Federal Budget October 2022
The Federal Budget was released by the Government on Tuesday 25 October 2022.
We have highlighted those points that we believe are most relevant to our clients and partners, broken down into the following sections:
- Individuals
- SMEs/Business
- Superannuation
- Key Takeaways
Should you want a more in depth read, the ABC has a good overall summary of the Budget “Winners and Losers”.
The announcements focused on easing the cost of living over the coming years, addressing the challenges of a slowing economy, and introducing investments designed to place Australia in a stronger position for the future. There were very few changes to superannuation & taxation, but a number of Social Security, Aged Care, Housing and other measures.
We emphasise that some of these measures are, at this stage, proposals, and will require legislation to be passed through both houses of Parliament to gain Royal Assent.
INDIVIDUALS
- Proceeding with previously legislated changes to tax rates
No change was announced to the previously legislated tax cuts, including ‘Stage 3’, which are to become effective from 1 July 2024.
Personal tax rates and thresholds
(excluding 2% Medicare levy, and excluding Low Income Tax Offset and Low & Middle Income Tax Offset)
| Marginal tax rate % | Thresholds – income range 2022/23 ($) | Marginal tax rate (%) | Thresholds – income range 2023/24 ($) |
| 0 | 0 – 18,200 | 0 | 0 – 18,200 |
| 19 | 18,201 – 45,000 | 19 | 18,201 – 45,000 |
| 32.5 | 45,001 – 120,000 | 30 | 45,001 – 200,000 |
| 37 | 120,001 – 180,000 | – | |
| 45 | > 180,000 | 45 | > 200,000 |
- Enhancing the Paid Parental Leave scheme
The Government proposes to introduce greater flexibility to the Paid Parental Leave Scheme from 1 July 2023 by combining Parental Leave Pay and Dad and Partner Pay into a single 20 week payment, and adding a number of other changes to increase flexibility. From 1 July 2024, the Government will start expanding the scheme by two additional weeks a year until it reaches a full 26 weeks from 1 July 2026.
- Increasing the Child Care Subsidy (CCS)
The CCS is a percentage-based subsidy based on family income that assists with the cost of child care. The Government proposes to increase the maximum CCS rate from 85% to 90% for families earning less than $80,000, as well as increase the subsidy rate (reduce the tampering) for families earning above this level.
- Lifting the income threshold for the Commonwealth Seniors Health Card
As previously announced, the Government has proposed increasing the income threshold for the Commonwealth Seniors Health Card from $61,284 to $90,000 for singles and from $98,054 to $144,000 (combined) for couples.
- Freezing of Income Test deeming rates
The Government will freeze social security deeming rates at their current levels until 30 June 2024. The lower deeming rate will remain frozen at 0.25%, and the upper rate will remain at 2.25%, providing some certainty on deeming of income in an environment of rising interest rates.
- Encouraging workforce participation by pensioners
A number of proposals were announced to incentivise pensioners to engage in paid employment, including temporarily increasing the Work Bonus income bank; extending the qualification period for Pensioner Concession Cards (after payments cease due to employment); and suspending, instead of cancelling, benefits and entitlements for up to two years.
- Incentivising pensioners to downsize
Legislation before Parliament is intended to reduce the financial impact on pensioners looking to downsize their homes in an effort to minimise the burden on older Australians and free up housing stock for younger families. The measures include extending the social security assets test exemption for principal home sale proceeds from 12 months to 24 months for income support recipients; and amending the social security income test, to apply only the lower deeming rate to the proceeds when calculating deemed income for up to 24 months.
- Lowering the Pharmaceutical Benefits Scheme (PBS) general co-payment
The Government will reduce the maximum general co-payment for medications on the PBS from $42.50 per script to $30 per script.
- Increasing funding to and improving aged care
The Government has announced additional funding and reform for the aged Care sector, including requiring all facilities to have a registered nurse onsite 24 hours per day, 7 days a week from 1 July 2023 and increasing care minutes to 215 minutes per resident per day from 1 October 2024.
- Powering Australia – Electric Car Discount
From 1 July 2022, the measure will exempt new battery, hydrogen fuel cell and plug-in hybrid electric cars from fringe benefits tax and import tariffs if they have a first retail price below the luxury car tax threshold for fuel-efficient cars ($84,916 in 2022‑23), increasing affordability and incentivising salary packaging.
SME’s/BUSINESS
- Reversal of depreciation self-assessment of effective life
The Government will not proceed with the measure to allow taxpayers to self-assess the effective life of intangible depreciating assets, announced in the 2021-22 Budget. Reversing this decision will maintain the status quo – effective lives of intangible depreciating assets will continue to be set by statute.
SUPERANNUATION
- Reducing the qualifying age for downsizer contributions to 55
Currently, downsizer contributions to superannuation can only be made by individuals age 60 or older (prior to 1 July 2022, the minimum qualifying age was 65). The Government is proposing to (further) lower this age to 55.
- Confirmed – Relaxing residency requirements for SMSFs
The previous Government announced in the 2021-22 Federal Budget the proposal to relax the residency requirements for self-managed superannuation funds (SMSFs), however, this was not legislated. The current Government has affirmed their intention to proceed with this measure.
KEY TAKEAWAYS
- Personal Taxation
The Government has announced personal tax rates to remain unchanged for 2022 -2023, paid parental leave expected to be expanded and an increase of up to $530,000 for child care subsidy rate for household income.
- Business Taxation
The Labor Government has reviewed a number of tax and superannuation related measures that had been announced by the previous Government, but not enacted. It states in the Budget papers that it will abandon eight of these, while three others will have deferred start dates. While most of the measures relate to “business taxation”, note that these proposals also include superannuation and personal tax measures.
- Tax Compliance and Integrity
As appears to be standard practice in modern Budgets, the Government will introduce increased funding for ATO compliance programs. The funding will enable the ATO to modernise its guidance products, engage earlier with taxpayers and tax agents and target its compliance activity. The Budget also confirms to introduce legislation to clarify the difference of digital currencies and not foreign currency.
- Superannuation
Changes to the SMSF residency rules that were previously announced will now start from the income year commencing on or after the date of assent of enabling legislation. The Government has announced they will not be proceeding with the three year cycle for SMSF Audits and the proposal to report standardised disclosure statements for retirement home products.
- Housing Measures
The Government has announced the Regional First Home Buyers Guarantee to be established aiming to encourage home ownership in regional locations. New national Housing Accord will also be introduced between state and territory governments, investors and other key stakeholders .
GOT A QUESTION?
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