The 2022 Federal Budget , brought down on 29 March (6 weeks earlier than normal), is the last Budget before the next Federal Election is due to be held.
This Budget Summary is not designed to cover all aspects of the Federal Budget. It is solely focused on the key financial planning areas which relate to our clients – superannuation, taxation and social security. Click here for a PDF verison.
Key proposals of relevance include:
- Continuation of the 50% reduction in minimum pension payment till 1 July 2023.
- $250 one-off cost of living payment to pensioners and concession card holders (including Commonwealth Seniors Health Card).
- An increase in this year’s Low and Middle Income Tax Offset of $420.
- 50% reduction in the fuel excise until 28 September 2022.
Please note, the measures announced in the Budget are not a fait accompli. In many cases, legislation will need to be passed, and that will not occur until after the election. And this also assumes that the current Government will be returned to form the 47th Australian Parliament.
One item of interest in the ‘Budget Strategy and Outlook’ (page 64) were the price assumptions for key commodities. The expected price falls are profound:
Table of contents
- Superannuation & Pensions
- Small Business
- Social Security
Superannuation & Pensions
Extension of the temporary reduction in minimum pension payments
The Government has again extended the ‘temporary’ 50 per cent reduction in the minimum drawdown requirements for account-based pensions for a further year. These rates determine the minimum amount of a pension that a retiree has to draw from their superannuation pensions.
COMMENT: This is beneficial to those who don’t need the standard legislated minimum amount to live off, or those who have assets outside of super they can use to fund their living costs. In both cases, preserving funds inside a tax-free pension makes sense.
Cost of living tax offset
The Low and Middle Income Tax Offset (LMITO) will increase, providing an additional $420 to reduce tax payable for eligible taxpayers in the 2021/22 financial year. This offset is non-refundable and available to those earning up to $126,000 per annum.
Eligibility for the LMITO is as follows:
COMMENT: The existing and proposed LMITO are non-refundable tax offsets. This means the amount of these tax offsets can only reduce a client’s tax liability to $0, but the client can’t receive a refund of any unused tax offsets. Non- refundable tax offsets can’t reduce a client’s Medicare Levy.
Halving of fuel excise
For six months from 12:01am 30 March 2022, the excise on fuel and petroleum based products will be halved. Whilst not a direct tax, the expectation is this should result in lower fuel prices during this period. Half the current excise on fuel and diesel is 22.1 cents per litre.
Small business training deductions
The Government is proposing to allow a deduction of 120% of eligible costs incurred in training staff in small businesses (i.e. businesses with an aggregated annual turnover less than $50 million). Generally, training must be delivered by an external registered training organisation in Australia and is only deductible if it relates to employees. For example, if an employer pays an external training company $5,000 to deliver eligible training to its employees, the employer can deduct $6,000 in its tax return. This measure is proposed to apply from 29 March 2022 to 30 June 2024.
Small business technology deductions
Small businesses may be eligible to deduct up to 120% of eligible business costs which support the business adopting digital technologies, such as cloud services or cyber security systems. Eligible expenditure will be capped at $100,000 per financial year and the measure is expected to operate from 29 March 2022 to 30 June 2023.
Cost of living payment
Commonwealth Seniors Health Card holders will receive a one-off $250 payment in April 2022. Other eligible recipients for this payment include the Age Pension, Disability Support Pension, Carer Payment and Allowance, JobSeeker Payment (and equivalent DVA payments), as well as individuals holding a Pensioner Concession Card.
COMMENT: The payments will not be means tested and will be tax-free. Individuals will only receive one payment even if they receive multiple qualifying benefits.
Paid parental leave
Under current rules, paid parental leave provides parents with up to 18 weeks of paid leave. An additional two weeks’ leave may also be available to partners eligible for Dad and Partner Pay, however, the maximum available to single parents is 18 weeks.
Parental leave pay is proposed to be combined with Dad and Partner Pay resulting in a single scheme of up to 20 weeks leave which can be shared between parents as they see fit. This leave can be taken at any time within two years of birth or adoption.
The First Home Loan Deposit Scheme and Family Home Guarantee allow eligible individuals to purchase a home with as little as a 2% deposit, and the Government will guarantee the loan. This removes the need for lenders mortgage insurance. Currently, guarantees are limited to 10,000 per year. From 1 July 2022, changes to the existing home guarantee schemes will be made by allocating a total of 50,000 guarantees.
COMMENT: Is it a good thing to burden young people with significant debt and hardly any equity in the property?
20 free Rapid Antigen Tests (RATs) for concession card holders
From 31 July 2022, the Rapid Antigen Test Concessional Access Program will deliver up to 20 free RATs over seven months until 31 July 2022 to all Australians with a concession card, including Department of Veterans’ Affairs card holders.
Federal budget analysis from previous years
We hope you enjoyed, or at least found benefit, in our 2022-23 Federal Budget analysis. Previous years can be found here:
If you want to read the full budget documents, the government keeps an “archive of budgets” here.