With the Federal Budget being released last night we have prepared this update to provide you with the highlights. The Treasurer Josh Frydenberg has delivered his fourth Federal Budget overnight. Being a Pre Election Budget it should be noted that some of these measures may not be implemented if there is a Government Change. All eyes will be on the Budget reply speeches to get a view of “how the others” would be doing things. We hope you enjoy this update.
This budget focuses on key spending measures to drive Australia’s economic recovery in a “post-pandemic, natural disaster and conflicted international environment”. The Government’s message in the lead up to the election has centred around job creation, temporary stimulus to low and middle income Australians, as well as infrastructure and regional recovery spending measures.
The budget position has improved dramatically from the forecasts delivered in the Mid-Year Economic and Fiscal Outlook (MYEFO) in late 2021. The deficit for 2022-23 is now expected to be $67.5 billion (down from $161 billion). This is largely due to a much stronger rebound in employment than was expected at the height of the pandemic last year. Revenue has also received a boost from strong household incomes, a tightening labour market, higher average wages driving stronger personal income tax and GST receipts, as well as strong bulk
There are also a number of measures which will take effect immediately or soon, which are aimed at addressing the cost-of-living challenges currently facing Australians.
- There were no changes to Marginal Tax Rates as The Government previously brought forward ‘stage 2’ of its already planned and legislated tax cuts which were due to commence from 2022. From 1 July 2020 the tax rates of 32.5% will apply to incomes up to $120,000 (previously $90,000 threshold);
- Proposed changes from 2024 will remain with marginal tax rates to reduce the 32.5 percent tax rate down to 30 percent and removal of the 37 percent tax rate so all income earners under $200,000 would pay no more than 30 cents in the dollar;
- Changes to the Low Income Tax Offset (LITO) and Low and Middle Income Tax Offset (LMITO) The low and middle income tax offset (LMITO) will be increased for the 2021-22 income year to assist with cost of living pressures.The LMITO for the 2021-22 income year will be paid from 1 July 2022 when Australians submit their tax returns for the 2021-22 income year. This proposal will increase the LMITO by $420 for the 2021-22 income year. This increases the maximum LMITO benefit in 2021-22 to $1,500 for individuals and $3,000 for couples. Other than those that do not require the full offset to reduce their tax liability to zero, all LMITO recipients will benefit from the full $420 increase. All other features of the current LMITO remain unchanged. Consistent with the current LMITO, taxpayers with incomes of $126,000 or more will not receive the additional $420.
- Changes to the Medicare Levy
- The threshold for singles has increased from $23,226 to $23,365.
- The family threshold has increased from $39,167 to $39,402.
- For single seniors and pensioners, the threshold has increased from $36,705 to $36,925.
- The family threshold for seniors and pensioners has increased from $51,094 to $51,401.
- For each dependent child or student, the family income thresholds increase by a further
$3,619, instead of the previous amount of $3,597.
- Temporary Fuel Excise Reduction The excise and excise-equivalent customs duty rate that applies to petrol and diesel will be halved for 6 months to reduce the burden of higher fuel prices. The excise and excise-equivalent customs duty rates for all other fuel and petroleum-based products, except aviation fuels, will also be reduced by 50 per cent for 6 months. The Australian Competition and Consumer Commission (ACCC) will monitor the price behaviour of retailers to ensure that the lower excise rate is fully passed on to Australians.
The measure will commence from 12.01am on 30 March 2022 and will remain in place for 6 months, ending at 11.59pm on 28 September 2022.
- Paid parental leave measures include:
- $346.1 million over 5 years to introduce an enhanced Paid Parental Leave scheme for eligible working families by integrating Dad and Partner Pay and Parental Leave Pay to provide eligible families access to up to 20 weeks leave to use in ways that suit their specific circumstances.
- broadening the income test to include an additional household income threshold of $350,000 to further support workforce participation, particularly for women who are the primary earner.
- eligible single parents will be able to access an additional 2 weeks of Paid Parental Leave and also benefit from the household income threshold test.
- Home Guarantee Scheme has been increased – The number of guarantees under the Home Guarantee Scheme will increase to 50,000 per year for 3 years from 2022-23 and then 35,000 a year ongoing to support homebuyers to purchase a home with a lower
deposit. The guarantees will be allocated to provide:
- 35,000 guarantees per year ongoing for the First Home Guarantee (formerly the First Home Loan Deposit Scheme)
- 5,000 places per year to 30 June 2025 for the Family Home Guarantee
- 10,000 places per year to 30 June 2025 for a new Regional Home Guarantee that will support eligible citizens and permanent residents who have not owned a home for 5 years to purchase a new home in a regional location with a minimum 5 per cent deposit.
- This will come at a cost of $8.6 million over 4 years from 2022-23 and $138.7 million over 7 years from 2026-27, with $20.5 million per year ongoing from 2033-34. The Government guaranteed liability cap of the National Housing and Finance Investment Corporation
(NHFIC) will be increased by $2.0 billion to $5.5 billion to enable NHFIC to support increased loans through the Affordable Housing Aggregator, which increases support for affordable housing.
- First Home Deposit Scheme (via Superannuation contributions) – From last budget The Government has increased the maximum amount of voluntary concessional and non-concessional contributions releasable from FHSSS accounts from $30,000 to $50,000 from 1 July 2022. This means all voluntary contributions made from 1 July 2017 up to the existing limit of $15,000 per year will count towards the total amount able to be released. The Government has also announced some minor amendments to the administration of the FHSSS to provide additional flexibility to the recipient and the ATO to make amendments to their application and withdrawal amount allowing an increase or decrease of the applied amount prior to a payment being made with no penalty to the recipient.;
- The Government has extended the 50 per cent reduction of the superannuation minimum drawdown requirement for a further 12 month period.
|Standard Rate||Reduced Rate|
|65 – 74||5%||3%|
|75 – 79||6%||3%|
|80 – 84||7%||4%|
|85 – 89||9%||5%|
|90 – 94||11%||6%|
- $250 economic support payments will be made to help eligible recipients with higher cost of living pressures. The payment will be made in April 2022 to eligible recipients of the following payments and to concession card holders:
- Age Pension
- Disability Support Pension
- Parenting Payment
- Carer Payment
- Carer Allowance (if not in receipt of a primary income support payment)
- Jobseeker Payment
- Youth Allowance
- Austudy and Abstudy Living Allowance
- Double Orphan Pension
- Special Benefit
- Farm Household Allowance
- Pensioner Concession Card (PCC) holders
- Commonwealth Seniors Health Card holders
- Eligible Veterans’ Affairs payment recipients and Veteran Gold card holders
The payments are exempt from taxation and will not count as income support for the purposes of any income support payment. A person can only receive one economic support payment, even if they are eligible under 2 or more of the categories outlined above. The payment will only be available to Australian residents.
- Pharmaceutical Benefits Scheme – lowering the Safety Net threshold. In additional support to ease the cost of living pressures, from 1 July 2022, the PBS Safety Net thresholds will be reduced from $1,542.10 to $1,457.10 for general patients and from $326.40 to $244.80 for concessional patients.
As a result of these changes, concessional patients will reach the PBS Safety Net with approximately 12 fewer scripts per year, and two fewer scripts for general patients in a calendar year. On reaching the PBS Safety Net, concessional patients receive their PBS medicines at no cost for the rest of the calendar year and general patients receive their PBS medicines at the concessional co-payment rate which is currently $6.80 per prescription. The change to the Safety Net thresholds will take effect from 1 July 2022.
- Small business – skills and training boost. Small businesses (with aggregated annual turnover of less than $50 million) will be able to deduct an additional 20 per cent of expenditure incurred on external training courses provided to their employees. The external training courses will need to be provided to employees in Australia or online, and delivered by entities
registered in Australia. Some exclusions will apply, such as for in-house or on-the-job training and expenditure on external training courses for persons other than employees.
The boost for eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year. The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2024, will be included in the income year in which the expenditure is incurred.
The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 until 30 June 2024.
- Small business – technology investment boost. Small businesses (with aggregated annual turnover of less than $50 million) will be able to deduct an additional 20 per cent of the cost incurred on business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud-based
services. An annual cap will apply in each qualifying income year so that expenditure up to $100,000 will be eligible for the boost.
The boost for eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year. The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2023 will be included in the income year in which the expenditure is incurred.
The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 until 30 June 2023.
Scott Malcolm has been awarded the internationally recognised Certified Financial Planner designation from the Financial Planning Association of Australia and is Director of Money Mechanics. Money Mechanics is a fee for service financial advice firm who partner with clients in Melbourne, Canberra, Newcastle and Sydney to achieve their life and wealth outcomes. Money Mechanics Pty Ltd (ABN 64 136 066 272) is a Corporate Authorised Representative (No. 336429) of Infocus Securities Australia Pty Ltd (ABN 47 097 797 049) AFSL and Australian Credit Licence No. 236523
The information provided on this article is of a general nature only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information you should consider its appropriateness having regard to your own objectives, financial situation and needs.