quarterly.

This change will provide greater clarity to workers as they will be able to see their superannuation contributions deposited on a more regular basis.

Cost-of-living support

The Government will provide $14.6 billion over 4 years in cost-of-living support to low – middle income households, including a one-off energy bill relief and additional funds to Medicare to allow better access to GPs through the bulk-billing scheme.

Aged care spending

Aged care workers are set to receive a 15% pay rise over the next four years which will benefit 250,000 workers.

NDIS Growth

The NDIS is currently growing at a rate of 13.8% per annum, costing the budget an additional $32m a day than originally forecast. This is unsustainable and the Government want to curtail this growth and reduce it to a more manageable 8% per annum. To slow growth and achieve the target, the government will outlay eight measures designed to improve decision-making at the NDIS.

How will the RBA react?

No doubt RBA Governor Philip Lowe will be watching the budget announcements very closely to see what impact it may have on inflationary pressures. Overall, the Budget is not expected to increase inflation, but I am sure that the RBA will be wary of Australian households receiving a boost from the cost-of-living measures which could increase discretionary spending.

If you have any questions about the Budget and how it may impact your financial future, please contact Hewison Private Wealth to discuss further.