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Budget Review 2023: with a focus on SMSFs

BUDGET REVIEW 2023

Introduction:
The Australian Federal Budget 2023 has been unveiled, outlining the government’s financial plan for the upcoming fiscal year. This review highlights the key elements of the budget and their potential impact on super funds ( SMSFs) and the housing sector and the broader economy.
Economic Outlook:
The Budget 2023 has a large focus on housing, social services and household incentives, which are intended to curb the unemployment rates and keep inflation within a manageable rate, with minimal impact to individuals and households.
Taxation:
In a bid to support household incomes and stimulate spending, the Budget includes tax relief measures for individuals. The government has extended the low- and middle-income tax offset (LMITO) for another year, providing tax relief of up to $1,080 for individuals and $2,160 for dual income families.

For businesses, the Budget continues the commitment to tax incentives such as the instant $20,000 asset write-off and loss carry-back provisions, aimed at encouraging investment and growth among small and medium enterprises.
Infrastructure and Jobs:
The Budget 2023 allocates significant funding for infrastructure projects across the nation. This commitment not only addresses the need for improved infrastructure but is also expected to create thousands of jobs, aiding in the reduction of unemployment rates.

Health and Aged Care:
In response to the Royal Commission into Aged Care Quality and Safety, the government has earmarked substantial funding for aged care. This includes improving the quality and safety of care, increasing home care packages, and ensuring a skilled and well-supported aged care workforce.
Furthermore, the Budget also allocates additional resources for mental health services and ongoing management of the COVID-19 pandemic.
Climate Change and Energy:
Addressing environmental concerns, the Budget 2023 outlines investments in clean energy technologies and initiatives aimed at reducing emissions. It includes funding for the development of hydrogen and carbon capture projects, among other renewable energy ventures.
Education and Skills:
The Budget continues to support education and skills development, with significant funding allocated to schools, universities, and vocational education and training. This includes measures to help Australians gain the skills needed for the jobs of the future.
Housing Measures:
In the Federal Budget 2023, the government has addressed Australia’s housing affordability crisis with a series of new measures.
Firstly, the First Home Loan Deposit Scheme will be expanded, allowing more first-time buyers to build a new home or purchase a newly built home with a deposit of as little as 5%.
In addition, the government has introduced the Family Home Guarantee, which targets single parents by providing them with the opportunity to enter or re-enter the housing market with a deposit of just 2%. 

 

Scheme Name

Eligibility

Deposit
Requirement

First Home Loan Deposit Scheme (FHLDS)

First home buyers, Australian Citizens, 18 years
and above, singles with a taxable income up to $125,000 per annum and couples
with a taxable income up to $200,000 per annum.

As low as 5%

Family Home Guarantee

Single parents with dependents, regardless of
whether they are first home buyers or previous owners, provided they do not
currently own a property. The taxable income limit is $125,000 per annum.

As low as 2%

New Home Guarantee

First home buyers building a new home or
purchasing a newly built home. The income thresholds are the same as the
FHLDS.

As low as 5%

  

Note:

The schemes apply to owner-occupied loans on a principal and interest basis.
The income assessment will be based on the previous financial year’s taxable income.
Other lending criteria may also apply, depending on the lender.
Remember that the actual eligibility criteria and terms for these schemes can be quite detailed. This table provides a simplified summary and the actual scheme rules should be checked for detailed conditions and criteria.

To encourage the construction of more affordable housing, the government has also extended the Home Builder program. This provides eligible owner-occupiers with a grant to build a new home or substantially renovate an existing one.
Superannuation:
Superannuation remains a central focus in the Federal Budget 2023. With an emphasis on efficiency and fair outcomes for individuals, SMSFs and businesses.
Firstly, the Superannuation Guarantee rate will increase to 11% from 1 July 2023, up from the current 10.5%. This increment is part of a legislated series of increases to the Superannuation Guarantee, which is set to reach 12% by 2025. This increase signifies employers will be contributing more to employees’ superannuation.
Additionally, the $450 per month threshold for Superannuation Guarantee eligibility has been removed. This change will especially benefit part-time and casual workers, enabling them to accumulate superannuation consistently, regardless of income level.
In terms of contributions, the concessional contributions cap remains at $27,500 for the 2023-24 financial year. However, the non-concessional contributions cap is four times the amount of the concessional cap, which means it stands at $110,000.

Financial Year

Concessional Contributions Cap

Non-Concessional Contributions Cap

Employer Contributions (SG Rate)

2023-2024

$27,500

$110,000

11%

2024-2025

$27,500

$110,000

11.5%

Another crucial element of the budget is the modification of Non-Arm’s Length Income (NALI) provisions. The NALI provisions apply when a superannuation fund gains income from a scheme in which the parties are not dealing with each other at arm’s length, and the income is more than what would have been expected if those parties had been dealing at arm’s length. The provisions aim to ensure that superannuation is used for retirement purposes and not for artificially reduced tax on investment income.
The Budget 2023 has proposed changes to these provisions to ensure they operate as intended, by clarifying that NALI provisions include expenses not incurred that would otherwise be expected in a commercial dealing. This means that if a super fund does not incur expenses it should have while earning income, that income might be treated as NALI and taxed at the highest marginal rate.
Finally, the Budget introduces a ‘Superannuation Amnesty,’ incentivizing employers to rectify past non-compliance without penalties. It also strengthens the ATO’s ability to recover unpaid superannuation.

Notes:

Concessional contributions include employer contributions (including contributions made under a salary sacrifice arrangement) and personal contributions claimed as a tax deduction by a self-employed person.
Non-concessional contributions are made from after-tax income. These contributions are not taxed in your super fund.
The Superannuation Guarantee (SG) rate is the mandatory minimum percentage of your salary that your employer must pay into your superannuation fund.
Remember, these are the current rates as per the Australian Federal Budget 2023, and they can change in the future as per government policy.

Final Sumamry:
The Australian Federal Budget 2023 shows a strong commitment to supporting housing for all Australians and ensuring a secure retirement through superannuation. The housing measures and superannuation reforms aim to create a fair and sustainable system that caters to the needs of all Australians. As with all budget measures, individual circumstances will determine the impact of these changes.

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