Federal Budget May 2024 overview: Superannuation and retiree announcements

Jim Chalmers delivered his third Federal Budget on 14 May 2024, forecasting to deliver a surplus of $9.3 billion this financial year. This would be the first time there has been back-to-back surpluses in nearly two decades, but the forecast surplus is less than the $22.1 billion last financial year.

The budget shows that compared to the December 2023 MYEFO budget update, there has been an improvement of $10.5 billion to the bottom line. MYEFO forecast a deficit of $1.1 billion for this financial year.

The forecasts for the coming years are large deficits though.

• -$28.3 billion for 2024–25
• -$42.8 billion for 2025–26
• -$26.7 billion for 2026–27
• -$24.3 billion for 2027–28.

High inflation and higher interest rates have resulted in lower growth over the past year. The government’s cost-of-living measures are expected to reduce inflation, with energy bill relief and Commonwealth Rent Assistance expected to directly reduce inflation by 0.5% in 2024–25 and not expected to add to broader inflationary pressures.

In fact, Treasury predicts inflation will fall to 2.75% by the end of 2024 – well before the RBA’s most recent forecast for the end of 2025.

The labour market has been strong with the unemployment rate near historic lows, workforce participation near its record high, and around 780,000 jobs created since May 2022. The unemployment rate is expected to rise modestly but remains below pre-pandemic levels.

The combination of nominal wages growing at their fastest rate in nearly 15 years and the moderation in inflation has resulted in real wages returning to annual growth.

Real GDP is expected to grow by 1.75% in 2023–24, by 2% in 2024–25 and by 2.25% in 2025–26.

Global growth is forecast to remain subdued over the next few years and is expected to record the longest stretch of below average growth since the early 1990s. Most advanced economies recorded subdued outcomes during 2023, with around a third of OECD nations recording a technical recession. Global inflation has moderated but remains too high, and there are risks it will persist.

The following are key announcements contained within the Budget papers that affect superannuation and seniors, as well as key announcements on cost-of-living pressures.

Superannuation announcements

Paying super on paid parental leave

As announced earlier this year, the Government will pay superannuation on Commonwealth government-funded Paid Parental Leave (PPL) scheme for births and adoptions on or after 1 July 2025. Eligible parents will receive an additional payment based on the Superannuation Guarantee (12% of their PPL payments), as a contribution to their superannuation fund.

This will benefit 180,000 families a year and reduce the gender super gap, which currently sees women retire with around 25% less super than men. Paying an annual superannuation payment of 12% on the full partnered entitlement of 22 weeks will increase a median earning mother’s superannuation balance at retirement by around $4,250, or 1.15%.

Superannuation industry and government body measures

The Government will provide the following funding to support industry and government departments implement recent new superannuation measures:

• $187 million over four years from 1 July 2024 to the ATO to strengthen its ability to detect, prevent and mitigate fraud against the tax and superannuation systems
• $60 million over four years from 2024–25 to increase the Productivity, Education and Training Fund to support practical activities by employer and worker representatives to boost workplace productivity and engage in tripartite cooperation. This will also support workplaces to implement policy changes such as the introduction of payday superannuation
• $10 million over two years from 2024–25 to provide additional support for small business employers in administering paid parental leave
• $10.0 million over four years from 2024–25 (and $1.9 million per year ongoing) for additional resourcing for ASIC to investigate and take enforcement action against market participants engaging in greenwashing and other sustainability-related financial misconduct
• $9.2 million over four years from 2024–25 (and $1.1 million per year ongoing) to the Commonwealth Superannuation Corporation and the Department of Finance to implement the 2023–24 Budget measure Better Targeted Superannuation Concessions for members of the Commonwealth defined benefit superannuation schemes
• $2.7 million over four years from 2024–25 (and $0.7 million per year ongoing) to support the SuperStream Gateway Network Governance Body, an industry-owned not for profit organisation, to manage the integrity of the Superannuation Transaction Network, which allows Gateway Members to transmit contribution data between employers and superannuation funds, with funding provided through the ATO
• The Government will also recalibrate the Fair Entitlements Guarantee Recovery Program to pursue unpaid superannuation entitlements owed by employers in liquidation or bankruptcy from 1 July 2024.

Announcements affecting older Australians

Deeming rates frozen for 12 months

The Government is continuing the freeze on social security deeming rates for financial investments at their current levels for a further 12 months. The lower deeming rate will remain at 0.25% and the upper rate will remain at 2.25% until 30 June 2025. This will benefit around 876,000 income support recipients, including around 450,000 Age Pensioners.

Learn more about deeming rates.

Carer payment participation rules relaxed

The Government will provide $18.6 million over five years from 2023–24 (and $3.1 million per year ongoing) to support Carer Payment recipients through increased flexibility to undertake work, study and volunteering activities.

From 20 March 2025, the existing 25 hour per week participation limit for Carer Payment recipients will be amended to 100 hours over four weeks. The participation limit will no longer capture study, volunteering activities and travel time and will only apply to employment. Carer Payment recipients exceeding the participation limit or their allowable temporary cessation of care days will have their payments suspended for up to six months, rather than cancelled. Recipients will also be able to use single temporary cessation of care days where they exceed the participation limit, rather than the current seven day minimum.

Learn more about the Carer Payment.

Freezing medicines costs

Rather than rising with inflation, medicines will be kept cheaper through a one-year freeze on the maximum Pharmaceutical Benefits Scheme (PBS) patient co-payment for everyone with a Medicare card ($31.60) and a five-year freeze for pensioners and other concession cardholders ($7.70).

The Government will also provide $3.4 billion over five years from 2023–24 for new and amended listings on the Pharmaceutical Benefits Scheme (PBS).

Aged care measures

The Government will provide $2.2 billion over five years from 2023–24 to deliver key aged care reforms and to continue to implement recommendations from the Royal Commission into Aged Care Quality and Safety. Funding includes:

• $1.2 billion over five years from 2023–24 for sustainment of, and essential enhancements to, critical aged care digital systems so they remain legislatively compliant and contemporary and can support the introduction of the new Aged Care Act from 1 July 2025
• $531 million in 2024–25 to release 24,100 additional home care packages in 2024–25
• $175 million over two years from 2024–25 to fund the ICT infrastructure needed to implement the new Support at Home Program and Single Assessment System from 1 July 2025
• $111 million over four years from 2024–25 to increase the regulatory capability of the Aged Care Quality and Safety Commission as part of the Government’s response to the Final Report of the Capability Review of the Aged Care Quality and Safety Commission, and to implement a new aged care regulatory framework from 1 July 2025
• $66 million over four years from 2024–25 to attract and retain aged care workers, collect more reliable data, and improve the outcomes for people receiving aged care services through existing aged care workforce programs
• $37 million over two years from 2024–25 to reduce wait times for the My Aged Care Contact Centre due to increased demand and service complexity
• $30 million over three years from 2024–25 to states and territories to continue to deliver the Specialist Dementia Care Program
• $22 million over three years from 2024–25 to extend the Home Care Workforce Support Program for an additional three years to facilitate the growth of the care and supportworkforce in thin markets.

The Government has also agreed to defer the commencement date of the new Aged Care Act to 1 July 2025.

Announcements on cost-of-living pressures

Income tax cuts and increase of Medicare level low-income thresholds

As has been widely reported, from 1 July 2024 the personal income tax rates and thresholds and will be changed as follows:

• The 19% tax rate reduces to 16%
• The 32.5% tax rate reduces to 30%
• The income threshold above which the 37% tax rate applies increases from $120,000 to $135,000
• The income threshold above which the 45% tax rate applies increases from $180,000 to $190,000.

The government have also now announced the following increases to the Medicare levy low-income thresholds:

• The threshold for singles has been increased from $24,276 to $26,000
• The family threshold has been increased from $40,939 to $43,846
• The family income thresholds will now increase by $4,027 for each dependent child, up from $3,760
• The threshold for single seniors and pensioners has been increased from $38,365 to $41,089
• The family threshold for seniors and pensioners has been increased from $53,406 to $57,198.

Learn more about income tax rates and use our income tax calculator to see how the tax cuts will affect you.

Energy rebate

From 1 July 2024, all Australian households will receive an energy rebate of $300. The credit doesn’t need to be applied for – it will be automatically applied to electricity bills over the course of 12 months. For example, quarterly bills will each contain a $75 credit. The government provided a $500 energy rebate in last year’s budget, but this was targeted at around 5 million eligible households – around half of all households.

Rent assistance

The Government will increase all Commonwealth Rent Assistance maximum rates by 10% from 20 September 2024 to help address rental affordability challenges for recipients. This is on top of the 15% increase delivered in last year’s Budget and takes maximum rates more than 40% higher than in May 2022.