What to expect from next week's Federal Budget

On Tuesday evening Federal Treasurer Jim Chalmers will hand down the government's 2023 Federal Budget - the second since Labor came into power last year, but the first in the traditional May slot.

Like the October 2022 Budget, next week's Budget will be set against a backdrop of high inflation and ongoing cost of living pressures, ensuring that the Treasurer and government will be walking a fine line when it comes to spending priorities.

In an address earlier this week following the Reserve Bank's latest interest rate rise, Chalmers stated that the priority of the Budget would be to deliver cost-of-living relief that doesn't add to inflation.

"It will be a responsible Budget, it will have two main tasks; to see people through a difficult period and to set this country up for the future. We know and this interest rate decision today is a reminder, of the complex combination of economic pressures that are being felt right around the country.

"The Budget will seek to alleviate some of that pressure, at the same time as it positions this country to take advantage of the remarkable opportunities that lay ahead."

So with the Budget just days away, what can we expect from the government come Tuesday night, and what do we already know?

Energy bills

As the Treasurer has outlined, cost-of-living relief will be top of the government's agenda in this Budget, and part of that is likely to come in the form of initiatives to help combat the cost of energy bills which have risen substantially over the last year.

The government has already announced a small business energy incentive which will provide businesses with an annual turnover of less than $50 million an additional 20% tax deduction on purchases of energy-efficient appliances. Close to 3.8 million businesses are set to be eligible for the incentive which is estimated to cost the government $314 million.

"We know that rapid increases in energy prices have hit small businesses hard. Making it easier for them to invest in energy efficiency and electrification helps them take control of their energy costs in the short term, and will boost their competitiveness for years to come," says chief executive of the Energy Efficiency Council, Luke Menzel.

The Budget is also expected to include details of energy bill relief for low-income households which is likely to come in the form of bill credits. In addition to that, the government will likely outline a home electrification package targeting renters and low-income earners which will aim to bring down the cost of bills over time by helping households switch over to more energy-efficient appliances.

Superannuation

At least two tweaks to superannuation will feature in the Budget, the first of which is a change to the frequency of superannuation payments from employers.

Announced earlier this week, payday super reform will require businesses to pay super to their employees at the same time that they pay salary or wages, starting from July 1, 2026. Employers are currently allowed to make contributions on a quarterly basis which proponents of the reform say deprives workers of greater returns and makes underpayment more prevalent.

"The Federal Government's announcement is a big win for Australians looking to grow their super. It will make it much easier for people to manage their money and make sure they are paid what they're owed," says director of Super Consumers Australia, Xavier O'Halloran.

"Not paying super on time can lead to real consumer harm. Currently, people miss out on months of investment returns and risk missing life insurance premiums when they fall due."

The government's previously-announced move to lift the tax rate on higher super balances will also feature in the Budget. Under the change, which will kick in on July 1, 2025, the concessional tax rate for balances above $3 million will jump from 15% to 30%.

JobSeeker

There's been plenty of speculation in the lead up to the Budget around a potential increase to the JobSeeker rate, with reports emerging in the last week that the government is considering a move that would see payments lift for some recipients over the age of 55.

While the Treasurer has stated that Australians will need to wait until Tuesday night to see if, and how, the government will approach the issue, advocate groups have urged the government not to leave behind other Australians on support payments.

"Until JobSeeker, Youth Allowance and related payments are substantially increased for all, we will continue to see people going without food and essential medication as well as being unable to afford to keep a roof over their head," says chief executive of the Australian Council of Social Service, Cassandra Goldie.

Housing

With the cost and availability of housing one of the larger issues currently facing the government, Tuesday's Budget is expected to include at least some measures on the housing front. One measure that the government has already set forth is an expansion of the various Home Guarantee Scheme initiatives.

From July 1 this year, siblings, family members and even friends will be able to make joint applications under the First Home Guarantee and the Regional First Home Buyer Guarantee schemes in order to purchase a home. The schemes will also open up to home buyers who may have purchased in the past, but haven't owned a property for at least ten years.

Eligibility requirements for the Family Home Guarantee will also be expanded to allow single legal guardians of children (e.g. aunts, uncles and grandparents) to make use of the scheme.

"Giving entry-level buyers more options to pool resources to get into their own homes as they contend with cost-of-living challenges has always made sense to REIA and has been a change to the HGS we've long advocated for," says president of the Real Estate Institute of Australia, Hayden Groves.

The Budget will also detail new incentives for investors in relation to build-to-rent projects - a move the government says will aim to help to increase the supply of rental housing.

Taxation 

While the government has already announced a few changes in the tax sphere such as a lift in the tax rate for higher super balances and, more recently, a 5% per year increase on tobacco for three years, it appears unlikely that there will be any sweeping changes to the tax system laid out in the Budget.

That includes any amendments to the stage three tax cuts, despite calls from members of the crossbench and even Labor's backbench to amend or scrap them entirely. It currently estimated that the cuts, which are already legislated and set to come into effect from July 1, 2024, will cost the government over $240 billion over the next ten years.

Healthcare

The government has already announced a number of measures related to health that are set to be included in the 2023 Budget, the largest of which is $11.3 billion worth of funding to pay for a 15% pay rise for hundreds of thousands of aged care workers from July.

"Fair wages play a major role in attracting and retaining workers to provide around-the-clock care for some of Australia's most vulnerable people," says Minister for Aged Care, Anika Wells.

A change to dispensing rules which will allow Australians to purchase up to 60 days' worth of medicine under a single prescription will also be outlined in Tuesday's Budget.

Set to begin on September 1, the government says the change will reduce the number of doctor and pharmacy visits users of a number of common medicines will need to make, potentially saving general patients up to $180 per year and concession card holders up to $43.80 a year per medicine.

The government has also promised hundreds of millions of dollars' worth of funding to further regulate vaping by cracking down on black market vapes and banning single-use vapes. Included in that will be $63 million for a new public health campaign aimed at deterring people from taking up vaping and smoking, and $30 million for support programs for those trying to quit.

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