Australia's wealthiest to be taxed more in bumper budget

Faced with local and global factors that have seen grocery, fuel and housing costs soar, the pressure is on the Albanese government to deliver reform that will have a meaningful impact on the wallets of ordinary Australians.

Flush with surging tax revenue from the cost of iron ore, coal and gas, here’s what we expect to see in the federal budget on May 9.

Australia’s wealthiest to be taxed more

Wealthy Australians could be forced to pay more tax if the May budget removes a number of tax discounts that traditionally favour those who have a large number of assets or a high superannuation balance.

Mark Molesworth, Tax Partner at BDO in Australia, said he expects the budget to increase the amount of tax those who are well-off will pay.

”The top end of town should be on notice if the recently proposed superannuation changes are anything to go by,” Molesworth said.

“Tax breaks on superannuation earnings and contributions are not the largest tax expenditure but the government’s move could be seen as a harbinger of other measures that similarly target a smaller population or group of entities that are seen to be well off.”

Stage three tax cuts could still be tweaked

Currently, the long-heralded stage three tax cuts are due to start in 2025, but Molesworth said tweaks could be made in the budget to target the very highest income earners.

“The government could still move to reduce the generosity of the stage three tax cuts by keeping the existing threshold for the top tax bracket at $180,000,” he said.

“Again, it would be framed at targeting high-income earners and would not trouble the vast majority of the population.

“What we probably don’t expect to see are system-wide tax reforms that affect a large cohort of taxpayers or consumers.

“On that basis, we don’t expect to see any changes to the rate or the base of the GST, however acceptable or desirable those changes might be.”

Superannuation tax loophole to close

Australians who have a superannuation balance above $3 million will have their concessional rate doubled from 2025.

This means – for around 80,000 Australians – when they make contributions to their superannuation they will be taxed at a rate of 30 per cent, up from 15 per cent.

The changes will come into effect after the next election and will not be retrospective but will rather apply to future earnings.

Family, friends could chip in to help get onto the property ladder

Home ownership will soon be in closer reach for millions more Australians as the federal government expands eligibility for its Home Guarantee Scheme (HGS), in a bid to tackle the housing crisis.

Under one of the changes, friends and family will be allowed to team up to buy a first home as the definition of the word “couple” will be changed from those who are married, or in de facto relationship, to “any two eligible individuals” from July 1.

Under the scheme, the federal government acts as a guarantor, making up the majority of a loan for prospective buyers.

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Welfare payments could increase for disadvantaged

While no concrete plan to increase welfare payments has been publicly announced, it is widely speculated the Labor government will attempt to improve welfare conditions during the current cost of living crisis.

John Hicks, professor of economics at Charles Sturt University, said some measures could be made to improve the cost of housing for Australians on low incomes.

”Closely associated with lower-cost housing and the provision of housing for the homeless are other aspects of welfare – including support for those out of work and unable to work,” Hicks said.

“It would be most unlikely that these groups will be ignored in a Labor budget.

“While payments at the level that are being proposed by some groups are unrealistic from a budget perspective, there is no doubt that some attempts will be made to raise payments.”

Possible boosts for single parents and the unemployed have been flagged.

The budget itself could be in surplus for the first time in 15 years

Inflation, record-low unemployment and tax revenue from the soaring cost of exports such as coal, iron ore and gas could see the government deliver a budget surplus for the first time in 15 years.

While this sounds fantastic, don’t mistake it with Australia’s government debt, which is currently sitting close to $900 billion.

Potential energy bill relief on the way

Australians struggling with paying their utility bills could be in luck come next Tuesday, with around $3 billion tipped to be set aside for specific energy bill relief.

This money is said to include deals with each of the states and territories to smooth out bill shock for residents despite rapidly rising wholesale costs for suppliers.

Reducing the strain on the nation’s general practitioners has been a key policy for the government, which has announced a doubling of the length of some prescriptions to keep patients out of waiting rooms.

From September 1, eligible prescriptions will be extended to 60 days supply.

This is tipped to save the average Australian on these prescriptions around $180 a year.

Huge overhaul on defence spending

We all know the government is spending big – $368 billion big – on new submarines.

But next Tuesday’s budget will likely overhaul exactly where defence money will go following the release of the government’s Defensive Strategic Review.

It’s expected much of the cash will go towards equipping each branch of the military with better long-range missile capability.