Federal Budget 2.0: Shuffle the Decks

There is nothing in this Budget that would create a UK-style crisis. The stage 3 tax cuts legislated to commence on 1 July 2024 are not mentioned and most funding initiatives appear to be a reallocation of previous Government initiatives. And, the commodity-driven $54.4 billion improvement in tax receipts has largely been banked, not spent.

With seven months before the 2023-24 Budget released in May 2023, this Budget is a shuffling of the deck not a new set of cards. And to continue the pun, we need to play the hand we have been dealt, buffeted by externalities – war, floods and global uncertainty.

Cost of living pressures will continue. While some initiatives such as the increase to childcare subsidies will help, the Budget flags some fairly bracing economic expectations:

• Inflation is expected to peak at 7.75% in the December quarter and will persist at higher rates for longer than expected before easing to 3.5% by June 2024.
• Real GDP is forecast to grow to 3.25% in 2022-23 then retract to 1.5% in 2023-24.
• Electricity prices are expected to increase nationally by an average of 20% in late 2022, with retail electricity prices expected to rise by a further 30% in 2023-24.
• The deficit sits at $36.9bn, while this is better than originally estimated, the deficit expands to $49.5bn by 2025-26.

Tight labour market conditions are expected to see annual wage growth pick up to 3.75% by June 2023. Even so, high inflation is expected to see real wages fall over 2022-23 before rising slightly over 2023-24. That is, your wages might increase but the gains will be eaten away by the increasing cost of living.

The ATO gets an extra $80m to extend its personal income tax compliance program, with $674m anticipated in increased receipts and over $80m in increased payments as a result. Tax deductions will be looked at closely.

As expected, multi-nationals are a target. New measures will limit opportunities to shift taxable profits offshore. And, the ATO’s Tax Avoidance Taskforce is expected to deliver a whopping $2.8bn in additional tax receipts and $1.1bn in payments over the 4 year period.

We’ll keep you updated on the latest changes via our website, Facebook and LinkedIn.

Get the right advice

To discuss the Federal Budget and its potential impact on your individual circumstances or business, call PPT’s friendly team on 5331 3711.

DISCLAIMER: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.