FEDERAL BUDGET SUMMARY 14 May 2024
Here’s a snapshot of the information Jim Chalmers presented on the evening of 14 May 2024, when the Government delivered what might be its last Budget in the current parliamentary term. The next election is expected to be held either late this year or early in 2025. We have gone into a little more detail about potential changes in Aged Care, but as with every budget announcement, it is important to remember the measures announced are not a fait accompli. They are still proposals and may be subject to change. Legislation will need to be passed to implement these measures
HIGHLIGHTS
Inflation, cost of living pressures, and housing all continue to dominate the fiscal landscape, impacting the lives of Australians.
The key challenges addressed in this year’s Budget include:
• Easing cost of living and inflationary pressures,
• Building more houses,
• Strengthening Medicare and the care economy (which includes Aged Care).
THE STATE OF THE ECONOMY The Treasurer announced a pleasing $9.3bn surplus for the 2023-24 financial year. This is the second consecutive surplus however deficits have been forecast for the next three financial years as the government embarks on what it describes as “unavoidable spending.”
Real GDP growth is expected to continue to improve from 1¾% in 2023-24 to 2¾% by 2027-28
The unemployment rate in recent years has placed Australia in an enviable position. The current historically low unemployment rate is expected to increase marginally in 2024-25 to 4½%.
As announced previously, the Government predicts the inflation rate will continue to fall, returning to the Reserve Bank of Australia’s target range of 2 – 3% by the end of 2024.
Now for a more detailed look at some of the key announcements impacting you from a financial planning perspective.
SUPERANNUATION The Budget was remarkably silent on superannuation changes with two exceptions:
Superannuation on Paid Parental Leave
From 1 July 2025, superannuation guarantee contributions of 12% will be paid on all Commonwealth-funded paid parental leave payments.
Enforcement activity and unpaid super
The Government will provide additional funds from 1 July 2024 to strengthen the ATO's ability to detect, prevent and mitigate fraud against the tax and superannuation systems.
The Fair Entitlements Guarantee Recovery Program will be recalibrated to pursue unpaid superannuation entitlements owed by employers in liquidation or bankruptcy from 1 July 2024.
Missed opportunity
The previous government had proposed introducing an amnesty that would allow members of superannuation funds that were locked into old-style legacy pension products to exit those products without incurring adverse tax or social security consequences. While we understand the current government is favourably disposed towards this, the Budget was silent on this initiative.
In addition to the amnesty for legacy pensions, simplification to the way self-managed super funds managed when members move overseas had previously been proposed. Sadly, this Budget has not advanced those proposals.
INCOME TAX The Budget reconfirms that 13.6 million Australian taxpayers will receive tax cuts from 1 July 2024. These changes have previously been legislated in the form of the amended Stage 3 tax cuts.
Small Business
Instant asset write off
Small businesses with an annual turnover of less than $10 million will have the current instant write-off of assets extended for another year to 30 June 2025. This will apply to assets costing less than $20,000 that are first used or installed ready for use by 30 June 2025. The asset threshold applies per asset so small businesses could instantly write off multiple assets.
AGED CARE Despite the Aged Care Taskforce delivering its final report (on aged care financial viability and reform) in December 2023, the Government has delivered another Budget that has avoided making decisions around funding aged care for long-term viability.
With increasing pressure on aged care providers and another pending wage increase for aged care workers, the funding issues cannot be ignored for long. Over the next four years, the expenditure on aged care is expected to total $190b, an increase of 35% over the four years. Changes are likely to be announced when the new Aged Care Act (which has been deferred until 1 July 2025) is introduced into Parliament later this year.
Aged care measures announced in this year’s Budget continue to focus on increasing access to home care, improving the quality and regulation of aged care services and addressing workforce issues.
The aged care proposals in this Budget come at a cost of $2.2 billion to be paid from consolidated revenue. The Government will also reprioritise unspent funds from the Commonwealth Home Support Programme over five years from 2023–24 to other sub-programs within aged care services.
More Home Care Packages
The waiting times for Home Care Packages have started to lengthen again, especially for the Level 3 and 4 packages.
Package Level |
Estimated waiting time |
Level 1 |
Less than 1 month |
Level 2 |
3-6 months |
Level 3 |
12-15 months |
Level 4 |
6-9 months |
Source: Wait times as at 30 April 2024. https://www.myagedcare.gov.au/assessment-outcome-home-care-packages
Since 2014, the number of Home Care Packages have significantly increased in an attempt to meet demand, and this year continues the trend. As at 31 December 2023 there were 269,573 people receiving a Home Care Package and the Government has proposed to release another 24,100 packages over 2024-25 (at a cost of $531.4m).
The increased number of packages may shorten waiting times, but even after a package has been allocated, the challenge is to find a home care provider that has capacity to provide the required services.
The Government continues plans to implement a new Single Assessment System to replace ACAT/ACAS and RAS assessments from 1 July 2024. Funding is proposed to be allocated to improving the infrastructure to facilitate this transition (as well as the eventual single at-home care system)
Improving aged care regulation
The Royal Commission highlighted the need to improve the quality and safety of aged care. Since 2021, Governments have been implementing measures to effect the Royal Commission’s recommendations for better regulation of aged care.
This Budget allocates another $110.9m over the next four years to increase the Aged Care Quality and Safety Commissioner’s regulatory capabilities.
Investment into IT systems and service delivery
Financial advisers, aged care providers and people accessing aged care services are increasingly frustrated by the inefficiencies in MyAgedCare and Services Australia.
Additional funding has been proposed for:
- MyAgedCare call centres to reduce waiting times
- Additional frontline staff to help stabilise Services Australia claims backlogs and service standards and improve the cyber security environment.
We can only hope that we will see real improvements in the Services Australia standards and outputs.
Pay increases for aged care workers
In last year’s Budget the Government committed $11.3 billion over a four-year period to fund the 15% award wage increase awarded by the Fair Work Commission to aged care workers.
In March this year, Fair Work made a further decision to increase award wages for aged care workers. In this Budget, the Government committed to fund the wage increases once the final determination is made (expected to be confirmed around the middle of this year). How this will be funded has not been confirmed.
The Government is providing $87.2 million for workforce initiatives to attract nurses and other workers into aged care
A new Aged Care Act
Commencement of the new Aged Care Act has been deferred until 1 July 2025. Consultation on the draft Act ended on 8 March 2024 and we expect to see the proposed legislation introduced into Parliament in September or October of this year.
The new Aged Care Act will take a person-centred and rights-based approach, with a focus on aged care recipients rather than service providers. It will set out the obligations of care providers and legislate requirements that protect an older person’s rights to safe, quality care, with a statement of rights.
It is likely that the new Act will include reforms for the funding of aged care and may direct a greater share of the costs to users of care services.
Centrelink – deeming rates
Deeming rates have been frozen since the middle of 2022 at 0.25% and 2.25%. These rates were due to be increased from 1 July 2024, but to help with cost of living pressures, the Government proposes to extend the freeze a further year until 30 June 2025.
This will be a welcome reprieve for clients who are impacted by the income test for age pension entitlements and means-test amount calculations.
Centrelink – Carer Payment
Recipients of the Carer Payment may have greater flexibility to undertake part-time work without impacting their entitlements.
From 20 March 2025, the existing 25-hour-per-week participation limit for Carer Payment recipients will be amended to 100 hours over a four-week period. The participation limit will no longer capture study, volunteering activities and travel time and will only apply to employment.
If the participation limit (or the allowable temporary cessation of care days) is exceeded, payments will be suspended for up to six months rather than cancelled.
WELFARE Supporting Australians with cost-of-living relief at the same time as implementing measures to place downward pressure on inflation was once again a key focus for the Government in relation to welfare announcements. Energy cost relief for all Australian households, further increases to Rent Assistance, significant spending on social housing and reducing the impact of indexation on student loans are a feature.
$300 Energy Bill Relief
The Government will provide $3.5 billion over the next three years to extend and expand the Energy Bill Relief Fund to provide a $300 rebate to all Australian households and a $325 rebate to eligible small businesses on 2024–25 bills.
HELP indexation
Tonight, the Government confirmed a previously announced measure to change the way Higher Education Loan Program (HELP) debt is indexed. As a result, $3 billion in student debt will be cut.
Two measures have been proposed as follows:
|
CURRENT LAW |
PROPOSED NEW LAW |
Method of indexation |
Outstanding HELP debt as at 1 June each year increases in line with CPI |
Outstanding HELP debt as at 1 June each year will increase in line with the lower of CPI and the Wage Price Index (WPI) |
Last year’s indexation |
On 1 June 2023, outstanding HELP debt was indexed by 7.1% |
The change in indexation method will be backdated to 1 June 2023 with HELP debt increasing by 3.2% on 1 June 2023 instead of 7.1% |
Students who had their loans indexed on 1 June 2023 and will be subject to indexation on 1 June 2024, will receive an indexation credit. The indexation credit can be estimated using the Government’s HELP Indexation Credit Estimator.
SOCIAL SECURITY This year’s budget provides good news for pensioners concerned about predicted increases in the deeming rates, waiting times when corresponding with Centrelink staff as well as those needing additional support with rising rental prices.
Deeming Rates
The Government will freeze social security deeming rates at their current levels for a further 12 months until 30 June 2025, to support Age Pensioners and other income support recipients who rely on income from deemed financial investments, as well as their pension payments, to manage cost of living pressures.
It was anticipated that the current low deeming rates of 0.25% and 2.25% would increase from 1 July 2024 after a two-year freeze, impacting many pensioners. Fortunately, pensioners will now have comfort knowing that these low rates will be retained for at least another year.
Increased flexibility for those on Carer Payment
Currently, to be eligible for a Carer Payment, a carer has a participation limit of 25 hours per week which includes employment, study, volunteering activities and travel time to and from work.
From 20 March 2025, Carer Payment recipients will have increased flexibility to undertake work, study, and volunteering activities whereby recipient’s participation limit will be amended to 100 hours over four weeks and will only apply to employment.
Additionally, if the participation limit is exceeded, payments will be suspended for up to six months, rather than being cancelled.
Support to help combat rental affordability
With rental prices in most Australian locations increasing rapidly over the past decade, rental affordability for many, including those on Government income support and family benefits, is a major concern.
After an increase in Rent Assistance in last year’s budget of 15%, the Government is providing a further $1.9 billion over five years to increase maximum rates of Rent Assistance by a further 10%.
Increase in JobSeeker rate for those with partial capacity to work
The higher rate of JobSeeker Payment, a boost of at least $54.90 per fortnight, will be extended to single recipients with a partial capacity to work of zero to 14 hours per week from 20 September 2024.
Boost to Centrelink resources
The Government will set aside $2.8 billion over the next five years in an attempt toimprove the way Services Australia (Centrelink) delivers services to the Australian community.
The funding is earmarked to assist with:
- additional frontline staff to help with claims and services
- sustaining the myGov platform and ensuring continued development of its capability
- enhance safety and security at Services Australia centres including an increased security presence and enhancements to service centre design.