It’s too restrictive

Have you ever set a health or fitness goal and gone all in? Some people cut out all the foods they love and rely on sheer willpower to get through the day. But that kind of discipline is difficult to keep up, and often all it takes is one bad day for the whole plan to unravel.

Something similar tends to happen with overly restrictive budgets. If you’ve ruled out every small pleasure, your budget will come to feel more like punishment than anything else.

So instead of completely overhauling your lifestyle and subjecting yourself to excessive levels of restraint, try to settle on a balanced approach that allows for some flexibility.

That might mean setting realistic spending limits rather than cutting out certain expenses altogether, or deliberately carving out room in your budget for treats and fun activities. This way you’re less likely to feel deprived and far more likely to stick to your plan over time.

It’s not a means to an end

Budgets capture values of the financial kind, but they should reflect your personal values too. If yours isn’t tied to goals that genuinely matter to you, it’ll be hard to muster up the motivation to keep going.

Ask yourself what the end goal of budgeting is, and really drill down on the reasons behind the reason. For example, if you want to retire comfortably or build up an emergency fund, then your ‘why’ is probably achieving security.

Other people might want freedom to travel or pass on a legacy to their children. Whatever the reason, it should be compelling enough to spur you on when you feel the urge to quit.

It’s too complicated

If your budget is full of dozens of categories and subcategories and you’re finding it’s a chore to maintain, it’ll probably be the first item on the chopping block when life inevitably gets busy.

So if you want budgeting to be a habit you can actually stick to, look for ways to reduce friction. One approach that might work for you is the 50/30/20 method. This divides your after-tax income into three broad buckets (needs, wants and savings) and eliminates a lot of the admin involved along the way.

You haven’t addressed underlying issues

One of the most overlooked reasons budgets fail has less to do with numbers and more with your emotional state. Impulse buying, FOMO, shopping to relieve stress or boredom – all of these can derail even the most well-designed plans.

To change your behaviour, you’ll have to understand your triggers and develop strategies to manage them. That might mean disconnecting your credit card from your phone, committing to waiting a few days before making a large purchase, or seeking support from a friend or partner.

In the end, what makes a budget successful isn’t how detailed it is or how many rows in a spreadsheet it takes up. It’s whether it’s realistic, sustainable and aligned with your goals and values. So long as those core elements are in place, you’ll find it much easier to stick to your budget long-term.

Know how much you need to live on (and have a budget)

Tracking your spending gets a bad wrap sometimes for being dull, but when it comes to retirement planning it’s an essential. Unlike during your working years, your savings won’t be getting topped up regularly by an employer, so how long your money lasts largely depends on how well you manage it.

Start by categorising your spending into essential needs (think groceries, housing costs and utilities). From there, you can work out how much of your income is left over to spend on travel, dining out and any hobbies you might have. These are the things that add joy and variety to life, so you probably don’t want to skimp on them. But it’s all about striking a balance.

Be sure to account for inflation

Your retirement plan won’t be of much use if it assumes that today’s dollars will be worth the same in the future. To really be prepared, you need to take into account inflation and the effect it’s likely to have on your spending and saving.

One of the ways you can combat the effects of inflation is to diversify your investments. Here, it might be helpful to talk to a financial adviser about spreading your money across asset classes that serve different purposes. For example, growth assets have the potential to deliver above inflation returns, while more defensive assets can help preserve your shorter and medium term funds.

Beyond your investments, you might be able to weather any inflationary shocks by making tweaks to your lifestyle. That might mean trimming your discretionary spending, holding off on major purchases, or even re-entering the workforce on a part-time basis.

Know your Government entitlements  

Assuming you satisfy the income and assets tests, the Age Pension can be a much-needed supplement to the money you get from super. Just remember to apply as soon as you’re eligible so that any waiting times are kept to a minimum.

But there’s more on the table besides the fortnightly payments. If you qualify, Centrelink will automatically send you a Pensioner Concession Card. This can make life easier by getting you discounts on doctor visits, certain medications, energy bills, and public transport.

And if you’ve reached pension age but your income and assets are above the allowable limits, don’t worry – you might be eligible for a Commonwealth Seniors Health Card. This offers discounts on healthcare and other services, but unlike the Pensioner Concession Card, you’ll have to apply for one yourself.

Keep healthcare and aged care costs in mind

The fact we live longer than we used to might be a blessing, but it opens the door to a whole lot of logistical concerns. In particular, you’ll need to be prepared for your expenses to go up later in life as you become more dependent and require more care.

Fortunately, there are relatively low-cost residential aged care options out there, and depending on your assets and income, further government support might be available to help ease the burden. You can also choose to ‘age in place’ by accessing in-home care services, or even by fitting your home with features that make it a tad more safe.

Ideally, your super and savings should be funding all the things you were dreaming about doing as a retiree, not getting eaten up by your mortgage, personal loan or credit card. But even if debt is going to play a bigger role in your post-work years than you hoped, there are strategies to help make things more manageable.

Revisit your mortgage arrangements

Your mortgage may be the biggest source of budgetary strain, so if you can reduce your monthly repayments even a little bit it might make managing your cash flow easier. Scan the market for an idea of what other lenders are charging, and if you believe you’re currently paying more than you need to be, it might be worth switching.

That might mean refinancing to a different lender or leveraging your market research to secure a lower rate with your existing one. You might even be able to switch to one of your lender’s cheaper loans, but that might involve parting with certain features (such as your offset account).

Put together a budget

Keeping a budget is good practice no matter your circumstances, but it can be particularly helpful when there’s debt to tackle. Start by calculating the income you receive from all sources. Once you have a ballpark figure, you can estimate how much you can afford to spend, how much you can save, and what you can direct towards paying off your debt.

While some people find success with budgets that account for every dollar, others might prefer a looser approach. You don’t need to tighten your purse strings so much you close yourself off from all things enjoyable; you just need a clear picture of where your money is going each month and a willingness to make a few sacrifices.

Consolidate your debts

Between the different interest charges and varying fees, having multiple debts can be a headache to manage. One potential solution is to roll all your debts into a single loan so you only have to budget for one recurring repayment rather than several.

People often choose to consolidate their debts into their home loan, as the interest rates on home loans tend to be lower than those on credit cards and personal loans. Just keep in mind that doing so will decrease the equity you have in your home.

Think about downsizing

If your children have moved out and you and your spouse no longer require a large home to accommodate them, you can think about selling your property and purchasing a smaller one. The benefits here are twofold: it might allow you to pay off the remaining balance on your mortgage, and if you’re 55 or older and meet certain eligibility criteria, you and your spouse might be able to use part of the sale proceeds to make a tax-free contribution of up to $300,000 each to your super.

Delay retirement for a little bit

Finally, you might consider putting off retirement for a few years so you can spend some more time lowering your debt levels. The more you can chip away during your working years, the less vulnerable you may be to interest rate fluctuations when you retire. And if you can free up enough money, you might be able to retire with more confidence that you’ll be able to do all the things you originally planned (as well as manage any surprise expenses).

Treasurer Jim Chalmers handed down the 2024-25 Federal Budget last night, forecasting a surplus of $9.3 billion this financial year. This is the second year in a row the Albanese Government has delivered a surplus, but forward estimates show double-digit deficits for the next four years, including a deficit of $28.3 billion for next financial year.

Easing cost of living pressures was at the forefront of this year’s Budget, but it wasn’t the only priority. Recent months have shown inflation to be more stubborn than expected, and the Government was facing plenty of pressure not to do anything that would inflame it.

The result is a Budget that the Government claims “strikes the right balance between keeping pressure off inflation, delivering cost-of-living relief, supporting sustainable economic growth and strengthening public finances.”

Below, we break down some of the key measures and what they might mean for you.

Stage-three tax cuts 

Perhaps the most high profile plank of the Albanese Government’s cost of living relief plan, the reworked stage-three tax cuts hope to extend the benefits offered to middle Australia beyond what they were slated to receive in the Coalition’s original version.

Starting 1 July, the 19% tax rate (which applies on incomes between $18,201 and $45,000) will be reduced to 16% and the 32.5% tax rate (which applies on incomes between $45,001 and $135,000) will be reduced to 30%.

Higher income earners can also expect some relief under the plan, with the Government increasing the threshold for the 37% tax rate from $120,000 to $135,000, and the threshold for the 45% tax rate from $180,000 to $190,000.

Energy bill relief

The other big news is the Government’s plan to provide $3.5 billion in energy bill relief, with rebates of $300 to be delivered to more 10 million households and $325 to go to around one million small businesses. This along with certain other support measures are expected to lower headline inflation by around 1/2 of a percentage point in 2024-25, according to the Government’s estimates.

Cheaper medicines

The Government will implement a freeze on increases to the maximum Pharmaceutical Benefits Scheme (PBS) patient co-payment, which will last one year for Medicare card holders and five years for pensioners and other concession cardholders. According to the Budget papers, this means that no pensioner or concession card holder will have to pay more than $7.70 on their co-payment (plus any applicable manufacturer premiums) until 2030.

Housing

Major investment in housing is also on the agenda, with the Government announcing a suite of measures aimed at boosting housing supply and making cities and regional communities more liveable. Some of the more notable measures include:

• A further $1 billion to help the states and territories build housing in well-located areas, with a focus on clearing obstacles to greater housing supply by supporting better shared facilities and essential services
• A $423.1 million boost to the National Agreement on Social Housing and Homelessness, which will bring the total cost of the five-year program to $9.3 billion
• An extra $1 billion will go to the National Housing Infrastructure Facility to help provide housing for women and children fleeing family violence and for youth
• An additional $1.9 billion will go to community housing providers and other charities to provide new social and affordable homes via the Housing Australia Future Fund and National Housing Accord
• Foreign investor fees on the purchase of established Build to rent developments will be lowered.

The Government will also allocate $88.8 million to help kickstart the careers of thousands of construction workers, which it hopes will help fulfil its target of building 1.2 million homes by 2029. Around 20,000 places in TAFE and VET courses will be fee-free, on top of the 355,000 free TAFE places delivered last year.

Aged care

Approximately $2.2 billion will go towards supporting aged care, which the Government hopes will show the beleaguered sector it’s serious about implementing some of the recommendations from the Royal Commission into Aged Care Quality and Safety. It includes:

• $531.4 million towards funding an extra 24,100 Home Care Packages for older Australians who wish to live in their home for longer
• $110.9 to implement the Aged Care Regulatory Framework and continuing to invest in the Aged Care Quality and Safety Commission
• $1.2 billion to improve digital infrastructure across the sector, including funding to support the implementation of the new Aged Care Act
• A commitment to fund an increase in the award wage of aged care workers, once the final Fair Work Commission determination on the increase is made.

HECS debt

The Government will wipe around $3 billion from student debts by capping the HELP indexation rate to be the lower of the consumer price index or the wage price index. This will be backdated to June 2023, meaning that last year’s 7.1% indexation — which was the source of much distress for many — will be decreased to 3.2%.

It’s estimated that around 3 million Australians will see their student debt go down as a result of the changes, with the average student expected to receive an indexation credit in the range of $1,200 for the past two years.

Healthcare

Medicare will also receive a boost, with the Government pouring $2.8 billion into the system to ensure it can continue to meet Australians’ healthcare needs. Some notable measures include:

• $882.2 million to help older Australians avoid hospital admission, be discharged earlier and facilitate the transition to other appropriate care
• $227 million to increase the number of Medicare Urgent Care Clinics and boost support for regional and remote clinics.
• $90 million to boost the number of health workers by making it easier for international health practitioners to work in Australia
• $49.1 million to help people with endometriosis and / or other complex gynaecological conditions (such as chronic pelvic pain and polycystic ovary syndrome) and $56.1 million over four years for improving access to sexual and reproductive healthcare.
• $20 million for childhood brain cancer research
• $227 million will be committed to developing 29 additional Medicare Urgent Care clinics across Australia, with a focus on improving accessibility for rural and remote areas
• $882.2 million towards supporting discharge and care planning for older Australians
• $90 million towards addressing workforce shortages, including improving mechanisms for international workers to join the Australian healthcare workforce
• $141.1 million will be earmarked for research and services supporting those with chronic health conditions
• $825.7 million will ensure continued testing, vaccination and antiviral treatment of COVID-19
• An additional $3.4 billion will be invested over five years for new and amended listings on the Pharmaceutical Benefits Scheme
• An $881.1 million commitment to be delivered over eight years as part of the Government’s pledge to provide better access to mental health care.

Higher education

In a bid to combat ‘placement poverty,’ the Government will be introducing a payment for student teachers, nurses, midwives and social workers, who often have to undertake several months’ worth of unpaid work as part of their course. The payment, which will be means tested, will be a maximum of $319.50 per week.

Small businesses

The Government’s instant asset write-off scheme will be extended for another year with a boost of $290 million, giving businesses with annual turnover of less than $10 million the chance to claim up to $20,000 from eligible assets. The Government will also commit $10.8 million to provide financial and mental health support to small business owners, in light of the impact that cost of living pressures and inflation have had on the cohort.

Support for renters

The Commonwealth Rent Assistance program, which is a fortnightly supplement available to welfare recipients who rent, will increase by 10%. This builds on the 15% increase from September 2023 and marks the first back to back increase outside of inflation in three decades.

Future Made in Australia 

Local manufacturing will receive a shot in the arm via the Government’s flagship Future Made in Australia initiative, which will allocate $22.7 billion towards improving regional trade, investing in new technologies and modernising industry and education. To ensure Australia doesn’t fall behind in the road to net zero, significant investments will also be made in the renewable energy sector, including:

• A $6.7 billion production tax incentive for the production of renewable hydrogen
• $1.7 billion to go to the Future Made in Australia Innovation Fund and extending funding for the Australian Renewable Energy Agency by another ten years
• $1.5 billion to bolster battery and solar panel supply chains through production incentives
• $134.2 million to better prioritise approvals for important renewable energy projects
• $15.7 million to streamline foreign investment and help attract foreign capital flows
• $17.3 million to mobilise private sector investment in sustainable activities
• $27.7 million to help integrate consumer energy resources like batteries and solar into the grid.

Support for new parents

The Government-funded paid parental leave (PPL) scheme will be modified so parents accessing the scheme can receive superannuation in addition to their payments. The changes hope to address the low super balances many women find themselves with later in life, which are often attributed to taking time off work to raise children.

Currently, couples who have recently had or adopted a child and meet the eligibility criteria can access up to 20 weeks of paid parental leave set at the minimum wage. The number of weeks will increase by two week increments in July each year until it reaches 26 weeks in 2026. If super is added to the equation, it would be paid to parents at 12% of the PPL rate.

Domestic Violence

As part of its pledge to address the crisis of domestic violence, the Government will commit $925.2 million over five years towards establishing the Leaving Violence Program. The program will provide up to $5,000 in financial support to eligible victim-survivors of domestic abuse — consisting of up to $1,500 in cash and up to $3,500 in goods and services — and will be indexed annually to make sure the payment can meet the rising cost of living.

Disability

The Government has committed to providing an additional $468.7 million to support the NDIS, following the $732.9 million allocated in the 23-24 budget. $226.7 million will also be used to fund a new employment program supporting Australians with disability.

Digital safety and AI

• $288.1 million over four years to support the initial delivery of the Digital ID system and support more Australians to realise Digital ID’s economic and privacy benefits
• $39.9 million over five years for the development of policies and capability to support the adoption and use of artificial intelligence technology in a safe and responsible manner
• $7.9 million over two years to support online safety including $6.5 million in 2024-25 to develop a pilot of age assurance technologies to protect children from harmful online content.
• $67.5 million over four years from 2024–25 (and $8.6 million per year ongoing) to continue to combat scams and online fraud through the introduction of mandatory industry codes to be established under a Scams Code Framework and increased use of the secure eInvoicing network.

Please note: These proposed policy measures and the information relating to them have been sourced from the 2024-25 Budget papers. As many have yet to be passed as legislation they may be subject to change.

Written and accurate as at: May 10, 2023 Current Stats & Facts

Aided by elevated commodity prices and strong jobs numbers, the Federal Government is expecting to eke out a surplus this financial year — the first time this will have been achieved in 15 years.

This may very well give the Labor Government scope to support Australians buckling under the cost of living crisis, but Chalmers stressed that restraint was necessary to avoid pouring more fuel on the inflation fire.

Below we recap some of the key measures proposed in the 2023-24 Federal Budget that may be relevant to you.

Please note: These key proposed policy measures, and the information relating to them, have been sourced from the 2023-24 Budget papers. And, they are yet to be passed as legislation and may be subject to change.

Easing cost of living pressures

Cheaper medicines

• The Pharmaceutical Benefits Scheme (PBS) will be revised to ensure scripts for a number of common medicines are dispensed in greater amounts, less often. From 1 September 2023, the Government will phase-in increases to the maximum dispensing quantities allowed for more than 300 Pharmaceutical Benefits Scheme medicines. The Government has noted that this will allow some patients to receive 60 days’ worth of the medicine they need for a stable, chronic health condition, rather than the current amount of 30 days’ supply.

Rent assistance

Strong rental growth has put renters at the centre of the cost of living crisis. To help alleviate the pressures many are facing, the Government will be increasing the maximum rates of Commonwealth Rent Assistance by 15 per cent from September 2023. The measure will cost $2.7 billion over 5 years and is expected to support 1.1 million households receiving Commonwealth Rent Assistance. According to the Government, this is the largest increase to Commonwealth Rent Assistance in more than three decades.

Energy bill relief

The Government has earmarked $3 billion to help households and small businesses struggling with their energy bills. From July 2023, it will deliver up to $500 in electricity bill relief for eligible households and up to $650 for eligible small businesses.

Eligible households and small business customers include pensioners, Commonwealth Seniors Health Card holders, Family Tax Benefit A and B recipients and small business customers of electricity retailers.

Superannuation

Increasing the payment frequency of the Superannuation Guarantee (SG) and investing in SG compliance

In a bid to crack down on non-compliant employers and make sure Aussies’ super balances are where they should be, the Government will require employers to pay their employees’ SG entitlements on the same day that they pay salary and wages, starting 1 July 2026. The tax office has admitted that the previous quarterly payment schedule leaves employees vulnerable to being shortchanged on their super payments, with an estimated $3.4 billion worth of super going unpaid in 2019-20.1

Better targeted superannuation concessions

Starting 1 July 2025, the Government will reduce the tax concessions available to individuals with total super balances of more than $3 million. The decision will apply to around 80,000 Australians, who will see their concessional tax rate on earnings increase from 15 per cent to 30 per cent for earnings corresponding to the proportion of their total super balance that is greater than $3 million. According to the Budget documents, this reform is intended to ensure generous superannuation concessions are better targeted and sustainable.

Social security

JobSeeker, Austudy and Youth Allowance

The Government will provide $4.9 billion over 5 years from 2022–23 (with $1.3 billion per year ongoing) to increase support for people receiving working age payments including the JobSeeker Payment. This measure will:

• Increase the base rate of working age and student payments by $40 per fortnight. This will apply to the JobSeeker Payment, Youth Allowance, Parenting Payment (Partnered), Austudy, ABSTUDY, Disability Support Pension (Youth), and Special Benefit. It will commence on 20 September 2023.
• Extend eligibility for the existing higher single JobSeeker Payment rate for recipients aged 60 years and over to recipients aged 55 years and over who are on the payment for nine or more continuous months.

Single parent payment

Single parents may benefit under a $1.9 billion plan to extend eligibility for the Parenting Payment (Single) until the youngest child is 14. Currently, single parents are only eligible to receive the payment until their youngest child turns eight, at which point they’re shifted to the much lower JobSeeker payment. The change will mean an extra $176.90 per fortnight for JobSeeker recipients who become eligible for the payment.

Strengthening Medicare

As part of the Government’s initial response to the Strengthening Medicare Taskforce recommendations, $5.7 billion has been allocated to initiatives to rebuild and strengthen Medicare over five years. Of this amount, $3.5 billion will be directed towards tripling bulk billing incentives for patients aged under 16 years, pensioners and other Commonwealth concession card holders.

To address concerns around the accessibility of primary care, the Government is committing to:

• $445.1 million over five years for improving collaboration between GPs, nurses and allied health professionals
• $143.9 million over two years to support after hours GP availability
• $98.9 million over four years to support general practices in caring for frequent hospital users
• $79.4 million over four years to Primary Health Networks, an amount which will be used to connect allied health services with people with chronic conditions in underserviced communities
• In addition to this, the Government will be increasing the Medicare rebate for standard consultations with nurse practitioners and participating midwives.

The Government will invest $824.4 million to support the development of digital health systems, as part of plans to modernise the My Health Record system and improve coordinated care. This will include the MyMedicare initiative, which is a voluntary scheme that will provide both patients and primary care teams with comprehensive information about their medical histories.

Aged care

Pay rise for aged care workers

A major centrepiece of this year’s Budget is an $11.3 billion package aimed at boosting the pay of aged care workers to better reflect the work they do. More than 250,000 aged care workers (including registered nurses, enrolled nurses, and home care workers) will see their wages increase by 15 per cent from 1 July 2023 — which the Government notes is the largest increase to award wages in a work value case under the Fair Work Act.

The pay rise is estimated to attract 10,000 more workers to the aged care sector, which the Fair Work Commission has acknowledged has been historically undervalued. It will also hopefully bring the Government a step closer to fulfilling its election promise of having a registered nurse on duty 24/7 in every aged care facility.

Aged care regulatory reform

The Government will provide additional funding of $309.9 million over 5 years from 2022–23 to implement the recommendations from the Royal Commission into Aged Care Quality and Safety and other initiatives to strengthen the regulation of the aged care sector and improve the health and safety of older Australians receiving aged care. Funding includes, for example:

$139.9 million over four years from 2023–24 to improve the accountability and transparency of approved aged care providers through enhancements to the Star Rating system
$12.9 million over two years from 2023–24 to improve food and nutrition in aged care through the development, monitoring and enforcement of food and nutritional standards.

Supporting small businesses

Small Business Energy Incentive

Up to 3.8 million small- and medium-sized businesses will be eligible for up to $20,000 in tax relief when they invest in eligible technologies to make their businesses more energy efficient (such as converting from gas to electricity, switching to more efficient electrical goods, and installing batteries and heat pumps). The incentive will apply to businesses with an aggregated annual turnover of less than $50 million, and eligible assets will need to be first used or installed and ready for use between 1 July 2023 and 30 June 2024.

$20,000 instant asset write-off

For businesses with aggregated annual turnover of less than $10 million, the Government will temporarily increase the instant asset write-off threshold to $20,000 from 1 July 2023 until 30 June 2024. This will allow small businesses to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use between these dates.

The $20,000 threshold will apply on a per asset basis, so small businesses may have the opportunity to instantly write off multiple assets. As for assets valued at $20,000 or more (which cannot be immediately deducted), these can continue to be placed into the small business simplified depreciation pool and depreciated at 15 per cent in the first income year and 30 per cent each income year thereafter.

Housing

Family, friends to team up to buy property

In a shake-up of the Home Guarantee Scheme (HGS) aimed at helping more Australians get on the property ladder, eligibility will be expanded to allow any two eligible people to be joint applicants for a guarantee beyond spouses and de facto partners — a move which could give friends and family members the chance to team up to buy a first home.

Other changes to the Home Guarantee Scheme will include:

• Allowing non-first home buyers who have not owned a property in Australia for at least 10 years to access the First Home Guarantee and Regional Home Guarantee
• Allowing a single legal guardian of children to access the Family Home Guarantee
• Allowing Australian permanent residents to access the Scheme.

The HGS — which includes the First Home Guarantee, the Regional First Home Buyer Guarantee, and the Family Home Guarantee — seeks to enable eligible home buyers with a deposit between 2 and 5 per cent (depending on the scheme) to purchase a home, with the Government guaranteeing enough to cover the 20 per cent deposit that lenders typically like to see.

First Nations

Delivering the Referendum to Recognise Aboriginal and Torres Strait Peoples in the Constitution Through a Voice to Parliament

The Government will provide $364.6 million over three years from 2022–23 to deliver the referendum to recognise Aboriginal and Torres Strait peoples in the Constitution through a Voice to Parliament. Funding includes, for example:

• $336.6 million over two years from 2023–24 for the Australian Electoral Commission to deliver the referendum, including $10.6 million to produce information pamphlets for the ‘yes’ and ‘no’ cases for distribution to all Australian households.

Supporting teachers and students

The Government will fund a number of initiatives aimed at supporting teachers and students, including a $9.3 million investment to help with attracting new teachers and increasing rates of retention.

Central Australian schools will receive a $40.4 million boost to improve student attendance, engagement and learning outcomes, and $38.4 million will be earmarked to pilot community-led and culturally appropriate distance learning models in remote locations.

Energy transition

The Government will establish a new national Net Zero Authority to help guide the net zero transformation. The Government has noted that it will ensure workers in emissions-intensive sectors are supported throughout the transition, as well as encourage communities, companies and investors to take advantage of new clean energy opportunities as they emerge.

Defence spending

The Government will make a number of investments geared towards strengthening sovereignty and security in the Indo-Pacific region. Some key investments include:

• The acquisition of conventionally armed, nuclear powered submarines as part of the AUKUS pact
• The establishment of the Advanced Strategic Capabilities Accelerator to develop advanced defence technologies
• Financial support for the Australian Defence Force aimed at improving recruitment, workforce development and retention.

Infrastructure

Better cities and more liveable suburbs

The Government will allocate $159.7 million towards transforming cities and suburbs as part of the urban Precincts and Partnerships Program. Another $211.7 million will fund the Thriving Suburbs Program, which will provide investment in community and economic infrastructure that enhances liveability and prosperity in suburban communities.

Hobart stadium

The Government will be chipping in $240 million for a multipurpose stadium in Hobart, which would support Tasmania’s bid to become the 19th team in the Australian Football League. The project will cost $715 million all up, with the remaining amount coming from the Tasmanian government, the AFL, and “borrowings against land sale or lease for commercial uses.”

Tobacco and vaping

The Albanese Government will make a number of investments with the goal of reducing smoking and vaping, particularly among younger Australians. These will include:

• $63.4 million to fund a public health information campaign to discourage vaping and smoking
• $29.5 million to increase and enhance supports to quit
• $263.8 million to invest in a new national lung cancer screening program
• $141.2 million to expand the Tackling Indigenous Smoking (TIS) program.

Starting 1 September 2023, the Government will also be raising the tax on tobacco by five per cent (in addition to ordinary indexation) each year for three years, as well as ensuring that loose leaf tobacco is taxed the same as cigarettes, in a bid to encourage smokers to quit.

Amending measures of the former Government

The Government will amend measures announced by the former Government to provide greater certainty to taxpayers. The Government will, for example:

• Amend the start date of the 2016–17 MYEFO measure: Tax integrity – franked distributions funded by capital raisings from 19 December 2016 to 15 September 2022
• Amend the non-arm’s length income (NALI) provisions which apply to expenditure incurred by superannuation funds by
  • limiting income of self-managed superannuation funds and small Australian Prudential Regulation Authority (APRA) regulated funds that are taxable as NALI to twice the level of a general expense. Additionally, fund income taxable as NALI will exclude contributions.
  • exempting large APRA regulated funds from the NALI provisions for both general and specific expenses of the fund.
  • exempting expenditure that occurred prior to the 2018-19 income year.

The Government will also not proceed with 3 separate patent box measures announced by the former Government in the 2021–22 and 2022–23 March Budgets.

Other policy measures

The Government will:

• Sunset the eligibility of plug-in hybrid electric cars from the fringe benefits tax exemption for eligible electric cars. This change will apply from 1 April 2025.
  • Arrangements involving plug-in hybrid electric cars entered into between 1 July 2022 and 31 March 2025 remain eligible for the Electric Car Discount.

• Provide $17.6 million over 4 years from 2023–24 (and $4.4 million per year ongoing) for the Australian Securities and Investments Commission (ASIC) to identify and take down phishing websites and other websites which promote investment scams, to be cost recovered through levies under ASIC’s industry funding model.

• Provide $23.4 million over 3 years from 2023–24 to the Department of the Treasury for a small business cyber wardens program delivered by the Council of Small Business Organisations Australia, to support small businesses to build in-house capability to protect against cyber threats.

• Provide $0.9 million over two years from 2022–23 to develop a 10 Year National Action Plan to support the health and wellbeing of Lesbian, Gay, Bisexual, Transgender, Intersex, Queer and Asexual (LGBTIQA+) people and establish a LGBTIQA+ Health Advisory Group.
  • The Government has noted that the Action Plan will provide a national framework to improve the health outcomes of, and address health disparities, experienced by LGBTIQA+ Australians.

• Subsidise, from 1 July 2023, storage costs of eggs, sperm or embryos for patients with cancer and people at risk of passing on genetic diseases or conditions, for eligible participants who have undergone Medicare Benefits Schedule covered genetic testing.

• Provide $91.1 million over two years from 2023–24 (including $0.2 million in capital) to commence the establishment of the Australian Centre for Disease Control.

• Provide $88.8 million over two years from 2023–24 to support the continued operation of the Consumer Data Right in the banking, energy and non-bank lending sectors, progress the design of action initiation and uplift cyber security.

• Provide $5.0 million over 5 years from 2023–24 to continue a superannuation consumer advocate to improve members’ outcomes, offset by an increase in the Superannuation Supervisory Levy administered by the APRA.

• Provide $89.6 million to the ATO and $1.2 million to Treasury to extend the Personal Income Tax Compliance Program for two years from 1 July 2025 and expand its scope from 1 July 2023.
  • The Government has noted that this extension will enable the ATO to continue to deliver a combination of proactive, preventative and corrective activities in key areas of non-compliance, and to expand the scope of the program to address emerging areas of risk, such as deductions relating to short-term rental properties to ensure they are genuinely available to rent.

• Extend funding for the Serious Financial Crime Taskforce (SFCT) and Serious Organised Crime program (SOC) over 4 years to 30 June 2027 and merge the programs, with a merged SFCT to commence from 1 July 2023. Funding for both programs currently terminates on 30 June 2023.
  • The SFCT and SOC are currently separately funded ATO-led cross-agency collaborations between the ATO, national policing and other law enforcement and regulatory agencies, targeting serious and organised crime groups and serious financial crime and tax evasion.
  • The Government has noted that an extension and merging of these programs will maximise the disruption of organised crime groups that seek to undermine the integrity of Australia’s public finances.

• Extend the clean building managed investment trust (MIT) withholding tax concession to data centres and warehouses.
  • The Government has noted that this measure will extend eligibility for the concession to data centres and warehouses that meet the relevant energy efficiency standard, where construction commences after 7:30 PM (AEST) on 9 May 2023 (Budget night). This measure will apply from 1 July 2025.

• Provide $8.0 million over 4 years from 2023–24 (and $2.0 million per year ongoing) to establish an Anti-Slavery Commissioner to work across Government, industry and civil society, to support compliance with the Modern Slavery Act 2018, to improve transparency in supply chains and help fight modern slavery in Australia and abroad.

• Provide $8.6 million over 3 years from 2023–24 to the Australian Transaction Reports and Analysis Centre (AUSTRAC) to develop and consult stakeholders on legislative reforms to modernise Australia’s anti-money laundering and counter-terrorism financing regime and support preparation for, and participation in, the evaluation of Australia’s regime against global standards by the Financial Action Task Force.

• Provide $26.9 million in 2023–24 to sustain and develop the next stage of the Digital ID program. Funding includes, for example:
  • $24.7 million for the Department of Finance and the Digital Transformation Agency (DTA) to maintain the current Digital ID system and design the policy and legislative foundations to transition to an economy-wide Digital ID ecosystem with an independent regulator.
  • $1.1 million for the Office of the Australian Information Commissioner to provide ongoing privacy assurance for the Digital ID program.
  • $1.1 million for the ATO for communications research associated with the myGovID brand.

Sources

1 https://ministers.treasury.gov.au/ministers/stephen-jones-2022/media-releases/introducing-payday-super

Written and accurate as at: Jan 12, 2023 Current Stats & Facts

With 2023 well and truly upon us, it’s the perfect time to start afresh and prepare for the year ahead. Whether you’re feeling confident or cautious about your finances this year, there’s likely to be some room for improvement.

Here are 8 simple ways to help build your money muscles and set yourself up to be fighting fit in 2023.

1. Set your targets

Consider creating achievable targets, starting with a main money goal for the year.

For example, your main goal might be to save a certain amount, pay down more on your mortgage, and/or contribute a percentage of your income into super. Deciding on a main goal at the start of the year can help focus your attention on the actions that will support your longer-term goals.

It can also be helpful to have short-term targets. These are ones you aim for throughout the year to keep you motivated. They could be anything from reducing your weekly grocery bill by $30, to getting a better deal on utilities.

2. Create your fitness plan

Every great athlete trains with purpose, so start out by mapping out your year ahead. If you anticipate new expenses in 2023 such as childcare, school fees, or an overseas trip, rather than waiting for them to appear on your statement, work out a plan now to cover the cost of them without getting off-track.

It can also help to look back on last year and review the ‘peak times’ when your expenses spiked. With a clear picture of when larger payments (such as car registration) occur, you’ll hopefully be ready for them.

Going through statements and creating spreadsheets can take a bit of time. Depending on the financial institution you are with, they may have a banking app that can do some of the heavy lifting for you, for example, by tracking and categorising your spending so that you can easily keep track of it going forward.

3. Start interval training

Research tells us that when we repeat behaviours frequently and consistently, they become habits¹. Just like regular exercise, flexing those financial muscles regularly can help form long-term habits to help set you up for the future.

How often will you save and invest, further reduce debt, or add to super? Committing to regular intervals, with reminders that keep you on track, can be a good way to keep up the momentum throughout the year. For example, you might commit to saving, reducing your debt or adding to your super once a month. Or, you may decide to add to your investments once a quarter. Find what works for you and your finances, and set yourself up for success with regular reminders.

4. Enrol in budget bootcamp

Put your household budget through its paces to help make sure your finances are ready for what lies ahead. Depending on how recent your budget is, there’s a high chance that some of the numbers may be out of date, so consider taking some time to refresh them through a new lens. Doing the number-crunching now can help to ensure your budget is realistic and manageable for the year ahead.

And, if you don’t already have a budget, then now might be the time to put one in place.

5. Build your willpower

If one of your weaknesses is impulse buying, you’re not alone. According to PayPal², 58% of us make impulse purchases because items are on sale, with 24% regretting it later. To avoid impulse buys, consider setting a seven-day rule where you wait a week before making the purchase. Doing this allows you the time to decide whether you really need it without getting swept away. Better still, if you’d rather avoid temptation altogether, unsubscribing from online sales and mailing lists could help keep your spending on course.

6. Boost your immunity

Consider strengthening your ability to deal with unplanned expenses by topping up your emergency fund. Start small if you have to, with spare change or money saved from cutting out unnecessary expenses. While your emergency fund needs to be accessible, keep it separate from your everyday funds, so you don’t risk digging into it until you really need to.

With rates on the rise, it’s also a good time to review any ‘bad’ debts you have, such as unpaid credit cards. While it might be hard to eliminate them immediately, consider working out a debt repayment strategy and exploring options for more favourable terms. This could help you save on interest, and help claw back a bit extra for that emergency fund.

7. Enlist your crew

Getting the family involved in household finances can help keep things on track, with the added bonus of teaching your kids some healthy financial habits for life.

Keeping an open dialogue about money, and asking family members to contribute their own ideas, can make everyone feel included in the ‘big’ decisions. If you don’t already, consider holding family ‘money meetings’, and make it fun by having a movie night or some other family activity afterwards. If everyone is committed to the same targets and has a say in how to achieve them, you may make better progress together.

8. Track and reward

Try to check in on your finances monthly to track your progress. It may help to put in place dates for ‘check-ins’ with your partner, or for family money meetings.

Also, consider rewarding yourself for making progress. It doesn’t need to be something expensive that undoes all your hard work, but it’s important to celebrate small wins. Research³ shows that it’s the smaller and more achievable wins that give us a sense of progress and keep us going in the longer term.

The home run

As with any new exercise regime, ease into it. Building financial muscles takes time, practice, and perseverance. So be kind to yourself, and keep it balanced.

Lastly, don‘t forget your personal trainer. Your financial adviser is there to help you keep score, stay on track, manage any hurdles, and make it across the finish line.

Sources:
1 https://dornsife.usc.edu/assets/sites/545/docs/Wendy_Wood_Research_Articles/Habits/Neal.Wood.Quinn.2006_Habits_a_repeat_performance.pdf
2 https://www.paypalobjects.com/marketing/web/au/paypal-2021-ecommerce-trends.pdf
3 https://www.hbs.edu/faculty/Pages/item.aspx?num=40692

The Labor Party won the majority of seats in the lower house at the May Federal election this year.

With this, the Albanese Government handed down an updated 2022-23 Federal Budget at 7:30pm (AEDT) on 25 October 2022.

In this latest Budget, the Government’s policy priorities—and the proposed measures to help achieve these priorities—centre on ‘building a better future’:

• Providing responsible cost-of-living relief that delivers an economic dividend
• Building a stronger, more resilient and more modern economy
• Beginning the hard task of budget repair to pay for what is important.

Other key areas of focus in terms of proposed measures include improving women’s economic equality, ending violence against women, and gender equality, health and wellbeing.

Below we recap on some of the key proposed measures that may be relevant to you. These measures, and the information relating to them, have been sourced from the 2022-23 Federal Budget papers. Please note: These measures are yet to be passed as legislation and may be subject to change.

Individual tax
Clarifying that digital currencies are not taxed as foreign currency

The Government will introduce legislation to clarify that digital currencies (such as Bitcoin) continue to be excluded from the Australian income tax treatment of foreign currency. This maintains the current tax treatment of digital currencies, including the capital gains tax treatment where they are held as an investment.

This measure is aimed at reducing uncertainty following the decision of the Government of El Salvador to adopt Bitcoin as legal tender and will be backdated to income years that include 1 July 2021. The exclusion does not apply to digital currencies issued by, or under the authority of, a government agency, which continue to be taxed as foreign currency.

Company tax
Making COVID-19 business grants non-assessable non-exempt

In response to COVID-19, payments from certain state and territory business grants, made prior to 30 June 2022, can be made non-assessable, non-exempt (NANE) for income tax purposes, subject to eligibility. This tax treatment is only provided in exceptional circumstances, such as the severe economic consequences facing businesses during the COVID-19 pandemic.

The Government has made the following state and territory COVID-19 grant programs eligible for NANE treatment, which will exempt eligible businesses from paying tax on these grants:

• Victoria Business Costs Assistance Program Four – Construction
• Victoria Licenced Hospitality Venue Fund 2021 – July Extension
• Victoria License, Hospitality Venue Fund 2021 – Top Up Payments
• Victoria Business Costs Assistance Program Round Two – Top Up
• Victoria Business Costs Assistance Program Round Three
• Victoria Business Costs Assistance Program Round Four
• Victoria Business Costs Assistance Program Round Five
• Victoria Impacted Public Events Support Program Round Two
• Victoria LivePerformance Support Program (Presenters) Round Two
• Victoria Live Performance Support Program (Suppliers) Round Two
• Victoria Commercial Landlord Hardship Fund 3
• Australian Capital Territory HOMEFRONT 3
• Australian Capital Territory Small Business Hardship Scheme.

Energy efficiency grants for small and medium sized enterprises 
The Government will provide $62.6 million over three years from 2022–23 to support small to medium enterprises to fund energy efficient equipment upgrades. The funding will support studies, planning, equipment and facility upgrade projects that will improve energy efficiency, reduce emissions or improve the management of power demand.

Housing
Safer and more affordable housing 
The Government will invest $10 billion in the newly created Housing Australia Future Fund, to generate returns to fund the delivery of 30,000 social and affordable homes over five years.

The Government will also provide $348.6 million over four years from 2022–23 for a number of further initiatives to deliver more social and affordable housing. Funding includes, for example:

• $324.6 million over four years from 2022–23 to establish the Help to Buy scheme to assist people on low to moderate incomes to purchase a new or existing home with an equity contribution from the Government.

The Government will also establish the Regional First Home Buyers Guarantee to support eligible citizens and permanent residents who have lived in a regional location for more than 12 months to purchase their first home in that location with a minimum 5 percent deposit. A total of 10,000 places will be available each year to 30 June 2026.

Community batteries for household solar
The Government will provide $224.3 million over four years from 2022–23 to deploy 400 community batteries across Australia to lower bills, cut emissions and reduce pressure on the electricity grid by allowing households to store and use excess power they produce.

Solar banks
The Government will provide $102.2 million over four years from 2022–23 to establish a Community Solar Banks program for the deployment of community-scale solar and clean energy technologies. Funding will improve access to clean energy technologies in regional communities, social housing, apartments, rental accommodation, and households that are traditionally unable to access rooftop solar.

Superannuation
Expanding eligibility for downsizer contributions
The Government will allow more people to make downsizer contributions to their superannuation, by reducing the minimum eligibility age from 60 to 55 years of age. The measure will have effect from the start of the first quarter after Royal Assent of the enabling legislation.

The downsizer contribution allows people to make a one-off after-tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home. Both members of a couple can contribute and contributions do not count towards non-concessional contribution caps.

This measure aims to provide greater flexibility to contribute to super and encourage older Australians to downsize sooner to a home that better suits their needs, and in turn, increasing the availability of suitable housing for Australian families.

Social security
Incentivising pensioners to downsize 

The Government will provide $73.2 million over four years from 2022–23 (and $0.4 million per year after that), including:

• extending the assets test exemption for principal home sale proceeds from 12 months to 24 months for income support recipients
• changing the income test, to apply only the lower deeming rate (0.25 percent) to principal home sale proceeds when calculating deemed income for 24 months after the sale of the principal home.

This measure will aim to reduce the financial impact on pensioners looking to downsize their homes in an effort to minimise the burden on older Australians and free up housing stock for younger families.

Lifting the income threshold for the Commonwealth Seniors Health Card
The Government will provide $69.6 million over four years from 2022–23 to increase the income threshold for the Commonwealth Seniors Health Card from $61,284 to $90,000 for singles and from $98,054 to $144,000 (combined) for couples.

The Government will also freeze social security deeming rates at their current levels for a further two years until 30 June 2024, to support older Australians who rely on income from deemed financial investments, as well as the pension, to deal with the rising cost of living.

Jobs and Skills Summit – incentivise pensioners into the workforce (with temporary work bonus expansion)
The Government will provide $61.9 million over two years from 2022–23 to provide age and veteran pensioners a one-off credit of $4,000 to their Work Bonus income bank. The temporary income bank top up will increase the amount pensioners can earn in 2022–23 from $7,800 to $11,800, before their pension is reduced, supporting pensioners who want to work, or work more hours, without losing their pension.

Modernisation to reduce wait times to access support and services
The Government will provide $87.0 million over two years from 2022–23 to improve the administration of the claims processing system and improve veterans’ services. This measure is aimed at enhancing ICT systems, including MyService and myGov to better support veterans and their families. This measure also supports the development of business cases to replace and modernise at risk legacy ICT systems.

Voluntary Income Management to replace the Cashless Debit Card
The Government will provide $217.7 million over four years from 2022–23 to abolish the Cashless Debit Card, and commence transition to voluntary income management. Participants will transition off the card from 6 March 2023, and will be able to progressively opt-in to income management and the BasicsCard on a voluntary basis. The Government will also extend and expand support services for participants transitioning off the Cashless Debit Card and individuals in current cashless welfare locations.

Child care
Plan for cheaper child care
The Government will provide $4.7 billion over four years from 2022–23 (and $1.7 billion per year after that) to deliver cheaper child care, easing the cost of living for families and reducing barriers to greater workforce participation. This includes $4.6 billion over four years from 2022–23 to:

• Increase the maximum Child Care Subsidy (CCS) rate from 85 percent to 90 percent for families for the first child in care and increase the CCS rate for all families earning less than $530,000 in household income
• Maintain current higher CCS rates for families with multiple children aged 5 or under in child care, with higher CCS rates to cease 26 weeks after the older child’s last session of care, or when the child turns six years old
• Task the Australian Competition and Consumer Commission to undertake a 12-month inquiry into the cost of child care and the Productivity Commission to conduct a comprehensive review of the child care sector
• Improve the transparency of the child care sector by requiring large providers to publicly report CCS-related revenue and profits.

Boosting parental leave to enhance economic security, support and flexibility for Australia’s families
The Government will enhance economic security, improve gender equality, and enhance and provide more flexibility for shared care arrangements at a cost to the budget of $531.6 million over four years from 2022–23 (and $619.3 million per year after that).

The Government will introduce reforms from 1 July 2023 to make the Paid Parental Leave Scheme flexible for families so that either parent is able to claim the payment and both birth parents and non-birth parents are allowed to receive the payment if they meet the eligibility criteria. Parents will also be able to claim weeks of the payment concurrently so they can take leave at the same time.

From 1 July 2024, the Government will start expanding the scheme by two additional weeks a year until it reaches a full 26 weeks from 1 July 2026.

Both parents will be able to share the leave entitlement, with a proportion maintained on a “use it or lose it” basis, to encourage and facilitate both parents to access the scheme and to share the caring responsibilities more equally. Sole parents will be able to access the full 26 weeks.

In addition, eligibility will be expanded through the introduction of a $350,000 family income test, which families can be assessed under if they do not meet the individual income test.

Aged Care
Fixing the aged care crisis
The Government will provide $2.5 billion over four years from 2022–23 to reform the aged care system. Funding includes, for example:

• $2.5 billion over four years from 2022–23 to improve the quality of care in residential aged care facilities by requiring all facilities to have a registered nurse onsite 24 hours per day, 7 days a week from 1 July 2023 and increasing care minutes to 215 miutes per resident per day from 1 October 2024.

Implementing aged care reform
The Government will provide $540.3 million over four years from 2022–23 to improve the delivery of aged care services and respond to the Final Report of the Royal Commission into Aged Care Quality and Safety. Funding includes, for example:

• $38.7 million over four years from 2022–23 to establish the Inspector-General of Aged Care and the Office of the Inspector-General of Aged Care as a Statutory Agency.
• $23.1 million in 2022–23 to support the implementation of the Support at Home Program from July 2024 through the rollout of a large scale trial of an integrated assessment tool, the establishment of a Service List Advisory Body, commissioning the Independent Hospital and Aged Care Pricing Authority to undertake a pricing study, and to consult with the aged care sector.

The Government will also extend existing grant arrangements for the Commonwealth Home Support Programme for a further 12 months to 30 June 2024, to reflect the new start date of 1 July 2024 for the Support at Home Program.

Health care
Reduced Co-payment for treatments on the PBS
The Government will provide $787.1 million over four years from 2022–23 (and $233.4 million per year ongoing) to decrease the general patient co-payment for treatments on the Pharmaceutical Benefits Scheme (PBS) from $42.50 to $30.00 on 1 January 2023.

First Nations
Delivery of a First Nations Voice to Parliament referendum – preparatory work
The Government will provide $75.1 million over two years from 2022–23 to prepare for the delivery of a referendum to enshrine a First Nations Voice to Parliament in the Constitution. The Government will also provide $5.8 million to commence work on establishing an independent Makarrata Commission.

Cyber security
Fighting online scams
The Government will provide $12.6 million over four years from 2022–23 to combat scams and online fraud to protect Australians from financial harm. Funding includes:

• $9.9 million over four years from 2022–23 to the Australian Competition and Consumer Commission for initial work on the establishment of a National Anti-Scam Centre
• $2.0 million in 2022–23 to the Department of Home Affairs to expand its arrangement with IDCARE to provide specialist identity support services, including counselling and identity recovery services for victims of identity theft
• $0.7 million in 2022–23 to the Treasury to raise public awareness of the risk of scams.

In addition, the Government will also provide $5.5 million over two years from 2022–23 for the Office of the Australian Information Commissioner to investigate and respond to the Optus data breach.

Employment
Secure Australian jobs

The Government will:

• Automatically sunset agreement-related instruments made prior to the commencement of the Fair Work Act 2009 and during the ‘bridging period’ (1 July to 31 December 2009), commonly referred to as ‘zombie agreements’, to ensure employees can access entitlements available under modern awards.
• Remove unnecessary complexity and make the Better off Overall Test simple, flexible and fair by streamlining the enterprise agreement approval process and consideration by the Fair Work Commission of whether an employee is better off under the proposed award.
• Increase the capacity of the Fair Work Commission to proactively help workers and businesses reach agreements by reducing the level of disputation required in order to access arbitration.

Other policy measures that may be of interest:

The Government will:

• Cut taxes on electric cars so that more Australians can afford them.
  • From 1 July 2022, the measure will exempt battery, hydrogen fuel cell and plug-in hybrid electric cars from fringe benefits tax and import tariffs if they have a first retail price below the luxury car tax threshold for fuel-efficient cars. The car must not have been held or used before 1 July 2022.Employers will need to include exempt electric car fringe benefits in an employee’s reportable fringe benefits amount. This measure is estimated to decrease receipts by $410.0 million and decrease payments by $65.0 million over the four years from 2022–23. The measure will be reviewed after three years.
  • In addition to above, the Government will provide $39.8 million over five years from 2022–23 to establish a National Electric Vehicle Charging Network to deliver 117 fast charging stations on highways across Australia, in partnership with the NRMA.
• Provide $12.0 million over four years from 2022–23 to community legal centres in New South Wales and Queensland to help fire and flood affected individuals to access timely legal assistance.
• Provide $80.3 million to the ATO to extend the Personal Income Taxation Compliance Program for two years from 1 July 2023. This extension will enable the ATO to continue to deliver a combination of proactive, preventative and corrective activities in key areas of non-compliance, including overclaiming of deductions and incorrect reporting of income. The funding will enable the ATO to modernise its guidance products, engage earlier with taxpayers and tax agents and target its compliance activity.
• Extend the existing ATO Shadow Economy Program for a further three years from 1 July 2023. The extension of the Shadow Economy Program will enable the ATO to continue a strong and co-ordinated response to target shadow economy activity, protect revenue and level the playing field for those businesses that are following the rules.
• Improve the integrity of the tax system by aligning the tax treatment of off-market share buy-backs undertaken by listed public companies with the treatment of on-market share buy-backs. This measure will apply from announcement on Budget night (7:30pm AEDT, 25 October 2022).
• Increase penalties for breaches of competition and consumer law to deter conduct that stifles competition and increases costs to consumers. Maximum penalties for corporations will increase from $10 million to $50 million per breach, and from 10 percent of annual turnover to 30 percent of turnover (whichever is greater) during the period the breach took place.
• Establish a new unit within the Attorney-General’s Department to scope options to establish an Anti-Slavery Commissioner to work with business, civil society and state and territory governments to support compliance with Australia’s Modern Slavery Act 2018 and address modern slavery in supply chains.
• Provide $3.4 million over four years from 2022–23 to support the development and delivery of education, technical advice and support services targeting the needs of small business employers to support the implementation of the Government’s election commitment to legislate 10 days of paid family and domestic violence leave.

Changes to measures announced in the March 2022 Budget

The Government will not proceed with the measure to allow taxpayers to self-assess the effective life of intangible depreciating assets, announced in the 2021–22 Budget. Reversing this decision will maintain the status quo – effective lives of intangible depreciating assets will continue to be set by statute. This will help to avoid the potential integrity concerns with the previously announced measure and contribute to budget repair.

The Government has reviewed and decided to not proceed with several legacy tax and superannuation measures that were announced (but not legislated) by the previous Government. Including, but not limited to:

• The 2016–17 MYEFO measure titled: Pension Supplement – changes to the payment of the Pension Supplement for permanent departures overseas and temporary absences
• The 2018–19 Budget measure that proposed changing the annual audit requirement for certain self-managed superannuation funds (SMSFs)
• The 2018–19 Budget measure that proposed introducing a limit of $10,000 for cash payments made to businesses for goods and services (a delayed start date was announced in 2018–19 MYEFO).

The Government has also decided to defer the start dates of several legacy tax and superannuation measures to allow sufficient time for policies to be legislated and implemented. Including, but not limited to:

• The 2019–20 MYEFO measure that proposed introducing a sharing economy reporting regime, from:
  • 1 July 2022 to 1 July 2023 for transactions relating to the supply of ride sourcing and short-term accommodation, and
  • 1 July 2023 to 1 July 2024 for all other reportable transactions (including but not limited to asset sharing, food delivery and tasking-based services).
• The 2021–22 Budget measure that proposed relaxing residency requirements for SMSFs, from 1 July 2022 to the income year commencing on or after the date of Royal Assent of the enabling legislation.

This year’s Budget papers have provided us with key information on Australia’s current and forecast economic and fiscal position (including expenditure and revenue) and the Government’s policy priorities (and accompanying proposed policy measures to achieve them). The focus for this Budget is on securing Australia’s recovery by creating jobs, guaranteeing the essential services, and building a more secure and resilient Australia.

Below we have provided an article covering the main proposed policy measures that may be relevant to you, and two videos that may be of interest if you want to know more.

Written and accurate as at: May 12, 2021 Current Stats & Facts

The Federal Budget is a series of papers. These Budget papers provide us with important information on the current and forecast economic and fiscal position of Australia (including expenditure and revenue), as well as the Government’s policy priorities (and accompanying proposed policy measures to achieve them).

Traditionally, the Budget is delivered in May each year—last year being a recent exception when it was delivered on 6 October 2020 due to COVID-19. This year, Treasurer Josh Frydenberg delivered the 2021-22 Budget on 11 May 2020.

Below, we touch on the Government’s policy priorities and the economic and fiscal position, followed by coverage of several key proposed policy measures that may be relevant to you.

Budget overview

Policy priorities

The Government’s policy priorities announced—and the accompanying proposed policy measures to help achieve these policy priorities—focus on securing Australia’s recovery from the COVID-19 pandemic by:

• creating jobs,
• guaranteeing the essential services, and
• building a more secure and resilient Australia.

In addition, there is also a focus on improving women’s safety and economic security.

Please see below for further information on the related proposed policy measures.

Economic and fiscal position

Major economic parameters overview

*Real GDP and Nominal GDP are percentage change on preceding year. The consumer price index, employment, and the wage price index are through-the-year growth to the June quarter. The unemployment rate is the rate for the June quarter.

Source: ABS Australian National Accounts: National Income, Expenditure and Product; Labour Force, Australia; Wage Price Index, Australia; Consumer Price Index, Australia and Treasury.

Budget aggregates overview

*Excludes expected net Future Fund earnings before 2020-21.

^Net debt is the sum of interest-bearing liabilities (which include Australian Government Securities (AGS) on issue measured at market value) minus the sum of selected financial assets (cash and deposits, advances paid and investments, loans and placements).

^#Gross debt measures the face value of AGS on issue.

Policy measures: Individual taxation

Employee Share Schemes (ESS)

The Government will remove the ‘cessation of employment’ taxing point for the tax-deferred ESS that are available for all companies—resulting in tax being deferred until the earliest of the remaining taxing points:

• In the case of shares, when there is no risk of forfeiture and no restrictions on disposal.
• In the case of options, when the employee exercises the option, and there is no risk of forfeiting the resulting share, and no restriction on disposal.
• The maximum period of deferral of 15 years.

The measure will apply to ESS interests issued from the first financial year after the date of Royal Assent of the enabling legislation.

Low and middle-income tax offset (LMITO)

The Government will retain the LMITO for the 2021-22 financial year—an additional financial year. For context, the LMITO provides a reduction in tax of up to $1,080:

• taxable income ≤$37,000, offset of $255,
• taxable income from $37,001 to $48,000, offset of $255 plus 7.5 cents per dollar above $37,000,
• taxable income from $48,001 to $90,000, offset of $1,080, and
• taxable income from $90,001 to $126,000, offset of $1,080 minus 3 cents per dollar above $90,000.

Medicare levy

In line with Budgets for previous financial years, the Government will increase the Medicare levy low-income thresholds for singles, families, and seniors and pensioners from 1 July 2020. The Medicare levy low-income thresholds will be increased from:

• $22,801 to $23,226 for singles,
• $38,474 to $39,167 for families*,
• $36,056 to $36,705 for single seniors and pensioners, and
• $50,191 to $51,094 for family seniors and pensioners.

*For each dependent child or student, the family income thresholds increase by a further $3,597 (previously $3,533).

Tax residency rules

The Government will replace the individual tax residency rules with a new framework. The primary test will be a simple ‘bright line’ test—a person physically present in Australia for 183 days or more in any financial year, will be an Australian tax resident. Individuals who don’t meet this test will be subject to secondary tests. The measure will apply from the first financial year after the date of Royal Assent of the enabling legislation.

Work-related self-education expenses

The Government will remove the exclusion of the first $250 of deductions of prescribed courses of education. For context, the first $250 of a prescribed course of education expense is currently not deductible. The measure will apply from the first financial year after the date of Royal Assent of the enabling legislation.

Policy measures: Company taxation

Intangible assets

The Government will allow taxpayers to self-assess the effective life of certain depreciating intangible assets* for tax purposes, rather than being required to use the effective life currently prescribed by statute.

*Patents, registered designs, copyrights, in-house software, licenses and telecommunications site access rights.

Taxpayers will be able to bring deductions forward if they self-assess the assets as having a shorter effective life than the current statutory life. The measure will apply to eligible assets acquired, following the completion of temporary full expensing (see below), which has been extended until 30 June 2023.

Patent box

The Government will introduce a patent box tax regime to further encourage innovation in Australia by taxing corporate income derived from Australian medical and biotechnology patents at a concessional effective corporate tax rate of 17 per cent (reduced from 30 per cent, or 25 per cent for small and medium companies), with the concession applying from income years starting on or after 1 July 2022.

Temporary full expensing

The Government will extend temporary full expensing for 12 months until 30 June 2023. Temporary full expensing will be extended to allow eligible businesses with an aggregated annual turnover or total income of less than $5 billion to deduct the full cost of eligible depreciable assets of any value, acquired from 7:30pm AEDT on 6 October 2020 and first used or installed ready for use by 30 June 2023.

Temporary loss carry-back

The Government will extend temporary loss carry-back by one financial year. The extension will allow eligible companies with an aggregated turnover of less than $5 billion, to carry back (utilise) tax losses from the 2022-23 income year to offset previously taxed profits as far back as the 2018-19 income year when they lodge their 2022-23 tax return.

 Policy measures: Housing

Family Home Guarantee

The Government will establish the Family Home Guarantee with 10,000 places from 2021-22 to support single parents with dependants to enter, or re-enter, the housing market with a 2 per cent deposit (the Government guaranteeing the remaining 18 per cent), regardless of whether that single parent is a first-home buyer or previous owner-occupier. The measure will commence on 1 July 2021, subject to the passage of legislation.

First Home Loan Deposit Scheme (FHLDS)

The Government will extend the FHLDS to provide an additional 10,000 New Home Guarantees in 2021-22 to allow eligible first home buyers to build a new home or purchase a newly constructed home with a 5 per cent deposit (the Government guaranteeing the remaining 15 per cent).

HomeBuilder grant program

The Government will extend the HomeBuilder grant program construction commencement period from six months to 18 months for all existing applicants.

Policy measures: Superannuation

Superannuation Guarantee

The Government will remove the current $450 per month minimum income threshold, over which employees have to be paid the Superannuation Guarantee by their employer. The measure will apply from the start of the first financial year after Royal Assent of the enabling legislation—the Government expects this to occur before 1 July 2022.

Downsizing measure

The Government will reduce the eligibility age to make downsizer contributions into superannuation from 65 to 60 years of age. The measure will apply from the start of the first financial year after Royal Assent of the enabling legislation—the Government expects this to occur before 1 July 2022.

First Home Super Saver Scheme (FHSSS)

The Government will increase the maximum releasable amount of voluntary concessional and non-concessional contributions under the FHSSS from $30,000 to $50,000. The measure will apply from the start of the first financial year after Royal Assent of the enabling legislation—the Government expects this to occur before 1 July 2022.

Please note: Voluntary contributions made from 1 July 2017, up to the existing limit of $15,000 per year, will count towards the total amount able to be released.

The Government will also make four technical changes to the legislation behind the FHSSS, to assist applicants who make errors on their FHSSS release applications. One of these technical changes will allow individuals to withdraw or amend their applications prior to them receiving an FHSSS amount, and allow those who withdraw to re-apply for FHSSS releases in the future. These technical changes will apply retrospectively from 1 July 2018.

Legacy retirement products

The Government will allow, for a two-year period, individuals to exit a specified range of legacy retirement products*, together with any associated reserves and fully access the underlying capital by commuting it to superannuation. They will then have the option to withdraw it, roll it to more flexible and contemporary retirement products and/or retain it within superannuation.

*Market-linked, life-expectancy and lifetime products, but not flexi-pension products or a lifetime product in a large APRA-regulated or public sector defined benefit scheme.

Please note: Social security and taxation treatment won’t be grandfathered for any new products commenced with commuted funds. The commuted reserves won’t be counted towards an individual’s concessional contributions cap and won’t trigger excess contributions. They will, however, be taxed as an assessable contribution of the fund (with a 15 per cent tax rate).

The measure will apply from the first financial year after the date of Royal Assent of the enabling legislation.

Residency requirements

The Government will relax residency requirements for self-managed superannuation funds (SMFSs) and small APRA-regulated funds (SAFs) by extending the ‘central control and management test’ safe harbour from two to five years for SMSFs, and removing the ‘active member’ test for both fund types. The measure will apply from the start of the first financial year after Royal Assent of the enabling legislation—the Government expects this to occur before 1 July 2022.

Superannuation assets and family law proceedings

The Government will shortly introduce enabling legislation to deliver the Improving the Visibility of Superannuation Assets in Family Law Proceedings measure. For context, the Government is building an electronic information-sharing mechanism between the Australian Taxation Office (ATO) and the Family Law Courts to allow superannuation assets to be readily identified during family law proceedings.

Victims of family and domestic violence

The Government won’t proceed with a measure to extend early release of superannuation to victims of family and domestic violence.

Work test

The Government will allow individuals aged 67 to 74 years (inclusive) to make or receive non-concessional (including under the bring-forward rule) or salary sacrifice contributions without meeting the work test, subject to existing contributions caps. Individuals aged 67 to 74 years will still have to meet the work test to make personal deductible contributions. The measure will apply from the start of the first financial year after Royal Assent of the enabling legislation—the Government expects this to occur before 1 July 2022.

Policy measures: Social security

Child care

The Government will reduce child care out-of-pocket costs and support parental choice by:

• increasing the Child Care Subsidy (CCS) rate by 30 percentage points for the second child and subsequent children aged five years and under in care, up to a maximum CCS rate of 95 per cent for these children, commencing on 11 July 2022; and
• removing the CCS annual cap of $10,560 per child per year, commencing on 1 July 2022.

 Pension Loans Scheme (PLS)

The Government will allow PLS participants to access up to two lump sum advances in any 12-month period, up to a total value of 50 per cent of the maximum annual rate of the Age Pension. And, introduce a No Negative Equity Guarantee so borrowers under the PLS, or their estate, won’t have to repay more than the market value of their property. The measure will apply from 1 July 2022.

Policy measures: Aged care

The Government will:

• release 80,000 additional Home Care Packages over two years from 2021-22.
• improve access to quality aged care services for consumers in regional, rural and remote areas, including those with Indigenous backgrounds and special needs groups.
• increase the amount of front line care (care minutes) delivered to 240,000 aged care residents and 67,000 who access respite services, by 1 October 2023. This will be mandated at 200 minutes per day, including 40 minutes with a registered nurse.
• provide support for aged care providers to deliver better care and services through a new Government-funded Basic Daily Fee supplement increase of $10 per resident per day from 1 July 2021, while continuing the 30 per cent increase in the homelessness and viability supplements.
• support structural reforms, including a new Aged Care Act to replace the Aged Care Act 1997 and the Aged Care Quality and Safety Commission Act 2018, as well as the implementation of a new Refundable Accommodation Deposit (RAD) Support Loan Program to replace the current bed license and the Aged Care Approvals Round Process from 1 July 2024.

 Other policy measures

The Government will provide:

• $2.0 billion over four years from 2021-22 for the National Mental Health and Suicide Prevention Plan, including initiatives to be progressed with states and territories for a new national agreement on mental health and suicide prevention.
• $1.9 billion over five years from 2020-21 to distribute and administer COVID-19 vaccines to residents of Australia. The Government has also entered into advance purchase agreements for an additional 30 million doses of the Pfizer BioNTech vaccine and has provisioned to purchase additional vaccine doses, including mRNA vaccines.
• An additional $506.3 million* over two years from 2021-22 to expand the JobTrainer Fund by a further 163,000 places and extend the program until 31 December 2022. And, an additional $2.7 billion over four years from 2020-21 to expand the Boosting Apprenticeship Commencements wage subsidy to further support businesses and Group Training Organisations to take on new apprentices and trainees.

*Subject to matched funding by state and territory governments.

• $164.8 million over three years in financial assistance and support to women affected by family and domestic violence. This includes a two-year trial that will run until 30 June 2023 to provide immediate financial assistance to support women leaving a violent relationship and help them rebuild their lives. The package will enable eligible women to access up to $5,000 in financial assistance—this will include a maximum cash payment of $1,500 and the remaining amount in goods.

Moving forward

Many proposed policy measures were announced in this year’s Budget. We provided coverage on several proposed policy measures that may be relevant to you.

For more information on this year’s Budget and what it may mean for you, please watch:

• ABC News’ Leigh Sales interview Treasurer Josh Frydenberg, and
• ABC News’ James Glenday unpack many of the important details.

Please contact us if you wish to discuss any aspect of this year’s Budget.

*Australian Government. (2021). Budget 2021-22 papers.

If you have any questions regarding this article, please contact us.

In what has been billed as one of the most important budgets since the Great Depression, and the first since the onset of the COVID-19 pandemic dragged Australia into its first recession in almost 30 years, Treasurer Josh Frydenberg said the next phase of the journey is to secure Australia’s future.

As expected, the focus is on job creation, tax cuts and targeted spending to get the economy over the COVID-19 hump.

The Treasurer said this Budget, which was delayed six months due to the pandemic, is “all about helping those who are out of a job get into a job and helping those who are in work, stay in work”.

The big picture

After coming within a whisker of balancing the budget at the end of 2019, the Treasurer revealed the budget deficit is now projected to blow out to $213.7 billion this financial year, or 11 per cent of GDP, the biggest deficit in 75 years.

With official interest rates at a record low of 0.25 per cent, the Reserve Bank has little firepower left to stimulate the economy. That puts the onus on Government spending to get the economy moving, fortunately at extremely favourable borrowing rates. And that is just as well, because debt and deficit will be with us well into the decade.

The Government forecasts the deficit will fall to $66.9 billion by 2023-24. Net debt is expected to hit $703 billion this financial year, or 36 per cent of GDP, dwarfing the $85.3 billion debt last financial year. Debt is expected to peak at $966 billion, or 44 per cent of GDP, by June 2024.

The figures are eye-watering, but the Government is determined to do what it takes to keep Australians in jobs and grow our way out of recession.

So, what does the Budget mean for you, your family and your community?

It’s all about jobs

With young people bearing the brunt of COVID-related job losses, the Government is pulling out all stops to get young people into jobs. Youth unemployment currently stands at 14.3 per cent, more than twice the overall jobless rate of 6.8 per cent.

As we transition away from the JobKeeper and JobSeeker subsidies, the Government announced more than $6 billion in new spending which it estimates will help create 450,000 jobs for young people.

“Having a job means more than earning an income,” Mr Frydenberg said.

Measures include:

• • A new JobMaker program worth $4 billion by 2022-23, under which employers who fill new jobs with young workers who are unemployed or studying will receive a hiring credit of up to $10,400 over the next year. Employers who hire someone under 29 will receive $200 a week, and $100 a week for those aged 30-35. New employees must work at least 20 hours a week to be eligible.

• A $1.2 billion program to pay half the salary of up to 100,000 new apprentices and trainees taken on by businesses.

In recognition that the pandemic has had a disproportionate impact on women’s employment, the Budget includes the promised “Women’s economic security statement” but the size of the support package may disappoint some.

Just over $240 million has been allocated to “create more opportunities and choices for women” in science, technology, engineering and mathematics (STEM) as well as male-dominated industries and business.

Housing and infrastructure

As part of its job creation strategy, the government also announced $14 billion in new and accelerated infrastructure projects since the onset of COVID.

The projects will be in all states and territories and include major road and rail projects, smaller shovel-ready road safety projects, as well as new water infrastructure such as dams, weirs and pipelines.

The construction industry will also be supported by the first home loan deposit scheme being extended to an extra 10,000 new or newly built homes in 2020-21. This scheme allows first home owners to buy with a deposit as low as 5 per cent and the Government will guaranteeing up to 15 per cent.

Personal tax cuts

As widely tipped, the government will follow up last year’s tax cut by bringing forward stage two of its planned tax cuts and back date them to July 1 this year to give mostly low and middle-income taxpayers an immediate boost.

As the table below shows, the upper income threshold for the 19 per cent marginal tax rate will increase from $37,000 a year to $45,000 a year. The upper threshold for the 32.5 per cent tax bracket will increase from $90,000 to $120,000.

As a result, more than 11 million Australians will save between $87 and $2,745 this financial year. Couples will save up to $5,490.

^*Does not include Medicare Levy of 2%
^**LMITO will only be available until the end of the 2020-21 income year.

You don’t need to do anything to receive the tax cuts. The Australian Taxation Office (ATO) will automatically adjust the tax tables it applies to businesses and simply take less. It will also account for three months of taxes already paid from 1 July this year so workers can catch up on missed savings.

Business tax relief

In another move that will help protect jobs in the hard-hit small business sector, business owners will also get tax relief through loss carry back provisions for struggling firms. This will allow them to claim back a rebate on tax they have previously paid until they get back on their feet.

Businesses with turnover of up to $5 billion a year will be able to write off the full value of any depreciable asset they buy before June 2022.

Cash boost for retirees

Around 2.5 million pensioners will get extra help to make up for the traditional September rise in the Age Pension not going ahead this year. However, self-funded retirees may feel they have been left out.

Age pensioners and as well as people on the disability support pension, Veterans pension, Commonwealth Seniors Health Card holders and recipients of Family Tax Benefit will receive two payments of $250 from December and from March.

This is in addition to two previous payments of $750 earlier this year.

Health and aged care

After the terrible toll the pandemic has waged on aged care residents and the elderly, the Government will add 23,000 additional Home Care packages to allow senior Australians to remain in their home for as long as possible.

Funding for mental health and suicide prevention will also be increased by $5.7 billion this year, with a doubling of Medicare-funded places for psychological services.

Super funds on notice

Underperforming super funds are to be named and shamed with a new comparison tool called Your Super. This will allow super members to compare fees and returns.

All funds will be required to undergo an annual performance test from 2021 and underperforming funds will be banned from taking on new members unless they do better.

Looking ahead

As the underlying Budget assumptions are based on finding a coronavirus vaccine sometime next year, Government projections for economic growth, jobs and debt are necessarily best estimates only.

Only time will tell if Budget spending and other incentives will be enough to encourage business to invest and employ, and to prevent the economy dipping further as JobKeeper and JobSeeker temporary support payments are wound back.

Another test will be whether the Budget initiatives help those most affected by the recession, notably young people and women.

The Government has said it is prepared to consider more spending to get the economy out of recession. The Treasurer will have another opportunity to fine tune his economic strategy fairly soon, with the next federal budget due in just seven months, in May 2021.

If you have any questions about any of the Budget measures and how they might impact your finances, don’t hesitate to contact us.

Information in this article has been sourced from the Budget Speech 2020-21 and Federal Budget support documents.

It is important to note that the policies outlined in this publication are yet to be passed as legislation and therefore may be subject to change.