2022 Budget Summary
Last night, Treasurer Josh Frydenberg handed down the 2022-2023 Australian Budget, it demonstrated the fiscal dividend of a strong economy, with more Australians in work and fewer Australians on welfare, flowing through to a significantly improved fiscal outlook. The strength of the economy, and in particular the labour market, combined with higher near-term commodity prices, has driven large upward revisions to tax receipts and reductions in unemployment benefit payments. Since The Mid-Year Economic and Fiscal Outlook (MYEFO), the estimated underlying cash balance has improved by a substantial $103.6 billion over the 5 years to 2025‑26. This Budget projects a halving in the deficit to 1.6 per cent of GDP by 2025‑26 before falling to 0.7 per cent of GDP by the end of the medium term. This improvement will flow through to lower debt.
The key takeouts from this year’s Budget include:
- Extension of the temporary reduction in superannuation minimum drawdown rates
- Support for small businesses to adopt digital technology and train and upskill employees with new tax incentives
- Halving petrol and diesel excise for six months, delivering a saving of $300 for the average household
- $420 cost of living tax offset for low- and middle-income earners, and a $250 cost of living payment for pensioners, welfare recipients, veterans and concession cardholders
- National Housing Finance and Investment Corporation to get a $2 billion top-up to support 10,000 more affordable homes
- $17.9 billion of priority road and rail infrastructure as part of a $120 billion 10-year pipeline of work
- $468.3 million extra to implement royal commission recommendations in relation to Aged Care.
- Women’s economic security measures with paid parental leave and help with facilitating job options
- More spending on disability and mental health
Overall, the government focused on continuing its path to economic recovery through creating job opportunities, spending on large infrastructure projects, and encouraging business investment.
JBS Views & Planning Opportunities
We feel that some of the changes in the budget help reiterate the importance of obtaining ongoing advice and continuing to review your situation to ensure that you are structured appropriately and are positioned well for the future.
On a positive note, the reduction of superannuation drawdowns is very welcome, allowing you to keep more of your funds in a tax-effective environment and help with retirement planning strategies.
As in the past please remember all measures outlined in this newsletter are proposals only, each of the proposals must still pass Parliament before they’re legislated.
Superannuation Changes
Extension of the temporary reduction in superannuation minimum drawdown rates – from 1 July 2022
In the lead up to the Federal Budget, it was announced that the temporary drawdown relief for superannuation pensions would be extended. The Government has extended the 50 per cent reduction of the superannuation minimum drawdown requirements for account-based pensions and similar products for a further year to 30 June 2023. The minimum drawdown requirements determine the minimum amount of a pension that a retiree has to draw from their superannuation in order to qualify for tax concessions.
Given ongoing volatility, this change will allow retirees to avoid selling assets in order to satisfy the minimum drawdown requirements.
JBS View:
The temporary drawdown relief implemented in response to COVID-19 was scheduled to expire on 30 June 2022. Due to the ongoing impacts and market volatility, we welcome the extension of this concession. Pension drawdowns in a low or volatile market can negatively impact the longevity of retirement savings. This measure provides greater flexibility for retirees to manage the impact of investment market volatility.
Cost of Living Measures
Temporary reduction in fuel excise – from 30 March to 28 September 2022
The government has announced that it will reduce the fuel excise (and excise-equivalent customs duty rate) that applies to petrol and diesel by 50% for six months reducing petrol and diesel from 44.2 cents per litre to 22.1 cents per litre, which is estimated to result in total savings (including GST savings) per tank of fuel of:
- $9.72 for a small hatchback with a 40-litre petrol tank
- $14.59 for a mid-sized SUV with a 60-litre petrol tank
- $19.25 for a large 4WD with an 80-litre petrol tank.
Cost of Living Offset tax (Low and Middle Income Tax Offset)
The government will provide a one-off $420 cost of living tax offset via an increase to the existing low- and middle-income tax offset (LMITO) for 2021-22. Combined with the existing LMITO, eligible low- and middle-income earners will receive a tax offset of up to $1,500 for the 2021-22 income year. There was no further announcement to extend the LMITO. Below is a summary of the reductions in tax for given taxable income levels:
| Taxable Income | Existing LMITO | Proposed LMITO |
| $37,000 or less | $255 | $675 |
| Between $37,001 and $48,000 | $255 plus 7.5 cents for every dollar above $37,000, up to a maximum of $1,080 | $675 plus 7.5 cents for every dollar above $37,000, up to a maximum of $1,500 |
| Between $48,001 and $90,000 | $1,080 | $1,500 |
| Between $90,001 and $126,000 | $1,080 minus 3 cents for every dollar of the amount above $90,000 | $1,500 minus 3 cents for every dollar of the amount above $90,000 |
| $126,000 or more | $0 | $0 |
Cost of Living Payment – from April 2022
The government will provide a once-off Cost-of-Living Payment of $250 in April 2022 to eligible recipients who receive Government income support. The payments are exempt from taxation and won’t count as income for the purposes of any income support payment. A person can only receive one economic support payment, even if they are eligible under two or more income support payments. The payment will only be available to Australian residents.
JBS View:
We feel any measures aimed at helping alleviate the cost-of-living pressures are beneficial however, we need to be mindful that these measures are only temporary.
It’s important to remember that the changes in the LMITO are purely a tax offset and, can only reduce your tax liability to $0. For a good portion of our clients, we feel the changes in LMITO will provide a small boost from 1 July and feel it is prudent to ensure it is put to good financial use.
Business Support
Small Business – skills and training boost – from 29 March 2022
Small businesses (with aggregated annual turnover of less than $50 million) will be able to deduct an additional 20 per cent of expenditure incurred on external training courses provided to their employees. The external training courses will need to be provided to employees in Australia or online, and delivered by entities registered in Australia. Some exclusions will apply, such as for in-house or on-the-job training and expenditure on external training courses for persons other than employees. The boost for eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year. The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2024, will be included in the income year in which the expenditure is incurred. The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 until 30 June 2024.
Small Business – technology investment boost – from 29 March 2022 until 30 June 2023
Small businesses (with aggregated annual turnover of less than $50 million) will be able to deduct an additional 20 per cent of the cost incurred on business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud-based services. An annual cap will apply in each qualifying income year so that expenditure up to $100,000 will be eligible for the boost. The boost for eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year. The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2023 will be included in the income year in which the expenditure is incurred. The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 until 30 June 2023
Modernisation of PAYG instalment systems – from 1 January 2024
Companies will be able to choose to have their Pay As You Go (PAYG) instalments calculated based on current financial performance, extracted from business accounting software, with some tax adjustments. The aim is to support business cash flow by ensuring instalments reflect current performance. The government will consult with affected stakeholders, tax practitioners and digital service providers to finalise the policy scope, design and specifications of this measure.
JBS View:
These initiatives are great for small businesses and many of our clients will be able to take advantage of these new initiatives. With any deduction, it is important to remember that it’s a deduction, not free money. Business owners should not go out and spend the money unless it is beneficial for your business.
Other Initiatives
Boost to Aged Care
In response to the Royal Commission into Aged Care Quality and Safety, the Government has committed to investing $468.3 million over five years from 2021-22 to further implement the government’s response to the Royal Commission into Aged Care Quality and Safety. This funding is to continue ongoing reforms announced in the 2021-22 Federal Budget. This will include spending in home care, residential aged care services and sustainability, residential aged care quality and safety, workforce, and governance.
Enhanced Paid Parental Leave – effective no later than 1 March 2023
The Paid Parental Leave (PPL) scheme is to be enhanced by integrating Parental Leave Pay and Dad and Partner Pay into a single scheme of up to 20 weeks leave, which can be shared between eligible parents. The aim of the enhancements is to provide more flexibility for families to decide how to best manage work and care. The enhanced PPL scheme can be taken any time within two years of the birth or adoption of their child.
The existing PPL scheme comprised two payments:
- Parental Leave Pay – paid up to 18 weeks at a rate based on the national minimum wage. This payment is currently available to the primary carer who is either the natural mother, the initial primary carer of an adopted child, or another carer under exceptional circumstances.
- Dad and Partner Pay – paid up to two weeks at a rate based on the national minimum wage to fathers and partners
JBS View:
JBS understands the impact Aged Care has on client’s financial situations and the importance of having flexibility on whether you have in-home care or via an Aged Care facility. We welcome the additional funding and the choices this provides to those utilising the services.
Measures aimed to provide greater choices for parents are attractive to provide greater flexibility in regard to work and home life.
If you would like to discuss how any of these latest initiatives may impact you, please reach out and discuss your situation with the JBS Financial team.