The Labor Government’s 2023-24 May Budget leverages off the significant surge in tax revenue from strong employment, high commodity export prices, and stable corporate profits to fund a number of election promises including social welfare, health, and cost-of-living support, producing a small short-term surplus with minimal new tax measures and a focus on spending restraint and reprioritisation.
With the Reserve Bank seeking to dampen spending and reduce inflationary pressures through higher interest rates, the Government has adopted a fiscal policy that is a ‘steady-as-she goes’ approach with the forward estimates now predicting deficits will reduce by over $143 billion over 4 years. While there have been material tax changes to the resource sector, tobacco and superannuation, broader structural tax changes have been avoided and the stage 3 tax cuts currently remain unchanged, an approach that seeks to underline the Government’s fiscal credibility. There are targeted tax concessions such as for small business, investing in clean buildings and build-to-rent accommodation, however there are also enhanced tax integrity provisions including revised general anti-avoidance provisions and a minimum global and domestic tax imposition.
The challenge faced by the Government will be balancing the structural spending changes that are long term, against a revenue boost that may only be short lived, all in the context of a slowing Australian economy. Recent history has also shown that outside factors such as natural disasters, geopolitical tensions and COVID can significantly impact the Australian economy, meaning economic conditions can turn quickly and some buffer will be needed to cover these eventualities.
While the Government has indicated its willingness to manage future spending on large outlays such as the NDIS, key economic pressures such as inflation, productivity, and real wage growth remain. The Reserve Bank has noted that productivity has fallen to below pre-pandemic levels and while the Budget contains measures to ease the transition into more efficient energy reform, the Government has largely avoided incentives that promote business investment or improve its global competitiveness. These are no doubt longer term aims that the Government will, as part of its ‘sequential’ approach to reform, need to prioritise and focus on going forward if Australia is to remain connected and relevant in the growing Asian marketplace.
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Federal Budget Insights
Federal Budget May 2023-24: Health & aged care
This Budget prioritises funding for health and aged care, with a particular focus on reducing the cost of health care and medicines and improving the sustainability of the aged care system and NDIS.
09 May 2023
Federal Budget May 2023-24: Family
This Government has delivered a Budget with a strong focus on supporting Australian families, with significant spending measures announced to support parents and children.
09 May 2023
Federal Budget May 2023-24: Corporate tax
The Government has included in this year’s Budget very significant changes to the general anti-avoidance rule in Part IVA to specifically cover schemes to lower withholding taxes for foreigners and where the reduction of Australian tax occurs in the context of a broader scheme to limit foreign tax.
09 May 2023
Federal Budget May 2023-24: Energy & Resources
The Government has announced major investments in renewable energy to help Australia meet emissions reduction commitments and in response to the physical impacts of climate change.
09 May 2023
Federal Budget May 2023-24: Jobs & Education
This Budget is heavily focused toward funding initiatives for Jobs and Education. Funding to support jobs include $54.3 million towards supporting the Australian Apprenticeship Support Network, $27.4 million towards improving the safety and fairness of workplaces, and $26.3 million toward boosting the employment of young Australians in the care economy.
09 May 2023
Federal Budget May 2023-24: Funds & Superannuation
The Federal Government has announced several measures in relation to superannuation and managed investment trusts (MITs).
09 May 2023
Federal Budget May 2023-24: Personal tax
The 2023-24 Budget announces a marginal increase in the Medicare Levy low-income thresholds and an exemption of lump sum payments in arrears from the Medicare Levy. As flagged, the Government has also retained the proposed Stage Three tax cuts.
09 May 2023
Federal Budget May 2023-24: The digital economy
The Government has adopted a significant focus in this Budget on supporting businesses to integrate quantum and AI technology into their operations, announcing a number of initiatives designed to support the commercialisation and responsible use of these critical technologies.
09 May 2023
Federal Budget May 2023-24: Defence
The Government remains committed to strengthening Australia’s defence capability with several initial measures to implement the nuclear-powered submarine program.
09 May 2023
Federal Budget May 2023-24: Environment & Climate Change
As part of the Government’s commitment to ensuring a sustainable future and enabling a decarbonising of Australia’s economy, the Budget includes a reprioritisation of the Climate Change, Energy, the Environment and Water portfolio in order to fund policy priorities, as well as reforms to the operation of the Australian Carbon Credit Unit Scheme.
09 May 2023
Federal Budget May 2023-24: Small business
The Budget puts forward a number of measures aimed at supporting small businesses, including incentives for small businesses to save on energy bills, reduce time spent on tax compliance and re-engage with the tax system.
09 May 2023
Federal Budget May 2023-24: International
Australia to implement Pillar Two global minimum tax – In a significant development for multinationals, the Government will implement key aspects of Pillar Two of the OECD/G20 Two Pillar Solution to address tax base erosion.
09 May 2023
Federal Budget May 2023-24: Tax compliance
The Government has resolved to extend compliance programs for GST and personal income.
09 May 2023
Federal Budget May 2023-24: Infrastructure
The Government has once again announced a range of measures to invest in key infrastructure projects in each State and Territory. Critical investments are, in particular, being made in new and existing road, rail and community infrastructure projects.
09 May 2023
