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2022 Federal Budget Summary

Cash Payments, Tax Rebates & Fuel Costs

The Federal Government has promised to hand out cash bonuses and cut the cost of fuel for households as it prepares to call an election in mid-May. 

 

More than 10 million individuals will receive a one-off $420 cost of living tax offset from July 1, which boosts the low- and middle-income tax offset (LITO) to a maximum $1,500 for a single income household. The payment will apply to people earning less than $126,000 per year. 

 

Around 6 million people will also receive a oneoff, income tax-exempt payment of $250. More than half of those who will benefit are pensioners, with the remainder receiving other welfare payments such as the Disability Support Pension, Parenting Payment, Jobseeker Payment, and Youth Allowance.

The measures are aimed at helping Australians tackle the rising cost of living, which is expected to drive up official interest rates later this year, while the cost of fuel has soared following the Russia- Ukraine war. 

 

The government has immediately halved the fuel excise (and excise-equivalent customs duty rate) for six months from March 30. It is expected to cut the price of fuel by about 22.1c a litre.  

 

The Budget handouts have been partially funded by Australia’s strengthening economy, which is benefiting from lower-than-expected unemployment and strong global commodity prices. Nonetheless, the underlying cash deficit is predicted to be $79.8 billion or 3.5 per cent of GDP in 2021-22. 

 

The Budget changes are subject to the results of the next election, which is expected to be held in mid-May.

Superannuation 

The super industry has undergone major reforms in the last 18 months with the introduction of Your Future, Your Super regulation, which has prompted many underperforming funds to merge. So it was perhaps no surprise that there were few changes to super announced in the Budget. 

 

The government announced that the lowered minimum pension drawdown rate, which it halved in response to the COVID-19 pandemic, would be extended into 2022-23.  

 

While most retiree portfolios have already recovered from the 2020 market downturn, it will allow those retirees who don’t need to withdraw money to keep extra retirement funds in the tax-advantaged super environment.

There were no changes announced to previously legislated increases in the superannuation guarantee, which rises to 10.5% from 10% on July 1, 2022. Other previously announced changes also start on July 1, including allowing people approaching retirement age to make voluntary super contributions without having to meet the work test and the downsizer contribution scheme opening to those aged over 60 rather than over 65 currently.

Paid Parental Leave and Childcare Subsidies 

A revamped Paid Parental Leave scheme will make it more equitable and flexible while more generous childcare subsidies have been brought forward.   

 

Previously, only the primary carer (often the mother) was eligible to take 18 weeks under the Paid Parental Leave (PPL) scheme and the secondary carer just two weeks under the Dad and Partner Pay scheme. The two schemes will now be merged to create a 20-week scheme, paid at the minimum wage, allowing parents to choose who takes up the scheme regardless of gender or primary carer status. 

 

The eligibility criteria has also been broadened, allowing households earning up to $350,000 a year to qualify, while single parents also get an extra two weeks of government-funded paid parental leave. 

 

Previously announced childcare subsidy changes, which remove the annual cap and increase subsidies for more than one child, have been brought forward from July 1 to March 7. They are expected to save families up to $2,260 per year on childcare costs. 

 

The government is also committing $1.3 billion to support the new National Plan to End Violence against Women and Children 20222032, which is being finalised with states and territories.

Health Funding 

The government announced $2.4 billion over the next five years to add new items to the Pharmaceutical Benefits Scheme (PBS) and a further $525.3 million to reduce the PBS safety net threshold from July 1. For example, cystic fibrosis treatment Trikafta is now PBS-eligible after first being recommended for listing back in December 2021. 

 

The PBS safety net thresholds are also being lowered, meaning about 2.4 million people will qualify for free or discounted prescription medicines. 

 

With the COVID-19 pandemic still a risk as winter approaches, the government has allocated $4.2 billion in 2022-23 to boost health care, including $1 billion for more vaccines and $2.6 billion to replenish personal protective equipment.

Small and Medium Businesses 

The government has increased tax breaks for small and medium businesses investing in new technology and skills. 

 

Businesses with turnover of up to $50 million will be able to deduct an additional 20 per cent of expenditure incurred on Australian registered external training courses provided to employees. They will also be able to deduct an additional 20 per cent of expenditure (capped at $100,000) on business expenses and depreciating assets that support digital adoption, such as cloud-based services or portable payment devices. 

 

However, the temporary full expensing of investments, aimed at boosting investment during the pandemic, will end on June 30, 2023 as expected.  

 

If you have any questions about the budget or your circumstances, please don’t hesitate to give us a call on 02 9555 8188.

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The information contained within this website does not consider your personal circumstances and is of a general nature only. You should not act on it without first obtaining professional financial advice specific to your circumstances. Before purchasing any financial product, always consider the relevant Product Disclosure Statement (if applicable) which provides full details of risks, terms and conditions.

Some details (including names) have been modified for privacy purposes and assumptions have been applied regarding future interest rates, investment returns, the client’s circumstances and other financial and economic variables for illustrative purposes – actual outcomes may vary.

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