The second Federal Budget this year from the now Labor government has no big surprises and is conservative by nature given
- the present state of the economy post-COVID,
- a worsening economic position due to inflation and increased global instability,
- rising interest rates and cost of living pressures.
This Budget has no “hero” initiatives, addresses cost of living pressures, has several environmental initiatives and is of course subject to the successful passage of relevant legislation.
NOTABLE MENTIONS:
Supporting more Australians into home ownership
A “Help to Buy” shared equity scheme will be established to assist homebuyers to purchase a new or existing home with an equity contribution from the Federal Government.
Eligible home buyers will need a minimum deposit of 2%, with an equity contribution from the Federal Government of up to a maximum of 40% of the purchase price of a new home, and up to a maximum of 30% of the purchase price for an existing home.
A Regional First Home Buyer Guarantee will be introduced to expand home ownership in regional areas. From 1 October 2022, 10,000 places will be available each financial year to support regional first homebuyers to purchase new or existing homes with a deposit from 5%.
SUPERANNUATION
The Budget was quiet on superannuation, however there were two superannuation announcements that will affect some people:
Downsizer contributions
As previously announced, the government has confirmed the minimum age applying to people wishing to make downsizer contributions to superannuation will reduce from 60 years to 55 years. This change will take effect from the beginning of the first quarter following the relevant legislation receiving Royal Assent.
Self-managed superannuation funds
In the 2021-22 Budget, the previous government announced plans to amend residency rules for self-managed superannuation fund including the abolition of the active member test and extending the central management and control safe harbour from 2 years to 5 years. The government announced they plan to introduce legislation to Parliament with the changes applying from the start of the financial year following the legislation receiving Royal Assent.
SOCIAL SECURITY
The Government re-announced several social security measures in the budget papers. These measures provide positive changes for many pensioners who are working or considering downsizing their home as well as those looking to qualify for a Commonwealth Seniors Health Card.
Extension of asset test exemption for home sale proceeds
This measure aims to reduce the financial impact on pensioners looking to downsize their homes in the hope to minimise the burden on older Australians and free up housing stock for younger families.
From 1 January 2023, it is proposed that a two-year asset test exemption will be available for home sale proceeds that are going to be used to buy, build, rebuild, repair or renovate a new principal home. Currently, the proceeds from a home sale that are earmarked to buy, build, rebuild, repair or renovate a new principal home are only exempt from the asset test for 12 months.
Only the amount of sale proceeds that will be used for the new home are exempt. For example, if your home is sold for $1 million and $800,000 of this will be used for the new home, the amount exempt under the asset test is limited to $800,000.
The impact of home sale proceeds during the exemption period will also reduce under the income test. Sale proceeds are often deemed to earn an income at the higher 2.25% rate. Under this measure, the exempt amount will have the lower deeming rate applied (currently 0.25% frozen until 30 June 2024).
Reduced impact of employment income on pensioners
Currently, the Work Bonus system allows age and veterans pensioners (both employees and the self-employed) to earn $7,800 per year of employment income with no impact on their pension payments under the income test.
The Government has proposed to add a one-off credit of $4,000 to their Work Bonus income bank effectively increasing the amount of exempt employment income that can be generated in this financial year from $7,800 to $11,800.
The additional $4,000 income credit will be available until 30 June 2023.
Other measures supporting working pensioners include a proposal to allow employment income to exceed the income limits for up to two years without a need to re-submit a pension claim and the Pensioner Concession Card will also be retained for a period of two years where the pensioner has a nil rate of pension due to employment income.
Commonwealth Senior Health Card income thresholds increase
The Government will increase the income thresholds for eligibility to the Commonwealth Seniors Health Card to:
- $90,000 per year for singles (up from $61,284) and
- $144,000 combined per year for couples (up from $98,054)
WELFARE
Cost of medication to decrease
From 1 January 2023, the Government will decrease the general patient co-payment for treatments on the Pharmaceutical Benefits Scheme from $42.50 to $30.00. This provides a $12.50 reduction per script for those paying the general rate.
More affordable childcare
The Government is investing $4.7 billion to make early childhood education and care more affordable for Australian families. It is estimated that 96 per cent of families with children in care will be better off and no family is worse off.
From July 2023, Child Care Subsidy rates will increase up to 90 per cent for eligible families earning less than $530,000. It is hoped that these measures will increase the hours worked by women with young children by up to 1.4 million hours per week in 2023–24 (or an extra 37,000 full‑time workers).
Paid Parental Leave
The Government is investing over $530 million over a four-year period to expand the Paid Parental Leave Scheme to provide greater support to families. By 2026, families will be able to access up to 26 weeks of Paid Parental Leave.
The Scheme will have increased flexibility as either parent will be able to claim Paid Parental Leave first and both parents can receive the payment at the same time. The reforms also allow parents to take leave in blocks as small as a day at a time, with periods of work in between.
