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
End of investment incentives?
The temporary full expensing rules provide businesses with a turnover of up to $5 billion with an immediate deduction for 100% of the cost of eligible depreciating assets. This measure will end on 30 June 2023. To take advantage of this limited incentive, purchase eligible depreciating assets and install them ready for use prior to 30 June 2023.
Paid parental leave
The Federal Government has announced the biggest expansion of the Paid Parental Leave (PPL) scheme since 2011.
PPL will be increased from 18 weeks to 26 weeks by FY26-27. To encourage both parents to access the reformed PPL scheme, there will be a yet to be determined ‘use it or lose it’ portion for each parent.
Taxation
While taxation did not feature broadly in this Budget, the government has previously committed to implementing the stage three tax cuts introduced by the previous government and due to take effect from 1 July 2024.
Prepare for an ATO visit
The ATO has renewed funding to focus on key-areas on non-compliance for individuals, the shadow economy; and new priority areas of observed business risks.
These measures are expected to increase receipts by $6bn over a four-year period from FY22-23. Focus areas include over-claiming of deductions and incorrect reporting of income for individuals.
Look at electric cars
From 1 July 2022 newly acquired electric cars will be exempted from FBT and import taxes if they are below the luxury car tax threshold for fuel efficient vehicles ($84,916 for 2022-23).
The measure covers battery, hydrogen fuel cell and plug-in hybrid cars.
The exemption from FBT will encourage those interested in upgrading to an electric car to use salary packaging measures offered by their employer.
Small Business
The Budget included several measures designed to support the small business community.
These included supporting small and medium-sized businesses to improve energy efficiency and reduce their energy use, delivering a simpler and fairer industrial relations system, and supporting small-business well-being.
As part of their support for small business well-being, the government will commit funds to extending the tailored small business mental health and financial counselling programs, NewAccess for Small Business Owners and the Small Business Debt Helpline.
Skilled migration
The permanent Migration Program will be increased by 35,000 to 195,000 in 2022–23. More than 90% of new places will be for skilled migrants, and more than a quarter targeted to regional areas.
Student and secondary training visa holders will have their work restrictions relaxed until 30 June 2023. This will allow them to work additional hours in any sector, helping to address workforce shortages.
Start-ups
The Government will provide $15.4 million over 4 years from 2022–23 (and $2.8 million per year ongoing) to establish the Startup Year program to deliver income-contingent Higher Education Loan Program loans to up to 2,000 recent graduates, postgraduate and final year undergraduate students per year.
The Start-up Year will support students’ participation in a one-year, business-focused accelerator program at an Australian higher education provider, which will encourage innovation and support Australia’s startup community.
Superannuation
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.
OTHER MENTIONS:
Aged care
The Government is committing $2.5 billion over the next four years to help fund more care for older Australians and to increase nursing numbers in care facilities.
Addressing the Housing crisis
Housing Accord
The purpose of the Accord is to set a target of delivering 1,000,000 new homes by mid-2029.
As part of its commitment, the government will contribute $350m over five years to deliver 10,000 affordable dwellings. States and territories will support delivery of up to a further 10,000 affordable homes.
Institutional housing investment
Coupled with the general low level of institutional housing investment, the government is eyeing the substantial pool of capital held within the superannuation sector as a source of potential funding for housing.
Social and affordable housing
The government previously announced its plans to establish a $10bn Housing Australia Future Fund. Returns generated by the fund will be used to build 30,000 new and affordable dwellings over the course of the next 5 years.
Other housing measures
- the Regional First Home Buyer Guarantee where the government will guarantee 15% of the purchase price for up to 10,000 eligible first home buyers in regional areas,
- Expanding the Defence Home Ownership Assistance Scheme that enables veterans and members of the Defence Force to purchase a home,
- Help to Buy – a shared equity contribution scheme that allows eligible people to buy a home, with the government as a part owner, with a smaller deposit and smaller mortgage.
- Extending the superannuation downsizer contribution opportunity.
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)
