2022/2023 Federal Budget – Impact on Individuals
The Government has not introduced any new individual tax measures. The focus of this Budget was towards the cost of living relief measures, especially targeted towards working parents. These measures include increases to the paid parental leave, child care subsidy and affordable housing.
Cost of Living Relief
The buzzwords for the 2022/2023 budget were ‘cost of living relief’, with several initiatives announced in order to ease the pressures that are associated with the rapidly increasing cost of living caused by COVID-19, natural disasters and international pressures.
Personal Income Tax Rates
From 1 July 2024, there will be updates to the personal income tax rates. This will see the removal of the 37% tax bracket, and the 32.5% tax bracket being reduced to 30%. Additionally, the threshold for the 45% tax bracket will increase from $180,000 to $200,000. These income tax changes were legislated by the previous Government.
The new personal tax rates are set out in the table below:
||Tax Rates from 1 July 2024
|Up to $18,200
|$18,201 – $45,000
|$45,001 – $200,000
The new personal tax rates will not come into effect until 1 July 2024.
Low and Middle Income Tax Offset (LMITO)
Notably, the current Government did not announce an extension to the LMITO, which is scheduled to cease at the end of the 2022 financial year. However, an extension to the payment has not been ruled out and has been extended in the past.
Families, Health & Aged Care
Child Care Subsidy (CCS)
The Government has announced that it will provide $4.7 billion over four years from 2022/2023, and $1.7 billion per year ongoing in order to deliver cheaper childcare and ease the cost of living.
The proposed changes include:
- An increase in the maximum CCS rate from 85% to 90% for the first child in care.
- An increase to the CCS family income eligibility threshold to $530,000.
- An increase to the CCS rate for all of the families that earn less than the threshold.
Boosted Paid Parental Leave (PPL)
The government has also introduced reforms to the PPL scheme, investing $531.6 million over four years from 2022/2023 and $619.3 million per year ongoing.
The current Parental Leave Payment (18 weeks of paid leave for the primary carer) and the Dad & Partner Leave Payment (2 weeks of paid leave) will be combined under a new PPL 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.
From 1 July 2024 – 1 July 2026, an expansion of the PPL scheme to 26 weeks will be phased in by adding two weeks to the PPL each year.
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 PPL can be taken at any time within two years of the birth or adoption of the child.
An additional two weeks of PPL will also be made available to eligible single parents, meaning that they can now access the full 20 weeks that are available to couples.
COVID-19 Response Package – Aged Care
The Government has announced that an additional $2.5 billion over 4 years from 2022/2023 will be used in order to support reform in the aged care sector. The funding will ensure that all of the facilities have a registered nurse on duty 24 hours a day from 1 July 2023 and an increased care minutes per residency per day from 1 October 2024.
The Government also plans to build one million new houses within the next decade. The establishment of the $10 billion Housing Australia Future Fund has been announced, which will fund the delivery of 30,000 social and affordable homes. Furthermore, an initial $350 million in federal funding over five years from 2024/2025 in order to deliver an additional 10,000 affordable homes.