On the 25th of October Jim Chalmers handed down the first federal budget of the Albanese Government. Given that this was delivered during a period of elevated inflation and rising interest rates, the measures announced were a departure from the big spending budgets we have become accustomed to in recent years.

Instead, it was a more steady economic statement that suggested there are ”hard days to come”. Treasury now forecasts inflation to peak at 7.75% and growth to slow from 3.25% this year to 1.5% in 2023/24.

The most notable budget announcements included;

Superannuation

On the superannuation front, the Government shied away from any significant reform. The only real change was the extension of the home downsizer scheme, with eligibility to be dropped to age 55, from 60 currently. This allows people who downsize their home, to make extra contributions to super.

The government has also committed $350 million over 3 years to the Housing Accord. Part of the plan is to encourage superannuation funds to invest in affordable housing, with the goal to build 1 million houses.

The government has indicated it will continue with measures to relax residency rules for super funds. However, this measure is set to be delayed from its original 1 July 22 start date.

Taxation

Despite suggestions to the contrary, the Government has elected to retain the stage 3 tax cuts due in the 2024/25 financial year. These cuts, which were legislated by the previous government, will cut the rate of tax on income between $45,000 and $200,000 pa to 30%.
Treasurer Jim Chalmers did announce an immediate end to the streaming of franking credits via off market buy backs by listed companies. The strategy, very popular with many self managed super fund trustees, has allowed companies to buy back their own shares in exchange for big fully franked dividends.

The speech also confirmed that crypto currencies will be taxed as assets, not as foreign currencies. As such, profits will be assessed for capital gains tax when sold on an exchange or exchanged for each other.

Families & Health

In keeping with their election promise, the Government announced changes to the parental leave scheme. It will gradually expand to 18 to 26 weeks paid leave, from 18 weeks currently. The scheme allows for this leave between two partners in a couple, and it will be available to more people, with a family income limit of $530,000 being introduced.

There will also be increased funding for childcare. For a family on a combined income of $120,000 pa, the savings are $1,780 a year.

The pharmaceutical benefits scheme is set to get a boost, with the maximum co-payment under the scheme set to be dropped from $42.50 to $30.

Seniors

Some adjustments will be made to Age Pension income and asset tests in a bid to encourage pensioners to downsize their family home.

The Commonwealth Seniors Health Card will be made available to more self-funded retirees. As proposed before the election, the income threshold will be lifted to $144,000 for couples and $90,000 for singles.

Additional funding has also been provided to increase minimum care minutes in aged care homes. Funds have also been set aside to fund the expected wage increase for aged care workers.

While there was nothing groundbreaking in Mr. Chalmer’s speech, it is clear that the government expects conditions to get tougher. This means that future budgets are likely to include tough measures.

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