There are no new direct taxation measures for individual taxpayers or changes to tax rates and offsets. There are however updates to ongoing taxpayer compliance. For completeness, the current rates are as follows:
Low and Middle Income Tax Offset (LMITO)
There was confirmation that the LMITO will not be extended or renewed. This was legislated to cease at 30 June 2022 last year and the Government has decided not to resurrect it.
Personal tax rates
The stage 3 tax cuts legislated to apply from 1 July 2024 remain as is, whilst also remaining a point of contention given the balance of National debt and future spending commitments. The Government remains committed to their election promise of not changing the course and thus there are no anticipated changes to individual resident tax rates.
Current resident tax rates for financial year 1 July 2022 to 30 June 2024 are:
| 2022-23 | |
| Rate | Threshold |
| 0% | $0 – $18,200 |
| 19% | $18,201 |
| 32.5% | $45,001 |
| 37% | $120,001 |
| 45% | $180,001 |
Medicare is an additional 2% where applicable, so the top marginal rate is effectively 47%
Based on current legislation resident tax rates from 1 July 2024 will become:
| Rate | Threshold |
| 0% | $0 – $18,200 |
| 19% | $18,201 – $45,000 |
| 30% | $45,001 – $200,000 |
| 45% | $200,001+ |
Medicare Levy low-income threshold increase
As part of cost of living relief, Medicare low-income thresholds are increased so low-income individuals continue to be exempt from paying the Medicare Levy.
The threshold for singles will be increased from $23,365 to $24,276. The family threshold will be increased from $39,402 to $40,939. For single seniors and pensioners, the threshold will be increased from $36,925 to $38,365. The family threshold for seniors and pensioners will be increased from $51,401 to $53,406. For each dependent child or student, the family income thresholds will increase by a further $3,760 instead of the previous amount of $3,619.
ATO funding and compliance program extension
The Government will provide $89.6 million to the ATO and $1.2 million to Treasury to extend the Personal Income Tax Compliance Program for two years from 1 July 2025 and expand its scope from 1 July 2023.
This extension will enable the ATO to continue to deliver a combination of proactive, preventative and corrective activities in key areas of non-compliance, and to expand the scope of the program to address emerging areas of risk, such as deductions relating to short-term rental properties to ensure they are genuinely available to rent. This measure is estimated to increase receipts by $474.9 million and increase payments by $90.8 million over the 5 years from 2022–23.
SUPERANNUATION
$3 million superannuation balances
The Government stuck with their pre-election promise to make no immediate changes to the superannuation system.
The Budget did restate the Government’s earlier proposal of an intention to apply an additional tax to people with a total superannuation balance that exceeds $3 million. The Government has performed consultation and although it will not apply until 1 July 2025, there is an intention to legislate the measures sooner rather than later.
A reminder that the key features of the proposal are:
- It applies to the total superannuation held by an individual, regardless of how many funds they have balance in.
- It applies a 15% tax to unrealised gains in asset values.
- It applies to the increase in value for balances over $3 million from 1 July 2025 onwards. So unrealised gains to 30 June 2025 are effectively grandfathered and not subject to this tax. The first time the member balance will be looked at is 30 June 2026. The increase in value is adjusted for contributions and withdrawals to arrive at an earnings amount.
- The tax is assessed to the member, so they will have the choice of paying the amount personally, or electing to have the tax paid by their superannuation fund.
- It will also apply to defined benefit superannuation balances, but the detail on how to achieve that has not been released yet.
The most controversial aspects of this proposal are:
- The taxation of unrealised gains.
- Losses/decrease in value do not result in a refund of tax, but rather a carry forward loss into the following year. Much like tax and capital losses, they only carry forward, not backwards.
- There is no intention to index the $3 million limit.
- It is currently unknown how it will apply to defined benefit superannuation balances.
Non-arm’s Length Income (NALI) amendments
Non-arm’s length income in a superannuation fund attracts a penalty tax of 45%. This can also apply to non-arm’s length expenditure (or saving on expenditure) of a self-managed superannuation fund, even where the expenditure is a general expense not directly connected to income generation. The amendments to NALI provisions will apply to expenditure incurred by superannuation funds by:
- Limiting income of self-managed superannuation funds and small Australian Prudential Regulation Authority (APRA) regulated funds that are taxable as NALI to twice the level of a general expense.
- Excluding contributions from fund income taxable as NALI.
- Exempting large APRA regulated funds from the NALI provisions for both general and specific expenses of the fund.
- Exempting expenditure that occurred prior to the 2018-19 income year.
For more information on the May 2023 Federal Budget please click here for our overview.
