The 2022 Federal Budget: Recap and highlights
29 March 2022
Assisting with the increasing cost of living, helping Australians to own their own homes, supporting mental health, and incentivising small businesses to adopt digital technology… these are just some of the proposals Josh Frydenberg handed down as part of the 2022 Federal Budget.
In this article, Dr Jeffrey Scott, MetLife’s Head of Advice Strategy, provides a brief overview of the key highlights from the recent Federal Budget that are most likely to impact financial advisers and/or their clients.
Personal Income Tax: Increasing the Medicare levy low-income thresholds
The government will increase the Medicare levy low-income thresholds for seniors, pensioners, families, and singles from 1 July 2021 so that low-income individuals will continue to be exempt from paying the Medicare levy.
The threshold for:
Cost of Living Payments
The government will put $1.5 billion towards a $250 economic support payment to help with higher cost of living pressures. The payment will be made in April 2022 to eligible recipients of the following payments and concession cardholders:
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 two or more of the categories.
The payment will only be available to Australian residents.
Supporting Retirees: Extension of the temporary reduction in superannuation minimum drawdown rates
The government has extended the 50 per cent reduction of the superannuation minimum drawdown requirements for account-based pensions (and similar products) for a further year to 30 June 2023.
The minimum drawdown requirements determine the minimum amount of a pension that a retiree has to draw from their superannuation in order to qualify for tax concessions. Given ongoing volatility, this change will allow retirees to avoid selling assets in order to satisfy the minimum drawdown requirements.
|Age||2013–14 to 2018–19 income years (inclusive)||2019–20 to 2022–23 income years (inclusive)|
|95 or more||14.0%||7%|
Addressing the cost of living pressures: Temporary reduction in fuel excise
Reduction in fuel excise will commence at 12.01 am on 30 March 2022 and remain in place for six months, ending at 11.59 pm on 28 September 2022. The rate of excise and excise-equivalent customs duty currently applying to petrol and diesel is 44.2 cents per litre. This measure will halve the rate on petrol and diesel to 22.1 cents per litre from 30 March 2022.
Cost of living tax offset
The government will increase the low- and middle-income tax offset (LMITO) for the 2021-22 income year.
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.
Small businesses technology investment boost
The government will introduce a technology investment boost to support digital adoption by small businesses. The boost will apply to eligible expenditures incurred from 7:30pm (AEDT) on 29 March 2022 (Budget night) until 30 June 2023.
Small businesses (with an 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 can 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 expenditures is incurred.
Investing in skills development and growing Australia’s workforce
The government will provide $1.3 billion over 5 years from 2021-22 to support employers to engage and retain new apprentices and reform the Australian Apprenticeships system to sustain a skilled and responsive workforce.
Prioritising mental health
The government will provide $547.0 million over 5 years from 2021-22 to provide mental health Stage 2 reforms through the 5 pillars of the National Mental Health and Suicide Prevention Plan – Prevention and Early Intervention, Suicide Prevention, Treatment, Supporting Vulnerable Australians and Workforce and Governance.
This will include assistance for:
Guaranteeing Medicare: Medical Benefits Schedule – new and amended listings
The government will provide $131.3 million over five years from 2021-22 to update the Medicare Benefits Schedule (MBS).
Women’s economic security package
The government will provide $346.1 million over 5 years from 2021-22 to improve economic security for women by enhancing the Paid Parental Leave scheme by rolling Dad and Partner Pay into Parental Leave Pay to create a single scheme of up to 20 weeks, fully flexible and shareable for eligible working parents as they see fit.
The Paid Parental Leave can be taken any time within two years of the birth or adoption of their child. The income test will also be broadened to have an additional household income eligibility test.
Affordable housing and home ownership
The government will increase the number of guarantees under the Home Guarantee Scheme to 50,000 per year for three 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:
The government will also increase the government guaranteed liability cap of the National Housing and Finance Investment Corporation (NHFIC) 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.
Small business support package
The government will provide $25.2 million over three years from 2021-22 to deliver initiatives to support small businesses.
Ageing and aged care
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, to improve transparency and regulatory standards and continue ongoing reforms announced in the 2021-22 Budget.
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About Dr Jeffrey Scott
Head of Advice Strategy | MetLife
Jeffrey has over 25 years experience in the insurance industry and is most notably credited for creating the first terminal illness benefit for life insurance products in Australia. He has also lectured on financial planning, taxation, super and insurance at the University of Technology and the University of New South Wales – and is a regular media commentator on these topics.
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