On Tuesday, 9 May 2023, Treasurer Jim Chalmers handed down the 2023-24 Federal Budget, his 2nd Budget, which follows the October 2022 Budget. Please find below a summary of key measures:
Budget highlights
The major tax-related measures announced in the Budget included:
Small businesses instant asset write-off threshold - to be increased to $20,000 for 2023-24 for businesses with aggregated annual turnover of less than $10m. The $20,000 threshold will apply on a per asset basis;
Small business Energy Incentive - businesses with annual turnover of less than $50m will be able to claim an additional 20% deduction on spending that supports electrification and more efficient use of energy. Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024;
Small business lodgment penalty amnesty - will be provided for small businesses with aggregate turnover of less than $10m to encourage them to re-engage with the tax system. The amnesty will remit failure-to-lodge penalties for outstanding tax statements lodged in the period from 1 June 2023 to 31 December 2023 that were originally due between 1 December 2019 to 29 February 2022;
Small business unpaid tax and super- additional funding from 1 July 2023 to assist the ATO to engage with taxpayers who have high-value debts over $100,000 and aged debts older than 2 years where those taxpayers are either public and multinational groups with an aggregated turnover of greater than $10m, or privately owned groups or individuals controlling over $5m of net wealth;
PAYG and GST instalment uplift factor - 6% for 2022-23 (being lower than the 12% rate that would otherwise have applied under the statutory formula);
Pt IVA - scope to be expanded to catch 2 additional types of scheme from 1 July 2024, regardless of whether the scheme was entered into before that date;
FBT rules for electric vehicles (EVs) - the eligibility of plug-in hybrid electric cars will sunset from 1 April 2025 from the FBT exemption for eligible electric cars;
MIT withholding tax concession for data centres and warehouses - the "clean building" managed investment trust withholding tax concession will be extended to data centres and warehouses that meet the relevant energy efficiency standard, where construction commences after 7:30 pm (AEST) on 9 May 2023;
Build-to-rent properties - for eligible new build-to-rent projects where construction commences after 7:30 PM (AEST) on 9 May 2023 (Budget night), the Government will: (i) increase the rate for the capital works tax deduction (depreciation) to 4% per year; (ii) reduce the final withholding tax rate on eligible fund payments from managed investment trust (MIT) investments from 30% to 15%;
BEPS Two Pillar Solution: start dates - (i) 15% global minimum tax for large multinational enterprises with the Income Inclusion Rule (IIR) will apply to income years starting on or after 1 January 2024 and the Undertaxed Profits Rule (UTPR) applying to income years starting on or after 1 January 2025; and (ii) 15% domestic minimum tax will apply to income years starting on or after 1 January 2024;
PRRT: LNG and gas transfer pricing - the Government has proposed to cap the use of deductions from 1 July 2023 to the value of 90% of each taxpayer's PRRT assessable receipts in respect of each project interest in the relevant income year and apply after mandatory transfers of exploration expenditure. Projects would not be subject to the cap until 7 years after the year of first production or from 1 July 2023, whichever is later. The cap will not apply to certain classes of deductible expenditure in the PRRT;
PRRT - meaning of "exploration" and "mining, quarrying and prospecting rights" to be amended in response to Shell Energy Holdings Australia case, applicable to all expenditure incurred from 21 August 2013. Will also restore the policy intent of the law and apply in respect of all mining, quarrying and prospecting rights (MQPRs) acquired or started to be used after 7:30 pm (AEST) on 9 May 2023.
Superannuation
The superannuation measures include:
Non-arm's length income (NALI) - the amount of non-arm's length expenses (NALE) taxed at 45% as NALI will be limited to twice the level of a general expense from 1 July 2023 for SMSFs and small APRA funds. In addition, fund income taxable as NALI will exclude contributions to effectively exempt large APRA regulated funds from the NALI provisions for both general and specific expenses of the fund;
Super account balances above $3m - the Budget confirmed the Government's intention to apply an additional 15% tax on total superannuation balances above $3 million from 1 July 2025;
Payday super - employers will be required to pay their employees' super guarantee at the same time as their salary and wages from 1 July 2026;
Pension drawdowns: no reduction in minimum - the Budget did not announce a further extension to 2023-24 of the temporary 50% reduction in the minimum annual payment amounts for superannuation pensions and annuities.
Where to get Budget documents
The 2023-24 Budget Papers are available from the following website:
Budget October 2023-24 - https://budget.gov.au/
More information on the tax and related announcements is also contained in a number of Budget press releases on the Treasurer's website and the Assistant Treasurer's website
Personal Taxation
Personal tax rates unchanged for 2023-24; Stage 3 start from 2024-25 unchanged
In the 2023-24 Budget, the Government did not announce any personal tax rates changes. The Stage 3 tax changes commence from 1 July 2024, as previously legislated.
Low income tax offsets - LMITO not extended beyond 2021-22
The 2023-24 Budget did not announce any extension of the low and middle income tax offset (LMITO) beyond the 2021-22 income year. The LMITO has now ceased and been fully replaced by the low income tax offset (LITO) - see below.
With no extension of the LMITO announced in the Budget, the LMITO remains legislated to only apply until the end of the 2021-22 income year. As a result, low-to-middle income earners may see their tax refunds from July 2023 reduced by between $675 and $1,500 (for incomes up to $90,000 but phasing out up to $126,000), all other things being equal.
Low income tax offset for 2023-24 (unchanged)
For completeness, and as a reminder, while the LMITO has now ceased, low and middle income taxpayers remain entitled to the low income tax offset (LITO). No changes were made to the LITO in the 2023-24 Budget. The LITO will continue to apply for the 2023-24 income year and beyond. The LITO was intended to replace the former low income and low and middle income tax offsets from 2022-23, but the new LITO was brought forward in the 2020 Budget to apply from the 2020-21 income year.
Low income tax offset for 2023-24 (unchanged)
Taxable Income (TI) | Amount of Offset |
$0 - $37,500 | $700 |
$37,501 - $45,000 | $700 - ([TI - $37,500] x 5%) |
$45,001 - $66,667 | $325 - ([TI - $45,000] x 1.5%) |
$66,668 + | Nil |
The maximum amount of the LITO is $700. The LITO is withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000 and then at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667
Medicare levy low-income thresholds for 2022-23
For the 2022-23 income year, the Medicare levy low-income threshold for singles will be increased to $24,276 (up from $23,365 for 2021-22). For couples with no children, the family income threshold will be increased to $40,939 (up from $39,402 for 2021-22). The additional amount of threshold for each dependent child or student will be increased to $3,760 (up from $3,619).
For single seniors and pensioners eligible for the SAPTO, the Medicare levy low-income threshold will be increased to $38,365 (up from $36,925 for 2021-22). The family threshold for seniors and pensioners will be increased to $53,406 (up from $51,401), plus $3,760 for each dependent child or student.
Date of effect
The increased thresholds will apply to the 2022-23 and later income years. Note that legislation is required to amend the thresholds and a Bill will be introduced shortly.
Source: Budget Paper No 2 [p 22]
Medicare levy exemption for lump sum payments in arrears from 1 July 2024
The Government will exempt eligible lump sum payments in arrears from the Medicare levy from 1 July 2024. The measure seeks to ensure low-income taxpayers do not pay higher amounts of the Medicare levy as a result of receiving an eligible lump sum payment, for example as compensation for underpaid wages.
Eligibility requirements will ensure that relief is targeted to taxpayers who are genuinely low-income and should be eligible for a reduced Medicare levy. To qualify, taxpayers must be eligible for a reduction in the Medicare levy in the 2 most recent years to which the lump sum accrues. Taxpayers must also satisfy the existing eligibility requirements of the existing lump sum payment in arrears tax offset, including that a lump sum accounts for at least 10 per cent of the taxpayer's income in the year of receipt.
The measure is estimated to only cost the Budget $2 million over the 5 years from 2022-23.
Date of effect
1 July 2024.
Source: Budget Paper No 2 [p 22]
Small Business
Instant asset write-off for small businesses: $20K threshold for 2023-24
The Government will temporarily increase the instant asset write-off threshold to $20,000 from 1 July 2023 to 30 June 2024.
Small businesses, i.e. those with aggregated annual turnover of less than $10 million, will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2024. The $20,000 threshold will apply on a per asset basis, so small businesses can instantly write off multiple assets.
Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year thereafter.
The provisions that prevent small businesses from re-entering the simplified depreciation regime for 5 years if they opt-out will continue to be suspended until 30 June 2024.
Context
The instant asset write-off rules allow for the immediate deduction for the cost of a depreciating asset for small business entities. However, those rules were effectively replaced by temporary full expensing in relation to depreciating assets first held, and used or installed ready for use for a taxable purpose, between the 2020 Budget time (6 October 2020) and 30 June 2022, then extended to 30 June 2023.
Given the temporary full expensing will not be available in 2023-24, the instant asset write-off rules come back into play. The threshold is currently $1,000 (but note again, this was not relevant while temporary full expensing allowed the cost of any qualifying asset to be written off immediately – which of course was available to other categories of taxpayers, not just small business entities).
By way of reminder, small business entities that use the simplified depreciation rules in Subdiv 328-D are entitled to an outright deduction for the "taxable purpose proportion" of the "adjustable value" of a depreciating asset if (s 328-180(1)):
the asset is a "low cost asset" (and is not an excluded depreciating asset); and
the taxpayer starts to hold the asset when the taxpayer is a small business entity (and, for a limited period, if the taxpayer also qualifies as a medium sized business).
The deduction is available in the income year in which the taxpayer first uses the asset, or first installs it ready for use, for a taxable purpose. The deduction is known as the "instant asset write-off".
A depreciating asset is a low cost asset if its cost as at the end of the income year in which the taxpayer starts to use it, or installs it ready for use, for a taxable purpose is less than the relevant threshold: s 328-180.
Impact on Budget bottom line
This measure is estimated to decrease receipts by $290.0 million over the 5 years from 2022-23.
Source: Budget Paper No 2 [p 27-28]
Small Business Energy Incentive: 20% bonus deduction
The Budget papers confirmed that the Small Business Energy Incentive will provide businesses with annual turnover of less than $50 million an additional 20% deduction on spending that supports electrification and more efficient use of energy. This measure was originally announced by the Treasurer on 30 April 2023: see 2023 WTB 18 [240].
The Small Business Energy Incentive will apply to a range of depreciating assets, as well as upgrades to existing assets. These will include assets that upgrade to more efficient electrical goods such as energy-efficient fridges, assets that support electrification such as heat pumps and electric heating or cooling systems, and demand management assets such as batteries or thermal energy storage.
However, certain exclusions will apply, such as:
electric vehicles;
renewable electricity generation assets;
capital works; and
assets that are not connected to the electricity grid and use fossil fuels.
Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business.
Date of effect
Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024.
Full details of eligibility criteria will be finalised following consultation.
Impact on Budget bottom line
This measure is estimated to decrease receipts by $310.0 million and increase payments by $4.2 million over the 5 years from 2022-23.
Source: Budget Paper No 2 [p 28]
Small business lodgment penalty amnesty; integrity measure to target unpaid tax and super
The Government announced that a lodgment penalty amnesty program will be provided for small businesses with aggregate turnover of less than $10 million to encourage them to re-engage with the tax system.
The amnesty will remit failure-to-lodge penalties for outstanding tax statements lodged in the period from 1 June 2023 to 31 December 2023 that were originally due during the period from 1 December 2019 to 29 February 2022.
Integrity measure to target unpaid tax and super
The Government will also provide funding from 1 July 2023 over 4 years to assist the ATO to engage more effectively with businesses to address the growth of tax and superannuation liabilities.
The additional funding will facilitate ATO engagement with taxpayers who have high-value debts over $100,000 and aged debts older than 2 years where those taxpayers are either public and multinational groups with an aggregated turnover of greater than $10 million, or privately owned groups or individuals controlling over $5 million of net wealth.
This measure is estimated to increase receipts by $718m and increase payments by $275.4m over 5 years from 2022-23. In addition to the $82.1m in funding for the ATO, the increase in payments also includes $12.3m in unpaid superannuation to be disbursed to employees, and $181m in GST payments to the States and Territories.
Source: Budget Paper No 2 [p 29]
PAYG and GST instalment uplift factor: 6% for 2022-23
The Budget papers state that the GDP uplift factor for PAYG and GST instalments will be set at 6% for the 2023-24 income year. The papers state that this uplift factor is lower than the 12% that would have applied under the statutory formula.
Date of effect
The 6% GDP uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods (up to $10 million annual aggregated turnover for GST instalments and $50 million annual aggregated turnover for PAYG instalments) in respect of instalments that relate to the 2023-24 income year and fall due after the enabling legislation receives assent.
This measure is estimated to have no net impact on receipts.
Source: Budget Paper No 2 [p 27]
Business Taxation
Start dates for global minimum tax and domestic minimum tax under Two Pillar Solution
The Government will implement 2 key aspects of Pillar Two of the OECD/G20 Two-Pillar Solution to address the tax challenges arising from digitalisation of the global economy:
a 15% global minimum tax for large multinational enterprises with the Income Inclusion Rule ("IIR") applying to income years starting on or after 1 January 2024 and the Undertaxed Profits Rule ("UTPR") applying to income years starting on or after 1 January 2025. The IIR imposes top-up tax on a parent entity in respect of the low taxed income of a constituent entity, while the UTPR denies deductions or requires an equivalent adjustment to the extent the low tax income of a constituent entity is not subject to tax under the IIR; and
a 15% domestic minimum tax applying to income years starting on or after 1 January 2024.
The global minimum tax and domestic minimum tax will be based on the OECD Global Anti-Base Erosion Model Rules, which are designed to ensure large multinationals (annual global revenue of $1.2 billion or more) pay an effective minimum level of tax on the income arising in each jurisdiction in which they operate.
The global minimum tax rules allow Australia to apply a top up tax on a resident multinational parent or subsidiary company where the group's income is taxed below 15% overseas.
A domestic minimum tax will give Australia first claim on top-up tax for any low-taxed domestic income. In a small number of instances, a large multinational company's effective Australian tax rate may fall below 15%. In these instances, the domestic minimum tax applies so that Australia collects the revenue that would otherwise have been collected by another country's global minimum tax.
Source: Budget Paper No 2 [p 20]
Scope of Pt IVA to expand to catch 2 additional types of scheme
The Government will expand the scope of the general anti-avoidance provisions in Pt IVA of the ITAA 1936 so that they can apply to:
schemes that reduce tax paid in Australia by accessing a lower withholding tax rate on income paid to foreign residents. Part IVA already applies to schemes that produce a tax benefit by not having any withholding tax liability in respect of an amount paid to a foreign resident; and
schemes that achieve an Australian income tax benefit, even where the dominant purpose was to reduce foreign income tax.
This measure will apply to income years commencing on or after 1 July 2024, regardless of whether the scheme was entered into before that date.
Source: Budget Paper No 2 [p 29]
Previously announced measures: patent box measures abandoned; other changes (largely minor)
The Government addresses the fate of a number of previously announced measures in the Budget papers. The result is a mixture of the mundane, the interesting and the obvious. Let us start with the interesting.
Patent box measures
The Government states that it will not proceed with 3 separate patent box measures announced in the 2021-22 and 2022-23 Budgets (by the former Government).
In the 2021-22 Budget, the former Government announced the introduction of concessional tax treatment for eligible corporate income associated with new patents in the medical and biotechnology sectors (referred to "patent box" income): see 2021 WTB 19 [405]. Such income was to be taxed at a concessional rate of 17%, with effect for income years starting on or after 1 July 2022. In the March 2022 Budget (see 2022 WTB 13 [267]), the former Government announced the extension of the patent box income measures to provide the same concessional tax treatment for corporate taxpayers who:
commercialise their eligible patents linked to certain agricultural and veterinary chemical products; or
commercialise their patented technologies which have the potential to lower emissions.
Capital raisings and franked distributions
The Budget papers confirm that the start date for the measure to make certain distributions funded by capital raisings unfrankable has been changed from the original 19 December 2016 to 15 September 2022. This is perhaps the obvious measure, as this change is encapsulated in the Bill currently before Parliament, i.e. the Treasury Laws Amendment (2023 Measures No 1) Bill 2023: see 2023 WTB 7 [74].
Excise administration for fuel and alcohol
The 2022-23 March Budget contained a number of changes intended to streamline the administration of the fuel and alcohol excise and excise-equivalent customs goods: see 2022 WTB 13 [283]. The measures were means to start on 1 July 2023 but will now take effect from 1 July 2024.
The changed start date applies to the measures that:
remove overlapping Australian Border Force and ATO systems (Uniform Business Experience);
streamline license application and renewal requirements;
remove regulatory barriers for excise and excise equivalent customs goods (including lubricants, bunker fuels for commercial shipping industries, and vapour recovery units); and
publication by the ATO on its website a public register of entities that hold excise licences to store or manufacture excise and excise equivalent customs goods, from 1 July 2024.
Super
The Budget papers also set out some changes to the non-arm's length income (NALI) provisions, which are dealt with separately in this issue of the Weekly Tax Bulletin (ie under the heading "Superannuation").
Impact to the Budget bottom line
These changes will increase receipts by $722.6 million and increase payments by $159.3 million over the 5 years from 2022-23.
Source: Budget Paper No 2 [p 13 -14]
Build-to-rent properties: building allowance up, MIT withholding rate down
The Budget Papers confirm the earlier announcement by the PM to implement the following measures designed to increase the supply of housing: see 2023 WTB 17 [228].
For eligible new build-to-rent projects where construction commences after 7:30 PM (AEST) on 9 May 2023 (Budget night), the Government will:
increase the rate for the capital works tax deduction (depreciation) to 4% per year
reduce the final withholding tax rate on eligible fund payments from managed investment trust (MIT) investments from 30% to 15%.
Building allowance
This measure will apply to build-to-rent projects consisting of 50 or more apartments or dwellings made available for rent to the general public. The dwellings must be retained under single ownership for at least 10 years before being able to be sold and landlords must offer a lease term of at least 3 years for each dwelling.
Currently, Div 43 of the ITAA 1997 allows for a deduction of capital expenditure incurred in constructing income producing buildings (and certain structural improvements). The rate for income-producing buildings constructed after 27 February 1992 is 2.5%, other than short-term traveller accommodation and industrial buildings (which are eligible for a 4% rate).
MIT withholding tax
The reduced managed investment trust withholding tax rate for residential build-to-rent will apply from 1 July 2024.
The MIT withholding tax regime is similar in structure to the withholding tax regime for dividends, interest and royalties: i.e, one set of rules imposes the tax on the person who receives the income or is entitled to receive the income and another set of rules requires a payer to withhold and remit the tax to the ATO.
Significant changes were made to the MIT withholding tax arrangements in 2019. The changes ensure that a 30% MIT withholding tax rate (rather than the otherwise standard 15% rate) applies to MIT fund payments to the extent they are attributable to non-concessional MIT income (NCMI). Among other things, the 30% rate applies to payments originating from income and gains from investments in residential housing – other than affordable housing or premises used primarily for the provision of disability accommodation. Presumably the changes will seek to expand the exceptions to include certain "build-to-rent projects" and so fall within qualification for a rate of 15%.
Consultation to follow
Consultation will be undertaken on implementation details, including any minimum proportion of dwellings being offered as affordable tenancies and the length of time dwellings must be retained under single ownership.
Source: Budget Paper No 2 [p 19-20]
FBT rules for Electric Vehicles: rules for plug-in hybrids to sunset
The Budget papers state that the Government will sunset the eligibility of plug-in hybrid electric cars from the FBT 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.
It can be noted that while the Government seems to be stating that it will implement the sunset, this measure is already enacted by the Treasury Laws Amendment (Electric Car Discount) Act 2022. The was the result of a Senate amendment put forward by Senator Pocock and the Greens: see 2022 WTB 50 [999].
The other amendment that made it to the amending Act was that a review must be undertaken in 2025 to determine the effectiveness of the measures it contains.
Source: Budget Paper No 2 [p 25]
Extension of MIT withholding tax concession to data centres and warehouses
The Government will extend the "clean building" managed investment trust withholding tax 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.
This measure will apply from 1 July 2025.
This measure will also raise the minimum energy efficiency requirements for existing and new clean buildings to a 6-star rating from the Green Building Council Australia or a 6-star rating under the National Australian Built Environment Rating System. The Government will consult on transitional arrangements for existing buildings.
Source: Budget Paper No 2 [p 18]
GST compliance program extended by 4 years
The Government will provide $588.8 million to the ATO over 4 years from 1 July 2023 to continue a range of activities that promote GST compliance.
These activities will ensure businesses meet their tax obligations, including accurately accounting for and remitting GST, and correctly claiming GST refunds. Funding through this extension will also help the ATO develop more sophisticated analytical tools to combat emerging risks to the GST system.
Impact on Budget bottom line
This measure is estimated to increase GST receipts by $3.8 billion, and other tax receipts by $3.8 billion, over the 5 years from 2022-23.
Source: Budget Paper No 2 [p 19]
Superannuation
Super tax changes for account balances above $3m confirmed, but no further details
The Government confirmed its intention to implement superannuation tax changes for individuals with account balances above $3 million from 1 July 2025, including in relation to defined benefit schemes.
However, the Budget Papers did not reveal any further details other than to note its estimate that the measure will increase receipts by $950m, and increase payments by $47.6m, over the 5 years from 2022-23. This includes $50m in receipts associated with updating the notional contribution calculation methodology, applicable to all defined benefit members. In 2027-28, the first full year of receipts collection, the measure is expected to increase receipts by $2.3bn.
Source: Budget Paper No 2 [p 15]
Background
Under the proposed changes, announced on 28 February 2023, individuals with total superannuation balances (TSBs) over $3m at the end of a financial year will be subject to an additional tax of 15% on earnings from 1 July 2025. Earnings will be calculated with reference to the difference in TSB at the start and end of the financial year, adjusting for withdrawals and contributions. This means that the proposed additional 15% earnings tax on an individual's balance above $3m will operate on an accruals basis and include any notional (unrealised) gains and losses.
Currently, fund earnings from superannuation in the accumulation phase are taxed at up to 15%. This 15% tax rate will continue for total superannuation balances below $3m but individuals will pay an extra 15% for balances above that amount (around 80,000 people). The measure is expected to improve the Budget position by $900m over the forward estimates, $2bn in its first full year and $3.2bn over 5 years.
In response to the Government's consultation paper, the SMSF Association has called for super funds to be given the option of reporting "actual earnings" rather than the proposed model which would calculate earnings based on the movement in the member's TSB, which by definition, includes "unrealised gains". In its submission, the Association set out numerous reasons why certain amounts would need to be excluded from an individual's TSB to avoid "earnings" being overstated under the proposed model.
Super to be paid on employees' payday from 1 July 2026; more funding to catch non-payers
The Budget papers confirmed the Government's intention to require all employers to pay their employees' super guarantee at the same time as their salary and wages from 1 July 2026. This payday super measure was originally announced by the Treasurer on 2 May 2023: see 2023 WTB 18 [244].
While there are scant details in the Budget papers, Treasury and the ATO are expected to consult closely with industry and stakeholders on these changes in the second half of 2023. The final design will be considered as part of the 2024-25 Budget.
More funding to recover unpaid super; ATO to be set enhanced targets
The Papers also state that the ATO will receive additional resourcing (some $40.2 million) to help it detect unpaid super payments earlier. It is estimated that $3.4 billion worth of super went unpaid in 2019-20.
The Government will also set enhanced targets for the ATO for the recovery of payments.
Budget outcome
The Budget estimates that the package will increase receipts by $835 million and decrease payments by $243.1 million over the 5 years from 2022-23.
However, this effect will be immediately offset by the associated company tax deductions of SG payments in 2027-28. Over the medium-term from 2022-23 to 2033-34 the proposal is estimated to reduce the underlying cash balance by $256.6 million as there will be less SG charge debt raised due to increased compliance.
Date of effect
The proposed 1 July 2026 start date for payday super is intended to provide sufficient time for employers, superannuation funds, payroll providers and other parts of the superannuation system to prepare for the change.
Source: Budget Paper No 2 [p 26-27]
Super pensions: No reduction in minimum drawdowns for 2023-24
The Budget did not announce a further extension to 2023-24 of the temporary 50% reduction in the minimum annual payment amounts for superannuation pensions and annuities. As a result, the 50% reduction in the minimum pension drawdowns, which has applied for the 2019-20, 2020-21 and 2021-22 and 2022-23 income years, is set to end on 30 June 2023.
Accordingly, superannuation trustees and members will need to start planning for the additional cash flow requirements to satisfy the minimum annual payment amounts for 2023-24 in relation to account-based, allocated and market linked pensions.
Minimum drawdowns for 2023-24
Minimum payments are determined by the age of the beneficiary and the value of the account balance as at 1 July each year under Sch 7 of the SIS Regs. The relevant percentage factor is based on the age of the beneficiary on 1 July in the financial year in which the payment is made (or on the commencement day if the pension commenced in that year).
Age of beneficiary (years) | Standard percentage factor (%) 2023-2024 |
0-64 | 4 |
65-74 | 5 |
75-79 | 6 |
80-84 | 7 |
85-89 | 9 |
90-94 | 11 |
95+ | 14 |
No maximum annual payments apply, except for transition to retirement pensions which have a maximum annual payment limit of 10% of the account balance at the start of each financial year.
OTHER MEASURES
Energy Price Relief Plan
There has been much interest in the Government's plan to address rising energy prices. For that reason, although not remotely linked to tax, an outline is provided below.
The Government will provide $1.5 billion over 5 years from 2022-23 (and $2.7 million per year ongoing) to reduce the impact of rising energy prices on Australian households and businesses by providing targeted energy bill relief and progressing gas market reforms.
Funding includes:
$1.5 billion over 2 years from 2023-24 to establish the Energy Bill Relief Fund to support targeted energy bill relief to eligible households and small business customers, which includes pensioners, Commonwealth Seniors Health Card holders, Family Tax Benefit A and B recipients and small business customers of electricity retailers;
$14.7 million over 5 years from 2022-23 (and $2.7 million per year ongoing) to the ACCC to administer and enforce compliance with a temporary cap of $12 per gigajoule on the price of gas and to develop and implement a mandatory gas code of conduct;
$9.5 million over 3 years from 2022-23 for the Australian Energy Regulator to monitor coal and gas markets across the National Electricity Market.
The Government will also provide funding to support the NSW and Queensland governments to implement a cap of $125 per tonne on the price of coal used for electricity generation.
Source: Budget Paper No 2 [p 86]
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Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.