Australian Federal Budget 2022 Summary
With the federal election only a couple of months away, it was no surprise to see an Australian federal budget filled with announcements that will appeal to the life of voters – such as cost-of-living relief payments, tax cuts, improved parental leave, small business incentives, and investing in healthcare and essential services.
While superannuation was largely untouched, there were several proposed changes to both individual and business taxation in the Australian federal budget.
Overall, the government focused on continuing its path to economic recovery through creating job opportunities, spending on large infrastructure projects, and encouraging business investment as stated in the Australian Federal Budget Summary.
Some of the measures stated in the Australian Federal Budget Summary are briefly discussed below.
Extension of temporary reduction in minimum drawn down rates
The government has announced a 12-month extension of the temporary 50% reduction in superannuation minimum drawdown rates for account-based pensions and similar products to cover the 2022-23 income year. This will apply to:
•Account-based pensions and annuities
•Transition-to-retirement pensions
•Term allocated pensions and annuities (also known as market-linked income streams).
Halving the minimum drawdown rates was originally announced in the Australian Federal Budget Summary as part of the response to the coronavirus pandemic.
The government stated that even though Australia has entered a period of economic recovery, there is still significant volatility in financial markets due to the ongoing impacts of the coronavirus and the war in Ukraine.
One-off cost of living tax offset for individuals
The government will provide a one-off $420 cost of living tax offset via an increase to the existing low and middle income tax offset (LMITO) for 2021-22. Combined with the existing LMITO, eligible low- and middle-income earners will receive a tax offset of up to $1,500 for the 2021-22 income year.
Currently, the LMITO amount is between $255 and $1,080 and is available for the 2018-19, 2019-20, 2020-21 and 2021-22 financial years. There was no further announcement to extend the LMITO. Therefore, the LMITO is currently due to end after the 2021-22 financial year.
The LMITO for the 2021-22 income year will be paid on 1 July 2022, when individual taxpayers submit their tax returns for the 2021-22 income year. The amount of offset is calculated by the ATO based on the individual’s taxable income.
Increasing the Medicare Levy and Low Income Thresholds
The government will increase the Medicare Levy low-income thresholds for singles, families, seniors and pensioners from the 2021-2022 income year. This is a routine increase and applies retrospectively from the beginning of the financial year.
Coronavirus tests tax deductible
The government restated its intention to introduce legislation to ensure that coronavirus tests (including PCR and Rapid Antigen Tests) are tax deductible when purchased for work-related purposes.
By making these tests tax deductible, it also ensures that businesses will not be subject to fringe benefits tax (FBT) on tests that are provided to employees for this purpose. This measure is expected to be applicable from the beginning of the 2021/22 tax year.
$250 Cost of Living Payment
The government will provide a once-off cost-of-living payment of $250 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.
Based on the Australian Federal Budget 2022 Summary, the payments are exempt from taxation and won’t 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 two or more of the categories outlined above. The payment will only be available to Australian residents.
Aged care funding to implement reforms in response to the Royal Commission
The government will provide $468.3 million over five years from 2021-22 to further implement the government’s response to the Royal Commission into Aged Care Quality and Safety. This funding is to continue ongoing reforms announced in the 2021-22 Australian Federal Budget.
This will include spending in five key areas:
• Home care
• Residential Aged Care Services and Sustainability
• Residential Aged Care Quality and Safety
• Workforce
• Governance
Temporary reduction in fuel excise
From 30 March to 28 September 2022:
The government has announced that it will reduce the fuel excise (and excise-equivalent customs duty rate) that applies to petrol and diesel by 50% for six months. The excise (and excise-equivalent customs duty rate) that applies to all other fuels and petroleum-based products (including LPG and biodiesel), except aviation fuels, will also be reduced by 50% for six months.
The government says this will result in a reduction in excise on petrol and diesel from 44.2 cents per litre to 22.1 cents per litre, which results in total savings (including GST savings) per tank of fuel of:
• $9.72 for a small hatchback with a 40 litre petrol tank
• $14.59 for a mid-sized SUV with a 60 litre petrol tank
• $19.25 for a large 4WD with an 80 litre petrol tank. It will take a while for this to flow through as current fuel stock will have paid this excise.
Conclusion
When compared to previous Australian Federal Budget years, it was a pretty quiet one in regards to superannuation and social security changes, which I must say is great. Some measures from the last Australian Federal Budget are still yet to be implemented. As usual, these are not all active now and will be brought in via parliament. If you are wondering how any of these might impact you, reach out and I will be happy to discuss further.
