Paul Osborne
(Australian Associated Press)
 

WHAT WE KNOW ABOUT THE 2023 FEDERAL BUDGET SO FAR

Treasurer Jim Chalmers will deliver his second federal budget on May 9, focusing on cost of living relief while ensuring spending does not add to inflation.

BUDGET POSITION

* Deficits likely over the next four years. Treasury says persistent deficits of around two per cent of GDP are projected. The deficit for 2022/23 was $11.2 billion at the end of March, against the October budget prediction of $33.4 billion.

* Government debt is sitting on just under $900 billion.

* Treasury expects to see a small increase in real wages in 2023/24, reflecting the combination of rising wages and falling inflation.

* Growth to slow to 1.25 per cent in 2023/24 as cost-of-living pressures and rising interest rates increasingly weigh on consumption.

* Net overseas migration numbers are being boosted by international students and working holiday makers.

* Several payments are growing faster than the economy including interest on government debt, and growing spending on the NDIS, health, aged care, and defence.

* Expecting to see initial work on improving the cost effectiveness and productivity of government services and government-funded services, to help the budget bottom line.

SPENDING

* Defence funding reshuffle following the Defence Strategic Review and AUKUS submarines deal.

* $3 billion in energy bill relief, including deals with each of the states and territories. This will be helped by the gas market intervention which Treasury expects to ease price rises to 18 per cent and four per cent over two years (rather than 20 per cent in both years).

* Possible boost in support for single parents and the older unemployed.

* Large investment in clean energy.

* Support for small businesses.

* Aged care budget to rise from $24.8 billion to $29.6 billion, with the figure hitting $35.8 billion by 2025/26.

* Child Care Subsidy to cost $55.31 billion over four years.

* $535.3 million towards the nine National Collecting Institutions – such as the National Library and National Gallery of Australia – over four years.

* $163.4 million for the Australian Institute of Marine Science.

* Medicines changes – from September 1, general patients will be able save up to $180 a year if their medicine is able to be prescribed for 60 days, concession card holders will save up to $43.80 a year per medicine.

* $2.2 billion for Medicare reforms, including incentives for after-hours doctors.

* $737 million for programs to deal with harm caused by tobacco and vaping products.

* Extra $262.3 million for national parks, including Uluru.

* $3.7 billion extra for the five-year National Skills Agreement, taking total spending to $12.8 billion.

* $2 billion for more social and affordable housing via the National Housing Finance and Investment Corporation.

* $400 million for defence force retention bonuses.

* Funding for the new National Anti-Corruption Commission and a standalone privacy commissioner.

* Review of $120 billion infrastructure project list.

TAX

* $3.3 billion increase in tobacco taxes over three years, to pay for health programs.

* Expected changes to bring in more petroleum resources rent tax revenue.

* Multinational tax avoidance crackdown continues.

* Commodity price estimates to be upgraded, having been set at a very conservative $55 a tonne for iron ore.

* Income and company tax receipts to be higher than expected.

(Feedsy Exclusive)

While most people write wills, very few families discuss inheritance. Parents avoid discussing inheritance planning with their children due to the subject’s sensitivity.

However, avoiding the conversation does more harm than good. For example, poor wealth management by heirs can lead to business collapse.

Here are some reasons why you should discuss inheritance planning with your family.

To Prevent Conflict

The risk of conflict is higher when you fail to communicate how you want your heirs to run your estates. While the will specifies who should get what, you may need to explain how you want them to run the business.

Your heirs may also experience unforeseen disputes if they are not aware of your share of the business and who should take the voting power.

To Protect Juvenile Heirs

Inheritance discussions with family help you devise plans to protect the minors entitled to your estate.

For example, you can guarantee your kids’ education through education insurance or a life insurance policy.

Your discussions can also help everyone understand when they can receive their inheritance and how they will receive it.

To Express Your Expectations

Since inheritance planning goes beyond property division, your family will know how you expect them to run your estate once you are gone.

Your heirs can also prepare for the new responsibility in advance instead of experiencing sudden changes.

To Encourage More Discussions

While it may seem difficult, talking about inheritance with your family is a gesture that the topic is open for discussion. So, your heirs can ask the questions they have about the subject.

These conversations also create a sense of ownership among your heirs, increasing their morale when under your leadership.

To Avoid High Taxation

Estate planning discussions can help you devise ways to minimise the tax burden for your heirs. The approach you choose depends on your situation.

Since your kids and spouse are the beneficiaries of your property, you can involve them in inheritance planning to simplify the process. You also get an opportunity to express your expectations, ensuring that your legacy continues after you are gone.

If this article has inspired you to think about your own unique situation and, more importantly, what you and your family are going through right now, please contact your advice professional.

This information does not take into account the objectives, financial situation or needs of any person. Before making a decision, you should consider whether it is appropriate in light of your particular objectives, financial situation or needs.

Dominic Giannini and Poppy Johnston
(Australian Associated Press)

The Australian Taxation Office estimates $3.4 billion in super was unpaid in 2019/20.

The ATO’s resources will be boosted to crack down on compliance and it will have a new target for recovery payments.

Super Consumers Australia said the decision would better enable people to manage their money and ensure they are paid what they are owed.

“Our recent survey found the majority of people don’t realise they can report non-payment to the ATO and that it is the regulator’s responsibility to investigate,” the organisation’s director Xavier O’Halloran said.

“We encourage people to report unpaid super to the ATO if they can’t resolve the issue directly with their employer.”

The Association of Superannuation Funds of Australia said it was important employers were held to account.

“Left unaddressed, the issue of unpaid superannuation guarantee contributions comes at a significant cost to people’s retirement,” deputy CEO Glen McCrea said.

“For example, a 35-year-old on $65,000 per year who misses out on SG for two years would be around $24,000 worse off in today’s dollars at the time of retirement.”

Chair of the Council of Small Business Organisations Australia, Matthew Addison, said payday super would lift processing costs for all parties, including super funds.

He told AAP that would ultimately push up administration fees for employees and eat into super balances.

Mr Addison said employers would bear the cost of additional payroll software, as well as more frequent transactions, through the mandatory clearing system used to send money to super funds.

The council is urging the government to consult with small businesses on a workable system that won’t lift processing costs or unfairly punish compliant employers for the poor behaviour of a few companies that deliberately avoid paying super.

The council would also prefer businesses with fewer than 15 employees to choose monthly super payments and opt for more frequent payments if desired.

However, Mr Addison welcomed the long lead-up time, which he said would give businesses a chance to adapt to more frequent payments.

Poppy Johnston
(Australian Associated Press)

The treasurer has defended his decision to push ahead with his predecessor’s plan to axe a tax offset that saved low and middle income earners up to $1500 a year.

Jim Chalmers has confirmed the tax offset for low and middle income earners will end in line with the former government’s decision to wind down the relief measure.

Dr Chalmers said the low and middle income tax offset (LMITO), designed to give low and middle income earners immediate tax relief, was due to end as specified by the former treasurer in the lead-up to the Morrison government’s last budget in May 2022.

“At the time, my predecessor Josh Frydenberg said this is not a permanent feature of the tax system,” Dr Chalmers told reporters in Brisbane.

The opposition has accused the government of confirming the changes under the cover of the Easter break.

Opposition Leader Peter Dutton said many Australians would be worse off if the offset was scrapped.

“They said before the election of course, that they would have a $275 reduction in their electricity prices each year and now we find the government only has a plan to slug 10 million Australians to the tune of $1500 a year,” Mr Dutton told reporters.

Dr Chalmers said Labor made it clear that it could not afford to extend the low and middle income tax offset if it won the federal election.

“We made it clear at the time that the LMITO was ending last year, and so it has been completely and predictably dishonest from Angus Taylor, Michael Sukkar and all of these other B-graders to now pretend that this is some kind of new announcement made by the government,” he said.

H&R Block tax expert Mark Chapman said the LMITO was introduced in 2018 under the Turnbull government as part of three-stage reforms to the tax system.

Mr Chapman told AAP the offset was supposed to expire a few years ago but was extended and boosted throughout the COVID-19 pandemic to help people doing it tough.

The stage two reforms, which were meant to kick in once the LMITO was removed, were also brought in early and lifted tax bracket thresholds for middle-income earners and permanently boosted the existing low income tax offset.

The controversial stage three tax reforms, which will flatten Australia’s tax brackets, are due to start in 2024.

Despite the disappearance of the tax relief measure, Dr Chalmers said there would still be cost of living assistance in the May budget. This includes $1.5 billion in electricity bill assistance.

He said the budget would also focus on building resilience against international shocks as the global economy.

The treasurer is due to head to Washington for key talks with world counterparts, with global financial uncertainty set to dominate discussions.

Dr Chalmers will take part in the G20 finance ministers’ talks in the US, as well as IMF and World Bank meetings and central bank governors’ meetings during the three-day trip.

He will hand down his second budget on May 9.

Maeve Bannister and Poppy Johnston
(Australian Associated Press)

Pruning back stage-three tax cuts, raising the GST and cutting wasteful spending on major defence and transport projects are among a suite of options the government could consider to rein in the budget deficit.

Treasurer Jim Chalmers is due to hand down his second budget in less than four weeks and the spotlight is on how the government plans to ease cost-of-living pressures without fuelling inflation or adding to government debt.

A Grattan Institute pre-budget report presented a number of immediate and long-term options for addressing the deficit.

Without urgent action, the institute warns, Australia is on track for 25 years of deficits, expected to be worth nearly $50 billion every year by 2030.

Among its “menu of options” to reduce spending, the report proposes undoing West Australia’s special deal on the GST and cutting back on spending on politicised grants and advertising.

To increase budget revenue, the institute also recommends re-designing the planned stage-three tax cuts to be less generous to the highest income-earners and introducing better-targeted tax concessions on superannuation.

The treasurer told ABC Radio on Wednesday the government was looking at some of the options, including the possibility of reforming the petroleum resource rent tax.

Treasury is reviewing the tax on the profits of fossil fuel extractors and Dr Chalmers says the agency is working through options to improve how the tax applies to gas producers.

The government has also committed to “modest but meaningful” changes to super tax breaks to target returns on balances over $3 million.

But Dr Chalmers also said there were some things “we won’t be coming at”, including changes to Family Tax Benefit Part B.

The institute said the benefit, designed to help parents who were not in paid work because they were caring for children, was important for supporting single parents but the case for such a benefit for single-income couple families was weaker.

The report said scrapping the benefit could save $1.3 billion a year and remove barriers to workforce participation for the second earner in a couple.

But Dr Chalmers agreed with the overall message in the report that the budget had structural issues.

“Even as the budget gets a bit better in the near-term because of high commodity prices and low unemployment, we’ve got structural challenges that come from the cost of servicing that trillion dollars in Liberal debt, combined with the NDIS and aged care and health care and national security,” he said.

Reforming capital gains tax discounts and negative gearing and increasing the super preservation age were also flagged in the report as opportunities.

As well as an array of more realistic policy options, the institute also flagged a few bolder options for the government to consider, including a carbon tax, inheritance tax and realigning the company tax rates at 30 per cent.