As Australians continue to grapple with cost-of-living pressures, Federal Treasurer Jim Chalmers has handed down the Albanese Government’s first Budget.

Among the proposals are increased subsidies for young families to access childcare, assistance for regional Australians to buy their first home and incentives for older Australians to stay in the workforce.

Read on for a round-up of how the proposals might affect your household expenses and financial future.

And remember, many of these proposals could change as legislation passes through parliament. Legislation passed by the Australian Parliament does not become law until it is formally accepted by the Governor-General. The process is referred to as Royal Assent.

Superannuation

Encouraging Australians to downsize and build their super

Proposed effective date: the first 1 Jan/1 Apr/1 Jul/1 Oct after Royal Assent

The Government is proposing to lower the age at which you can make downsizer contributions to your super from selling your home from 60 to 55. Downsizer contributions don’t count towards your non-concessional contribution (after-tax) cap so if you’re eligible and under 75, you could potentially contribute up to $630,000 towards your super by bringing forward three years’ worth of after-tax contributions.

It’s important to note that if you exceed your non-concessional super contribution caps, additional tax and penalties may apply. Find out or more information on super contributions caps here.

Relaxing residency requirements for SMSFs

Proposed effective date: 1 July on or after Royal Assent

Self-managed super fund (SMSF) members will have greater flexibility to retain and contribute to their fund while being temporarily overseas.

Tax

‘Stage three’ tax cuts unchanged

Proposed effective date: 1 July 2024

Marginal tax rate* (%) Thresholds – income range 2022-23 to 2023-24 ($) Thresholds – MTR* (%) and income range from 1 July 2024 ($)
0 0 – 18,200 0% 0 – 18,200
19 18,201 – 45,000 19% 18,201 – 45,000
32.5 45,001 – 120,000 30% 45,001 – 200,000
37 120,001 – 180,000
45 > 180,000 45% > 200,000
Low income tax offset Up to 700 Up to 700

*Excluding 2 per cent Medicare Levy

Social security

Extending access to cheaper medicine for older Australians

Proposed effective date: 7 days after Royal Assent

The Government is increasing the income test threshold for the Commonwealth Seniors Health Card.

Current income test threshold Proposed income test threshold
Single $61,284 $90,000
Couple (combined) $98,054 $144,000
Couple illness separated (combined) $122,568 $180,000

Pensioners encouraged to participate in the workforce by…

1. …temporarily increasing the Work Bonus income bank

Proposed effective date: 1 December 2022 if Royal Assent before 25 November 2022, otherwise 7 days after Royal Assent

Eligible Australians will have an extra $4,000 credited to their Work Bonus income concession bank balance, with the maximum balance increasing from $7,800 to $11,800 until 30 June 2023.

The income bank offsets future income from work that would otherwise be assessable under the pension income test. The existing Work Bonus concession of $300 per fortnight will remain unchanged.

2. …extending the qualification period for Pensioner Concession Cards

Proposed effective date: the later of 1 January 2023 or one month after Royal Assent

Working pensioners will be able to keep their Pensioner Concession Card for up to two years after their pension stops.

3. …and suspending, instead of cancelling, benefits and entitlements for up to two years

Proposed effective date: the later of 1 January 2023 or one month after Royal Assent

If pensioners lose their entitlements due to increased income from work, they and their partners will be able to start receiving their pension again more easily if their situation changes.

Pensioners incentivised to downsize

Proposed effective date: the later of 1 January 2023 or one month after Royal Assent

The Government is aiming to reduce the financial impact on pensioners looking to downsize their homes and help free up housing stock for younger families by:

  • extending the social security assets test exemption for principal home sale proceeds from 12 months to 24 months for income support recipients
  • amending the social security income test, to apply only the lower deeming rate (currently 0.25%) to principal home sale proceeds when calculating deemed income for up to 24 months after the sale.

In particular circumstances the measures can extend for a further 12 months (up to 3 years in total) on approval.

Freezing of deeming rates

Proposed effective date: Immediate

The Government will freeze social security deeming rates at their current levels until 30 June 2024 to provide some certainty on how investment income is assessed in an environment of rising interest rates.

The lower deeming rate will remain at 0.25%, and the upper rate will remain at 2.25%.

Making medicine more affordable

Proposed effective date: 1 January 2023

The Government will reduce the maximum general co-payment for medications on the Pharmaceutical Benefits Scheme (PBS) from $42.50 to $30 per script.

This will support people who have a high demand for prescription medicines due to their health needs.

Families

Enhancing the Paid Parental Leave scheme

Proposed effective date: 1 July 2023

The Government is proposing to give families access to more leave and greater flexibility by:

  • combining Parental Leave Pay and Dad and Partner Pay into a single 20-week payment
  • introducing a family income limit of $350,000
  • enabling either parent to claim the payment
  • allowing eligible birth parents and non-birth parents to receive the payment
  • allowing parents to take leave at the same time while claiming the payment.

From 1 July 2024, the Government will start expanding the scheme by two weeks a year until it reaches a full 26 weeks from 1 July 2026.

Both parents will be able to share the leave entitlement on a ‘use it or lose it’ basis and single parents will be able to access all 26 weeks. Paid parental leave will be able to be taken in blocks as small as a day at a time, between periods of paid work.

The Expanding Paid Parental Leave Fact Sheet is available here.

Increasing the Child Care Subsidy (CCS)

Proposed effective date: 1 July 2023

The Government aims to ease the cost of living for families and reduce barriers to workforce participation by:

  • increasing the maximum CCS rate from 85% to 90% for families earning less than $80,000
  • increasing the CCS rate for families earning less than $530,000 in household income
  • maintaining higher CCS rates (up to 95%) for families with more than one child aged five and under in care.

The Cheaper Child Care Fact Sheet is available here.

Aged care

Improving the quality of aged care

The Government is increasing funding to reform aged care, including by:

  • establishing an aged care complaints commissioner, introducing new financial reporting requirements, supporting the sector in providing better food for residential and home care recipients and establishing a national registration and code of conduct for workers
  • capping administration and management fees in the Home Care Packages Program and abolishing exit fees
  • requiring all facilities to have a registered nurse onsite 24 hours per day, 7 days a week from 1 July 2023 and increasing care minutes to 215 minutes per resident per day from 1 October 2024
  • improving aged care infrastructure and services that support older First Nations people, and older Australians from diverse communities and regional areas.

Housing affordability

Helping regional Australians buy their first home

Proposed effective date: 1 October 2022

The Government is establishing the Regional First Home Buyers Guarantee (RFHBG) to support eligible citizens and permanent residents who have lived in a regional location for more than 12 months to purchase their first home in that location with a minimum 5% deposit, with 10,000 places per year to 30 June 2026.

The RFHBG is part of the Home Guarantee Scheme (HGS), which also includes:

  • The First Home Buyer Guarantee (FHBG), which offers 35,000 places per year to eligible first home buyers who have saved at least a 5% deposit
  • The Family Home Guarantee (FHG), which has 5,000 places per year and is available to a single parent with at least one dependent child and who has saved at least a 2% deposit.
Improving housing supply and affordability

The Government is putting $10 billion into a new Housing Australia Future Fund for:

  • construction and repairs of housing in remote Indigenous communities
  • transitional and crisis accommodation for women and children fleeing domestic and family violence and housing for older women
  • housing and specialist services for veterans at risk of homelessness.

Other programs and measures include:

  • establishing a ‘Help to Buy’ scheme to assist low and middle income earners to purchase a new or existing home using equity supplied by the Government
  • funding for research into affordable housing and developing the housing supply
  • extending the social security asset test exemption for sale proceeds for pensioners who have sold a home to up to two years and capping deeming on these proceeds at the lower rate, currently 0.25%.

The Improving Housing Supply and Affordability fact sheet is available here.

Education

Free technical and education courses

The Government is providing 480,000 fee-free TAFE and community-based vocational education places to give Australians access to the skills they need for the jobs of the future.

A $1 billion one-year National Skills Agreement will deliver 180,000 fee-free TAFE and community-based vocational education places throughout 2023, with a further 300,000 places to follow from 2024.

The Skills and Training fact sheet is available here.

Obviously, it was a big budget and there’s a lot to digest, but if you would like to discuss how any of this impacts you or your families please reach out to one of the Inspired Money Team on 08 6222 7909, who are only too glad to help point you in the right direction to maximise your benefits and minimise your headaches.