Federal Budget 2023 Personal Tax Considerations

The Federal Treasurer, Jim Chalmers delivered the 2023-2024 Federal Budget with only a few changes coming to light that will have any real impact on Australians’ personal tax positions. Here we’ll break it down and explore what it could mean for you.  

No changes to personal tax rates 

No changes to individual tax rates will apply for the 2023/2024 income year. The resident individual rates for 2023/2024 are unchanged from 2022/23 and will remain as follows: 

Taxable income	Tax on this income
0 – $18,200	Nil
$18,201 – $45,000	19 cents for each $1 over $18,200
$45,001 – $120,000	$5,092 plus 32.5 cents for each $1 over $45,000
$120,001 – $180,000	$29,467 plus 37 cents for each $1 over $120,000
$180,001 and over	$51,667 plus 45 cents for each $1 over $180,000

The above rates do not include the Medicare levy of 2%.

Perhaps most significantly, the Budget was silent on the Stage 3 individual tax cuts set to begin on 1 July 2024. Under the Stage 3 tax cuts introduced by the previous Coalition Government, the 37% marginal tax bracket will be removed completely and the 32.5% marginal tax rate bracket will be lowered to 30%. These cuts will only offer income tax relief for high income earners. If the Stage 3 tax cuts proceed, from 1 July 2024 a resident individual earning $200,000 p.a. will pay $9,075 less income tax. Someone earning $60,000 p.a. will only pay $375 less income tax. Those earning less than $45,000 p.a. will not benefit from these further tax cuts.

The current Labor Government has been under some pressure to not proceed with the Stage 3 cuts on the basis that they disproportionately advantage high income earners, which many view as unfair particularly with the current cost of living pressures having the hardest impact on low-income earners. As there is no suggestion in the Budget that the Stage 3 tax cuts will not proceed, it appears that the current Labor Government remains committed to move forward. 

Minor personal tax changes 

Although no changes to the headline personal tax rates themselves were announced, some minor changes surfaced that may impact personal tax positions for some Australians.  

These include: 

Increases in the Medicare Levy low-income thresholds for singles, families and pensioners from 1 July 2022.  

• For singles the threshold will be increased from $23,365 to $24,276  
  
  
• For families the 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 
  
  
• For family seniors and pensioners the threshold 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 

From 1 July 2024 the Government will also exempt eligible lumpsum payments in arrears from the Medicare levy for low-income taxpayers. The aim of this measure is to ensure the low-income taxpayers do not pay higher amounts of the Medicare levy as a result of receiving an eligible lump sum payment, for example, as compensation for underpaid wages.

Cost of living relief measures for individuals 

A range of other measures were announced to provide cost of living relief to individuals including: 

• A $40 per fortnight increase to various income support payments such as JobSeeker, Youth Allowance, Parent Payment (Partnered), and Austudy. 
  
  
• Reducing the minimum age for which older people qualify for the higher JobSeeker Payment rate from 60 to 55 years. Eligible recipients will receive an increase in their base rate payment of $92.10 per fortnight. 
  
  
• A 6 month extension to 31 December 2023 to the workforce participation incentive measures to support pensioners who want to enter the workforce, or work more hours, without impacting their pension payments.  Under this measure, pensioners can earn up to $11,800 before their pension is reduced.  
  
  

Further funding for ATO personal income tax compliance activity 

The Government announced it will provide $89.6 million in funding to the ATO to extend its current “Personal Income Tax Compliance Program” for two years from 1 July 2025 and to expand its scope from 1 July 2023. The ATO Program is focused on reducing key areas of personal income tax non-compliance, including overclaiming of deductions and incorrect reporting of income. The Budget papers state that the expansion in the scope will allow the ATO to address emerging areas of risk, such as “deductions relating to short term rental properties to ensure they are genuinely available to rent”. 

Check out the full coverage from the Federal Budget 2023/24 here.  

The views and opinions expressed in this article are those of the author/s and do not necessarily reflect the thought or position of Crowe Australasia.