What has been heralded as ‘targeted relief’ for Australians struggling with the ever-present and rising cost of living, a $14.6 billion relief package was the centrepiece of Jim Chalmers' second Budget; the cornerstone being their Energy Bill Relief Fund. Eligible households, typically those receiving welfare benefits, will have up to $500 deducted from their power bills in the next financial year. The rebate is expected to apply to 5.5 million Australians, but the quantum will be location-based after negotiation with the States. Those in the West and Top End will only receive $350, while residents elsewhere will receive $500 reflective of their higher power bills.

In a further bid to drive down longer-term energy costs, the Government will provide low interest loans to home owners for the purpose of making their homes more energy efficient.

The controversial plan to increase tax on large superannuation balances, originally announced in February, was re-confirmed in Tuesday’s Budget. The change will effectively double the tax rate, from 15% to 30%, on the proportion of earnings attributable to a member’s balance above $3 million. Strong on the announcement but short on the detail, we are still none the wiser on the specifics as to how this will be calculated and applied when the change is slated to come into effect in July 2025. What we did learn last night, however, is their intention to also capture defined benefit members in their net.

From July 2026, employers will be required to pay superannuation at the same time as wages, in a bid to protect employee entitlements and combat recalcitrant employers. For an employee paid fortnightly, Treasury modelling suggests that switching from quarterly to ‘payday’ super would leave a 25-year-old median income earner $6,000 better off in retirement by virtue of compounding returns.

The talk of the town leading up to Budget night was the ‘Stage 3’ tax cuts, which will proceed as already legislated despite strong opposition. From July, millions of Australians will benefit from the abolition of the 32.5% tax bracket, but the criticism lays in who it benefits most, being those on higher incomes. A widening of the third tax bracket will mean taxpayers earning up to $200,000 will be taxed at a maximum rate of 30%.

So what does this mean for the ‘average Joe’? An Australian earning the median salary of $80,000 will receive an $875 tax cut, while someone taking home $180,000 will benefit by $6,075 (but still pay over $45,000 in tax).

The ‘Stage 3’ tax cuts should mean you less tax, right? Well, the answer isn’t quite that simple. The Low-and-Middle Income Tax Offset (LMITO) which was first announced as a temporary measure in 2018 and then extended twice due to the pandemic, ended in June 2022. The tax-paying community has been waiting with bated breath to hear if another extension would be announced, but no. LMITO was an offset delivered through the annual tax return and with no further extension, taxpayers who benefited from this offset in recent years can expect a lesser refund when they lodge their tax return this year.

For lower-income Australians contending with limited earning potential yet rising costs, a number of welfare payments will increase:

• Single parents: eligibility will be expanded by raising the qualification age of the youngest child from 8 years to 14 years, meaning single parents can continue caring full-time for their children while receiving Single Parenting Payments for longer.

• Childcare: the long-awaited $4.7 billion childcare subsidy package will arrive in July, with the Government set to take on up to 90% of childcare costs for households earning less than $80,000; that rate reducing with the level of household income up to $530,000.

• Job seekers: the JobSeeker (unemployment payment) base rate will increase by $40 per fortnight. To support older Australians with the additional barriers they face re-entering the workforce, the age at which a higher rate applies will be lowered from 60 years to 55 years.

• Renters: the maximum rate of Commonwealth Rent Assistance will lift by 15%, the largest increase in more than 30 years, to ease affordability.

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This article is one part of our 2023 Budget series. To read more of our Budget commentary, click the links below:

–      Small and Medium Business

–      Economic and Fiscal Implications

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