2023-24 Federal Budget Announcement and What It Means

The 2023 Federal Budget was handed down on Tuesday 9 May, and it represented the first annual budget for the new Albanese government after their mini budget in October. The next Budget will be handed down on the second Tuesday of May 2024.

Modest cost-of-living relief, rent help, and power bill rebates are among the benefits to Queenslanders under the Federal Budget.

The Treasurer announced a package of cost-of-living measures, including up to $3 billion in energy bill relief (expected to reduce power bills by up to $500 for 5 million households) and $1.3 billion for home energy upgrades.

A Budget surplus of $4.2 billion is forecast in 2022-23, but an underlying cash deficit of $13.9 billion is expected in 2023-24 (and a $35.1 billion deficit for 2024-25). The Budget papers note that the global economic outlook has deteriorated and is highly uncertain with persistent inflation and rising interest rates expected to slow real GDP growth from 3.25% in 2022-23 to 1.5% in 2023-24, before rising to 2.25% in 2024-25.

While inflation remains elevated at 6% for this year, it is expected to fall to 3.25% in 2023-24 and return to the RBA's target band of 2-3% in 2024-25. The Government also believes that its cost of living measures will take 0.75 of a percentage point off inflation in 2023-24. On the revenue side, the Government said it is taking action to improve the sustainability of the tax system. This includes measures to reduce the tax concessions for superannuation balances above $3 million, more timely payments of tax and superannuation, and reforms to the tax settings for offshore liquefied natural gas projects.

Key points of interest include:

Housing

• Build to rent tax concessions are on the way, in a move that will complement the Queensland Government’s recent moves to make the State more attractive for investors. The federal Government’s $10 billion Housing Australia Future Fund remains in the crippling vice grip of the Greens (many of whom are from Queensland since the last election), who are still refusing to back the plan.
• The Government’s first home buyer schemes will extend eligibility from 1 July to include any two borrowers, beyond the current scope of spouse or de facto couples.  
• Commonwealth Rent Assistance will increase by 15%.  
• An extra $2 billion will support around 7,000 new social and affordable homes.

Tax measures

The major tax-related measures announced in the Budget included:

• Small Business Energy Incentive: businesses with an annual turnover of less than $50 million will be able to claim an additional 20% deduction on spending that supports electrification and more efficient use of energy. Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024.
• Small business lodgement penalty amnesty: will be provided for small businesses with aggregate turnover of less than $10 million to encourage them to re-engage with the tax system. The amnesty will remit failure-to-lodge penalties for outstanding tax statements lodged in the period from 1 June 2023 to 31 December 2023 that were originally due between 1 December 2019 to 29 February 2022
• Small business unpaid tax and super: additional funding from 1 July 2023 to assist the ATO to engage with taxpayers who have high-value debts over $100,000 and aged debts older than 2 years where those taxpayers are either public and multinational groups with an aggregated turnover of greater than $10 million, or privately owned groups or individuals controlling over $5 million of net wealth
• PAYG and GST instalment uplift factor: 6% for 2022-23 (being lower than the 12% rate that would otherwise have applied under the statutory formula)
• FBT rules for electric vehicles (EVs): the eligibility of plug-in hybrid electric cars will sunset from 1 April 2025 from the FBT exemption for eligible electric cars
• Build-to-rent properties: for eligible new build-to-rent projects where construction commences after 7:30 PM AEST on 9 May 2023, the Government will:
  • increase the rate for the capital works tax deduction (depreciation) to 4% per year
  • reduce the final withholding tax rate on eligible fund payments from managed investment trust (MIT) investments from 30% to 15%

Instant asset write-off for small businesses:

• The $20,000 threshold will apply on a per-asset basis, so small businesses can instantly write off multiple assets. Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year thereafter.
• The provisions that prevent small businesses from re-entering the simplified depreciation regime for five years if they opt out will continue to be suspended until 30 June 2024.

Small Business Energy Incentive: 20% bonus deduction

The Budget papers confirmed that the Small Business Energy Incentive will provide businesses with an annual turnover of less than $50 million with an additional 20% deduction on spending that supports electrification and more efficient use of energy. This measure was originally announced by the Treasurer on 30 April 2023.

The Small Business Energy Incentive will apply to a range of depreciating assets, as well as upgrades to existing assets. These will include assets that upgrade to more efficient electrical goods such as energy-efficient fridges, assets that support electrification such as heat pumps and electric heating or cooling systems, and demand management assets such as batteries or thermal energy storage.

However, certain exclusions will apply, such as:

• electric vehicles;
• renewable electricity generation assets;
• capital works; and
• assets that are not connected to the electricity grid and use fossil fuels.

Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business.

Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024. Full details of eligibility criteria will be finalised following consultation.

Start Ups

• Small businesses and startups will get $392.4m in the new Industry Growth Program to help them commercialise their ideas and grow their operations.
• The Government’s announcement to help protect small businesses to uplift cyber security is a welcome initiative, providing $101.6 million over 5 years from 2022–23, and investing $23.4 million to help build resilience to cyber security attacks by training in-house cyber wardens.

Safety and Workplace Relations

• The Government will provide $10 million over four years from 2023–24 (and $1.9 million per year ongoing) to address the rise of silicosis in workers and develop a national strategy for the prevention of silicosis and silica-related diseases.
• $20 million over two years from 2023–24 to increase productivity, education, and training, to support engagement with workplace reforms as they progress and the implementation of the Government’s workplace relations agenda.

ESG and Sustainability

• The Government will establish a new Net Zero Authority to assist and coordinate Australia’s transition to net zero. 
• Renewable energy gets an additional $4 billion, of which $2 billion is to be invested in a new program, Hydrogen Headstart, to support large-scale hydrogen production and attract investment. All up, $40 billion will be invested in renewable energy as part of the Government’s ambition to become a renewable energy superpower. 
• There’s $1.3 billion for a Household Energy Upgrades Fund to incentivise energy-saving upgrades for households and provide low-interest loans to make them.

Infrastructure

• The infrastructure pipeline remains strong with $120 billion of spending expected over the next 10 years.
• The Government will provide up to $3.4 billion over 10 years for infrastructure relating to the Brisbane 2032 Olympic Games. 
• There’s $300m for Tasmanian sports and recreation.

Training

The government has announced an additional 300,000 TAFE places in the Federal Budget. Treasurer Jim Chalmers said the investment will help to create more opportunities for Australians in “critical” sectors.

“To make sure all of these jobs and opportunities extend to every part of our country, we’re investing $3.7 billion for a revamped 5‑year national skills agreement with the states and territories,” Chalmers said.

Getting women into the workforce

A program of $8.6 million has been earmarked for the Australian Skills Guarantee, which includes national targets to increase the number of women in apprenticeships, traineeships, and cadetships on major government projects.

The program aims to double the number of women apprentices and trainees on government construction projects by 2030 and triple the proportion of women in trades apprenticeships by the same time.

Under a $91.3 million boost for the mental health workforce - the majority of which is women - an extra 500 psychology placements will be introduced.

Hydrogen

The Government announced a new $2 billion Hydrogen Headstart program to help Australia capitalise on our competitive advantages and scale up the development of Australia’s renewable hydrogen industry.  

The program will provide revenue support for large-scale renewable hydrogen projects through competitive hydrogen production contracts.

By bridging commercial gaps, the contracts will put Australia on course for up to a gigawatt of electrolyser capacity by 2030 through two to three flagship projects, with First Nations communities supported to engage with proponents and planning processes through a $2 million program.

$38.2 million will be provided for the creation of a Guarantee of Origin (GO) scheme to certify renewable energy and track and verify emissions from clean energy products. Essential for the international trade of hydrogen, this low-cost enabling measure will help new projects secure finance and improve the effectiveness of other Commonwealth efforts to scale up renewables and the hydrogen industry.

The GO scheme will commence with hydrogen and be extended to other products over time. It will offer transparency to end users in Australia and overseas with information about the carbon emissions of the products they are buying.

Budget funding also includes $5.6 million to analyse the implications for Australia of intensifying global competition for the clean energy industry; and to identify actions before the end of 2023 to further catalyse clean energy industries, ensure Australian manufacturing competitiveness and attract capital investment. This will help us fully capitalise on our potential as a renewable energy superpower.  

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