Federal budget 2023 for families and individuals

The budget announced various actions under its Energy Price Relief Plan that are intended to reduce the impact of rising energy prices on Australian households and businesses.

This included direct electricity bill relief to eligible households and small business customers.  From July 2023, this will give up to $500 in electricity bill relief for eligible households including pensioners, Commonwealth Seniors Health Card holders, Family Tax Benefit A and B recipients (up to $650 for eligible small businesses).

The government is also establishing the $1.3 billion Household Energy Upgrades Fund to provide concessional finance to more than 170,000 households for home upgrades that save energy.

The government is investing $5.7 billion over five years from 2022—23 to strengthen Medicare and make it cheaper and easier to see a doctor.  The government is tripling the incentive paid to GPs to bulk bill consultations for families with children under 16 years, pensioners and Commonwealth concession card holders.  It will apply to face-to-face, telehealth and videoconference consultations.

The budget includes measures intended to reduce the cost of medicines.

This includes allowing more than 300 Pharmaceutical Benefits Scheme medicines to be dispensed in greater amounts, phased in from 1 September 2023. Some patients will be able to get two months’ worth of the medicine they need for a stable, chronic health condition, saving time and out-of-pocket costs.

The government is increasing support for those on government support payments, which include:

• Increasing the base rate of income support payments like the JobSeeker Payment, Austudy and Youth Allowance by $40 per fortnight to eligible recipients
• Expanding eligibility for the existing higher rate of JobSeeker to recipients 55 and over who have received the payment for nine or more continuous months, which currently applies to those 60 and over
• Increasing the maximum rates of Commonwealth Rent Assistance by 15%
• Increasing the single parenting payment cut-off. Previously, single parents were required to apply for JobSeeker once their youngest dependent child reached eight years of age.  This will now be increased to 14 years of age

The budget papers highlight that the previously announced childcare changes and paid parental leave changes commence from July 2023.

From July 2023 the Child Care Subsidy rates for families earning less than $530,000 with children in care will increase.

From July 2023, Child Care Subsidy rates will lift from 85% to 90% for families earning less than $80,000. Subsidy rates will then taper down one percentage point for each additional $5,000 in income until it reaches 0% for families earning $530,000.

Families will continue to receive existing higher subsidy rates for their second and subsequent children aged five and under in care, up to 95%.

From July 2023 the changes to the Paid Parental Leave Scheme will also commence, with an extension of the scheme duration from its current 18 weeks to 20 weeks.

The previously announced measure preventing listed companies undertaking off-market share buy-backs to classify any part of the buy-back as a franked dividend are proposed to commence from 25 October 2022.  The proposed integrity measures to prevent certain distributions from being franked where funded by capital raisings will now have an amended start date of 15 September 2022, not 19 December 2016.

Such buy-backs have been particularly attractive for superannuation funds and certain other investors that are able to obtain tax refunds on franking credits attached to franked dividends paid from the off-market buy-back. The issue of broad drafting of the integrity measures which could capture unintended distributions remains despite further detail in the Explanatory Memorandum to the enacting Bill. For example, if a company pays a $5,000 dividend and undergoes a capital raising of $100 which was deemed “connected”, the entire dividend is unfrankable.

We expect to see listed companies wishing to undertake corporate actions which may come within the ambit of the proposed changes to apply for Class Rulings from the ATO, in order to give their shareholders clarity as to the tax treatment.

To achieve the above, the proposed integrity measure will treat off-market share buy-backs undertaken by listed companies on the same tax basis as on-market share buy-backs.

No changes to the already proposed changes were announced as part of this budget. Please see the Superannuation section for detail on this measure.

The Australian government has reiterated its intention to reduce the tax concessions available to individuals with a total superannuation balance (TSB) exceeding $3 million, from 1 July 2025. Any individual with a TSB less than $3 million will remain unaffected.

Individuals with a TSB in excess of $3 million will be subject to an additional tax of 15% on ‘Earnings’. ‘Earnings’ is calculated with reference to the difference in TSB at the start and end of the financial year, adjusted for withdrawals and contributions. Negative ‘Earnings’ can be carried forward to offset against future year ‘Earnings’.

To understand the proposed changes better, we have provided an example below:

Gary, with a TSB over $3m 

• Gary is 48 and has a total super balance of $4 million as at 30 June 2025
• He makes no withdrawals or contributions, and has a total super balance of $5 million at 30 June 2026

• Gary’s calculated “Earnings” are:
  • $5 million – $4 million = $1 million
• His proportion of “Earnings” corresponding to funds above $3 million is:
  • ($5 million – $3 million) ÷ $5 million = 40% 

• Therefore, his additional tax liability for the 2025-26 year is:
  • 15% x $1,000,000 x 40% = $60,000

As we expected, the Australian government has confirmed that the temporary 50% reduction in the minimum pension drawdown rates will lapse on 30 June 2023, and be reinstated to pre-COVID levels from 1 July 2023.

Trustees who have an income stream within their superannuation funds may need to revisit their investment strategy to ensure they have considered the need for greater liquidity to facilitate the higher drawdown rate required from 1 July.

The Australian government have confirmed the amendment to non-arm’s length income (NALI) provisions which apply to expenditure incurred by superannuation funds by reducing the income taxable as NALI to be that of twice the level of general expenses. Previously, it was proposed that income could be taxed at five times the level of general expense.

Given the complexities associated with this area, we recommend you contact your Bentleys Advisor if you have any questions.