2023 Federal Budget - The macro and micro view
2023 Budget Highlights
Shane Oliver
The macro – the economy, outlook and cost of living
Shane Oliver, AMP’s well-regarded Chief Economist, has a very comprehensive overview of the budget and an assessment of how the government plans to address Australia’s current economic issues - https://www.amp.com.au/insights-hub/blog/investing/economic-implications-fed-budget-2023-24?csid=1854945965.
And, if you’re really keen, you can download your own copy of the budget papers here (it’s 997 pages).
At a personal level
Here’s how the budget is planning to ease cost of living pressures, what you can do and what to look out for. Please note, while these are not strictly May 2023 Budget measures, this is important to know about, nevertheless.
Energy Price Relief Plan
From July 2023, this plan will deliver up to $500 in electricity bill relief for eligible households and up to $650 for eligible small businesses. Beneficiaries are expected to include pensioners, Commonwealth Seniors Health Card holders, people receiving Family Tax Benefit A and B, and small businesses whose is provided by electricity retailers.In Victoria
Eligible households can apply for a $250 Power Saving Bonus from 24 March 2023 to 31 August 2023. It’s easy. Visit https://compare.energy.vic.gov.au/psb-faq.If you haven’t already applied, do it now!
The Budget and taxing your super
$3M superannuation cap
The Government will reduce the tax concessions available only to those persons with a total superannuation balance greater than $3 million from 1 July 2025. The measure is limited to those individuals who have more than $3m in super at the end of a financial year. As it’s not due to start until 2025/26, it’s the balance in super at 30 June 2026 that matters initially.Treasury expects this to impact 80,000 people (this is 0.5% of everyone with super). However, the number of people with this amount in their super will grow, as the $3M cap is not indexed. The tax will bring in $2.3 billion in revenue in its first full year of receipts.
Currently, your earnings in super accumulation are taxed at 15% - this is the concessional tax rate. For higher income earners, Div 293 reduces the tax concession available on their super.
What the May 2023 budget didn’t say
Your super guarantee (employer super contribution)
Superannuation guarantee is legislated to continue to increase progressively from 10.5% (currently) to 12% by 1 July 2025. On 1 July 2023, your superannuation guarantee amount will increase by 0.50% to 11%.Future Superannuation Guarantee changes (SG)*
From 1 July 2026, your employer will be required to pay your SG entitlements on the same day that they pay your salary and wages are only required to pay their employees’ SG on a quarterly basis.Changes to your minimum super/pension drawdown*
The current 50% reduction to the minimum annual payments of pension from super won’t continue, and will revert to the full rate from 1 July 2023 for the 2023 - 2024 financial year. Here’s the relevant rates ( by age):
However, Colin Lewis (Australian Financial Review) notes that previous governments have made last-minute legislative changes to keep the 50% reduction, so watch this space!
Greening and hopefully Healing the Planet
Key Policy: Accelerating the decarbonisation of the economy and meeting our 2050 net-zero emissions target is a key policy agenda with $4.6b in new climate-related spending announced in the May 2023 Budget.
The budget includes a range of measures that aim to reduce emissions, improve energy efficiency and invest in renewable energy sources.
Dr Saul Griffith
Electrification of Australia budget
(comments courtesy of Rewiring Australia co-founder and chief scientist, Dr Saul Griffith)
"This is Australia's first electrification budget. It positions us to become a world leader in the efficient electric energy system of the future. It demonstrates federal ministers have worked hard to start the massive shift towards a new energy paradigm across the economy.
"The electrification budget builds on Australia's love affair with rooftop solar. It will help households to realise cost savings from substituting expensive gas machines for clean, electric alternatives. Tonight's investment allows us to use abundant Aussie wind and sunshine to power more of our driving, cooking and heating, simultaneously slashing energy bills and carbon emissions."
Investments – making Australia a renewable energy superpower
This measure covers an array of investments including $4bn to “transform Australia into a renewable energy superpower” (the total investment by government is now $40b) with the allocations as follows -
$15b to national reconstruction fund to support development of green industries, manufacturing
$1bn for household energy upgrades (low-cost loans) to instal energy=saving measures e.g. double glazing , solar panels, energy tech such as battery storage (see electrification above)
·$2bn on the new Hydrogen Headstart program - for research into new energy tech such as hydrogen that can be used to power homes and electric vehicles.
$14.6bn in cost-of-living plan - the Energy Bill Relief Fund to provide direct aid to alleviate bill shock experienced by individuals and businesses due to the drastic increase in electricity costs (eligibility rules apply).
“‘Hydrogen power’ means Wollongong, Gladstone and Whyalla can make and export everything from renewable energy to green steel.”
Jim Chalmers, Federal Treasurer
But wait! There’s more…
Workforce needs and opportunities
A new Energy Apprenticeships program to deliver 10,000 apprenticeships and a Clean Energy Capacity Study to explore future workforce needs and opportunities.Guarantee of Origin Scheme
From 2023-24 the government will provide $38.2 m over 4 years (plus ongoing funds) to establish a Guarantee of Origin Certificate scheme to certify renewable energy and track and verify emissions from clean energy products !Anti- Slavery Commissioner (ASC)
The budget also included $8 million for a federal government ASC to support compliance with the Modern Slavery Act 2018, improve transparency in supply chains and help fight modern slavery in Australia and abroad.
That’s a whole lot of major new investment proposals to take in!
Needless to say, there are many other proposals that fall under the Federal Governments announcements of major investments into Australia’s clean energy sector – so we’ve highlighted those which we thought may be of particular interest to you.
Next steps
If you have any questions about your financial situation or moving your money to responsible and ethical investments, call us for a quick chat or drop us a line.
Notes
*Already legislated
References in this post:
Budget papers
ABC, Federal budget 2023: Winners and Losers 9 May 2023
Energy Digital, Georgia Wilson Australia to invest US$2.71bn into the energy transition May 11 2023
King & Wood Mallesons, Henry Chen Federal Budget May 2023-24: Energy & Resources 9 May 2023
Climate Council The Federal Budget: Whats in it for Climate 10 May 2023
Department of Climate Change, Energy & the Enviroment and Water Budget 2023-23
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