Most Australians will enjoy an ongoing lower tax bill in the current and next financial year.
The Low and Middle Income Tax Offset (LMITO) was extended into the next financial year. It provides a one-off tax offset worth up to $1,080 to those earning $48,000 to $90,000, phasing out completely at $126,000. It provides tax relief to approximately 10 million Australians.
There was no change to long-planned tax cuts in 2024-25 that will apply a 30% flat tax rate on earnings between $45,000 and $200,000.
The overall changes announced in the Budget are largely supportive and are a positive for the economy. This is also broadly positive for investment markets although economic and investment cycles do not always move in unison.
The government announced several extensions of current schemes to encourage businesses to invest and create jobs.
Full expensing was extended allowing most businesses to deduct the full cost of eligible depreciable assets until June 30, 2023. Treasury estimates the temporary full expensing will apply to around $320 billion worth of investment.
The temporary loss carry-back provision will also continue for another year, allowing most companies to offset tax losses from the 2022-23 income year against previously taxed profits from as far back as 2018-19.
A new phase of the SME Guarantee Scheme – the SME Recovery Loan Scheme – will encourage greater lending to eligible businesses that received JobKeeper or were affected by the floods. It will guarantee up to 80% of the lenders’ loan and cap the rate at around 7.5%. Borrowers may also be offered repayment holidays of up to 24 months.
The JobTrainer program for 17 to 24-year-olds and the unemployed has been extended for another year and a further 163,000 places. The government committed another $500 million to expand the program, which has already created more than 100,000 training places for in-demand areas such as health, aged and disability care, IT and trades.
An additional $2.7 billion has been set side to extend the Boosting Apprenticeship Commencements program. It is expected to support more than 170,000 new apprentices and trainees by paying businesses a 50% wage subsidy (capped at $7,000 per quarter per employee) over 12 months.
The government has relaxed several thresholds that will potentially benefit older Australians, including removing the work test from July 1, 2022. Retirees aged between 67 and 74 currently need to work at least 40 hours over 30 consecutive days during the financial year if they want to top up their super. From July 1,2022 this will no longer be the case.
Downsizer contributions will also become available to those aged over 60 – down from 65 previously. The scheme is designed to encourage downsizing the family home by allowing a one-off super contribution of $300,000 ($600,000 for couples) from the sale.
The government has made further made its home equity release Pension Loans Scheme (PLS) better for older Australians. A “no negative equity guarantee” will eliminate the risk that borrowers may end up repaying more than the market value of their property.
Retirees will also soon be able to draw down their home equity as a lump sum ($12,000 for individuals and $18,000 for couples – about half the value of the Age Pension), which will help meet large one-off expenses such as buying a car.
Investors stuck in closed retirement products, such as Term Allocated Pensions (TAPs), will also have a two-year window to switch to newer, more flexible products.
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