On Tuesday night Treasurer Josh Frydenberg delivered the much anticipated 2022-23 Federal Budget. Given that there is an upcoming election in May, it’s not surprising to see a range of cost-of-living measures announced to ease the impact of rising inflation on low and middle-income earners.
The Treasurer announced that economic growth forecasts had been revised upwards due to high commodity prices, increased consumer spending, stronger-than-expected momentum in the labour market and a falling unemployment rate. Unemployment is expected to fall as low as 3.75% in the September 2022 quarter.
So, what are the key spending measures, and how will they impact you?
Tax cuts
The low and middle-income tax offset (LMITO) will be increased for the 2021-22 income year in an attempt to assist with rising cost of living expenses.
The proposed tax cuts will increase the LMITO by $420 for the 2021-22 income year, resulting in a maximum offset of $1,500 for individuals and $3,000 for couples. Taxpayers with income over $126,000 will not receive the additional $420.
Temporary reduction in fuel excise
The cost of petrol prices has been a hot conversation topic in living rooms all over the country in the past few weeks. To help reduce the cost of filling up at the bowser, the government has announced that the fuel excise and excise equivalent customs duty rate that applies to petrol and diesel will be halved for the next six months.
Halving the rate of excise and excise-equivalent customs duty currently applied to petrol and diesel will see the rate decrease from 44.2 cents per litre to 22.1 cents per litre.
Superannuation and retirement
The 50 per cent reduction of the minimum drawdown requirements for account-based pensions will be extended to the end of the 2022/23 financial year.
This measure was first announced as part of the Covid-19 Stimulus package for the 2019-20 financial year and has since been extended twice. There were no changes proposed to the Superannuation Guarantee (SG) rate, which will rise to 10.5 per cent from 1 July 2022, as was outlined in previously drafted legislation.
Business support
Measures have been announced to boost technology, skills, and training within the small business sector.
Small businesses (those with an aggregated turnover of less than $50 million) will be able to deduct a further 20 per cent of expenditure on the following items:
- Expenditure incurred in providing external training courses to employees.
- Costs incurred on business expenses and depreciating assets that support their digital adoption. This includes portable payment devices, subscriptions to cloud-based services or cyber security systems.
Social security
Economic support payments of $250 will be made to eligible recipients to help ease the cost of living pressures. The payment will be made in April 2022 to welfare recipients and holders of the Pensioner Concession Card and Commonwealth Seniors Health Card. The payments are exempt from taxation and will not count as income support for the purpose of any income support payment.
Additional support will also be provided by lowering the safety net threshold of the Pharmaceutical Benefits Scheme, which will be reduced from $1,542 to $1,457 for general patients and from $326 to $244 for concessional patients.
Women’s economic security
Several paid parental leave measures have been introduced to support women’s economic security and leadership. These include:
- Introducing an enhanced Paid Parental Leave scheme for eligible working families by integrating Partner Pay, Dad Pay and Parental Leave Pay to provide families with up to 20 weeks of leave that can be used in ways that suit their specific circumstances.
- Broadening the income test to include an additional household income threshold of $350,000. This is intended to further support workforce participation for women who are the household’s primary income earner.
- Providing eligible single parents with access to an additional two weeks of Paid Parental Leave.
Spending has also been pledged towards:
- Creating pipelines for women to progress into leadership and board positions.
- Supporting women commencing in trade occupations.
- Encouraging women to consider taking up careers in manufacturing and the technology workforce.
- Enabling more women to further develop entrepreneurial skills.
Housing affordability and home ownership
To improve homeownership numbers amongst first home buyers and low and middle-income earners, the number of places offered as part of the Home Guarantee Scheme has been increased to 50,000 per year for the next three years and then 35,000 on an ongoing basis after that.
The guarantees will be allocated as follows:
- 35,000 guarantees per year ongoing for first home buyers.
- 5,000 places per year to 30 June 2025 for single parents with at least one dependent child.
- 10,000 places per year to 30 June 2025 for a Regional Home Guarantee that will support eligible citizens who have not owned a home in the past five years to purchase a new home in a regional location.
There are several eligibility requirements that individuals must also meet in order to qualify for the Home Guarantee Scheme.
The Home Guarantee Scheme helps eligible Australians buy a home sooner with a smaller deposit and without the need to pay lenders mortgage insurance (LMI).
Other key spending areas outlined in the budget but not mentioned above include defence, cyber security, mental health, the health of women and girls, infrastructure projects in regional Australia and disaster support.
