Federal Budget 2023 – The Good, the Bad and the Ugly

The Budget, being more of a revision document on the budget of the former government, rather than a completely new situation, was a sober, sensible document that could have gone further but conservatively chose not to. I’ll stick with items that are truly relevant to you, my clients…

The Good

• Superannuation Downsizer Contributions will now allow those aged from 55 rather than 60 to use this opportunity. To recap you can each contribute up to $300k from the sale of a principal residence, without affecting other contribution limits.

• Electric and Plug-In Electric cars up to the $84916 fuel efficient luxury car limit will avoid import duty and be Fringe Benefits Tax Free if you package it. This means these vehicles will be dramatically more tax effective than petrol or diesel powered vehicles.

• Paid Parental Leave will be progressively expanded to 26 weeks (by 1 July 2026) with both partners able to access the payment, and also to be able to do concurrently if that suits your circumstances.

The Bad

• ATO getting extra funds to crack down on people who over claim tax deductions. Beware!

• Calls time (the end) of tax efficient off market buybacks using enlarged franking credits.

The Ugly

• Finds $22B in savings, funds election promises. The hard work in cutting the structural deficit is mainly in the future, but very little of the current torrent of extra taxes from high commodity prices and inflation has been spent, so the finances look temporarily much better. The costs of Aged Care, NDIS, Defence and Healthcare will explode in coming decades, so the Ugly is that very little of this has been dealt with by this or the former government, and the sting will be higher taxes or a more indebted government, or fewer services than we’ve been used to receiving. Something’s gotta give, and we have no visibility as to the mix yet. The hard work has yet to be seriously started.