2022-23 Federal Budget – Impact on Individuals
The government has introduced several initiatives in the 2022-23 federal budget that are designed to benefit individuals.
Cost of Living Relief
The buzzwords for the 2022 budget were ‘cost of living relief’, with a number of initiatives announced to ease the pressures associated with the rapidly increasing cost of living caused by COVID-19, natural disasters and international pressures.
One off Low-and Middle-Income Tax Offset (LMITO) Increase
An additional $420 will be added to the LMITO offset for the 2021-22 financial year. This means that low-and-middle-income earning individuals will receive the benefit of up to $1,500 (previously it was $1,080) with their 2022 income tax return and couples up to $3,000.
The new maximum LMITO amounts are set out in the table below:
|Up to $37,000
|$37,000 – $48,000
||$675 plus 7.5% of the amount of income over $37,000
|$48,000 – $90,000
||$1,500 (the new maximum offset)
|$90,000 – $126,000
||$1,500 less 3 cents for every dollar above $90,000, capped at $420
|$126,000 or more
The LMITO will be received on assessment after the individual lodges their tax return for the 2021-22 year.
Notably, the government did not announce an extension to the LMITO, which is scheduled to cease at the end of the 2022 financial year with the increased payment. However, an extension has not been ruled out and has occurred in the past.
Cost of Living Payment to Social Security Recipients
A $250 payment will be made in April 2022 to individuals who are currently in receipt of an Australian government allowance or pension to ease the pressure associated with the rising cost of living. The payment is only available to Australian residents and is exempt from income tax.
The payment will be made available to those that receive the age pension, disability support pension, parenting or carer payments, carer allowance (if not in receipt of a primary income support payment), Jobseeker payment, youth allowance, Austudy or Abstudy allowance, double orphan pension, special benefit, farm household allowance and some Veterans’ Affairs payments. People who hold a Pensioner Concession Card, Commonwealth Seniors Health Card or Veteran Gold card will also receive the payment.
Individuals will only receive one payment, regardless of the number of pensions or allowances they regularly receive.
Decreased Fuel Excise
A temporary 50% reduction to fuel excise will be in place for 6 months from 12:01am on 30 March 2022 to 11:59pm on 28 September 2022.
The reduction will reduce the excise from 44.2 cents per litre to 22.1 cents per litre and is estimated to save a family with two cars up to $700 over the 6-month period. The excise reduction applies to both petrol and diesel.
Deductibility of COVID-19 Tests
Individuals can claim a tax deduction for the cost of COVID-19 tests required to attend a place of work from 1 July 2021. This deduction includes the cost of both Polymerase Chain Reaction (PCR) Tests and Rapid Antigen Tests (RATs).
Tests taken for purposes outside of attending a place of work will not be deductible.
As expected, the superannuation guarantee rate will increase from 10% to 10.5% from 1 July 2022 for all individuals. The superannuation guarantee rate will continue to increase by 0.5% each year until it reaches 12.0% from 1 July 2025.
The concessional contributions cap will remain at $27,500 for the 2022-23 year for all individuals. This means that the maximum tax-deductible contribution that can be made before extra charges are levied is $27,500.
Families, Health and Aged care
Enhanced Paid Parental Leave
The current Parental Leave Payment (18 weeks paid leave for the primary carer) and the Dad and Partner leave payment (2 weeks paid leave) will be combined under a new Paid Parental Leave Scheme which will allow eligible working families to access up to 20 weeks of leave that can be used in ways that suit their circumstances. Leave will be fully flexible and both parents can decide how to best split their 20 weeks of paid leave between themselves.
The income test will be broadened to a threshold of $350,000 in family household income (currently the income threshold of $151,350 applies to the mother only).
The Paid Parental Leave can be taken at any time within two years of the birth or adoption of the child.
An additional two weeks of Paid Parental Leave will also be made available to eligible single parents, meaning they can now access the full 20 weeks available to couples.
COVID-19 Response Package – Aged Care
The government has announced that an additional $458.1 million in funding will be allocated to the Aged Care sector over the next five years to manage the impact of COVID-19. This includes the provision of bonuses of up to $800 to aged care workers in residential aged care and home care over two years from 2021-22.
Funding for the Aged Care Preparedness program will also be extended and expanded in 2022-23 with the goal of managing and preventing outbreaks of COVID-10 and preparing providers with the transition to living with COVID-19.
The capacity for vaccination services and PCR testing for both residents and staff will also be targeted in the short term.
Pharmaceutical Benefits Scheme – Lowering the Safety Net Threshold
From 1 July 2022, the Pharmaceutical Benefits Scheme (PBS) Safety Net Threshold will be reduced, allowing patients to reach the safety net sooner. It is estimated that concessional patients will require 12 fewer scripts, and general patients two fewer scripts, before the safety net is reached.
Once the PBS safety net has been reached, concessional patients receive PBS medicines for free for the rest of the calendar year and general patients receive their PBS medicines at a reduced rate; currently $6.80 per prescription.
Home Guarantee Scheme
The government will provide an additional $8.6 million to expand the Home Guarantee Scheme, increasing the number of places to 50,000 per year for three years from 2022-23 and then 35,000 per year thereafter. The Home Guarantee Scheme allows eligible homebuyers to purchase a home with a deposit of less than the 20% that is normally required without needing to pay lender’s mortgage insurance.
The scheme has been specifically expanded to allow more first home buyers, families and people wishing to live in regional areas to participate.
The scheme can be used together with other government initiatives, such as the First Home Super Saver Scheme, HomeBuilder grant or State and Territory First Home Owner Grants, and stamp duty concessions.