Labor’s 2022 Federal Budget Summary

Labor’s first Federal Budget in almost a decade focuses on providing relief for families, homebuyers, and social security recipients while also maintaining their pre-election promises.

Personal Taxation

  • No changes to personal income tax changes : There were no announced changes to current personal income tax measures. This includes:
    • no changes to the existing Liberal Stage 3 tax cuts which will take effect from 1 July 2024
    • no extension of the Low and Middle Income Tax Offset, which ended 30 June 2022.
  • Support for electric vehicles: For purchases of battery, hydrogen, or plug-in hybrid cars with a retail price below $84,619 (the luxury car tax threshold for fuel efficient vehicles) after 1 July 2022, fringe benefits tax and import tariffs will not apply. Is is worth nothing that Employers will still need to account for the cost in an employee’s reportable fringe benefits.

Home Ownership

  • Housing affordability measures: Labour have focused on improving access to housing for Australians. This is expected to occur largely via the Housing Accord – which combines the efforts of Federal, State, and Local Governments to work on housing affordability and reducing homelessness. Measures announced include:
    • A commitment to the ‘Help to Buy’ scheme which assists first home buyers in buying a home with the Federal Government being a part owner, allowing for a lower amount to be funded by the First Home Buyer.
    • A Regional First Home Buyer Guarantee, effective from 1 October 2022 which, comparable to the existing First Home Deposit Guarantee scheme, is expected to assist up to 10,000 first home buyers with mortgage guarantee, removing the need for lenders mortgage insurance and allowing them to buy with a lower deposit sooner.

Superannuation

  • Reducing the eligibility age to make downsizer contributions: Legislation has been introduced to reduce the downsizer eligibility age from 60 to 55. This change will take effect from the first quarter after it is passed into law, which is expected to be 1 January 2023.
  • SMSF and tax residency: Labour confirmed their intention to continue with Liberal’s 2021/22 Budget announcement of extending the temporary trustee absence period from 2 years to 5 years, along with removing the ‘active member’ test. Implementing these changes will help SMSFs to continue to maintain their Australian tax residency, even while members are overseas, and allow them to continue to contribute to their funds even if they become non-tax residents.
  • Three-year audit cycle for SMSFs not proceeding: Originally announced as part of Liberal’s 2018/19 Budget, Labor has confirmed that they will not proceed with this change and will retain the current audit cycle over SMSFs.

Social Security

  • Child care subsidy changes: As part of a package of reforms to encourage parents to return to the workforce, Labour have promised to work on reducing the cost of childcare for families. As a result of budget announcements, the maximum child care subsidy will increase from 1 July 2023 to 90% for families earning less than $80,000. For every $5,000 earned over this threshold the subsidy will reduce by 1% – tapering off in full for families with income above $530,000. As per existing arrangements, the higher rate of subsidy for families with multiple children in care will ceasing once the eldest child reaches 6 years of age, or has been out of care for 26 weeks.
  • Paid parental leave increases: In an attempt to improve Australia’s paid parental leave system, from 1 July 2024 the Paid Parental Leave Scheme will increase the maximum period of leave by two weeks each year – reaching a maximum of 26 weeks by 1 July 2026. In addition, from 1 July 2023, both parents will be able to access leave at the same time or enter into more flexible arrangements than currently available under the limited Dad and Partner Pay limits. The paid parental leave income test will also be extended to include a $350,000 family income test, which provides additional opportunities for families who do not meet the individual income test.
  • Work Bonus deposit for older Australians: As previously announced as an outcome from the Jobs and Skills Summit, age pensioners and veterans over service pension age are expected to receive a one-off credit of $4,000 into their Work Bonus income bank. The Work Bonus typically offsets $300 per fortnight of income earned from employment or self-employment activities. In effect, this will allow pensioners to earn more income without impacting their age pension entitlements, providing a much needed boost the the available workforce.
  • Increased income thresholds for Commonwealth Seniors Health Card: Labor has committed to increasing the income thresholds for the Commonwealth Seniors Health Card up to $90,000 for singles and $144,000 combined for couples when assessing eligibility.
  • Extension of deeming rate freeze: The Government has also confirmed its intention to retain the current deeming rates until at least 30 June 2024.
  • Plan for cheaper medicines: From 1 January 2023, the general patient co-payment for Pharmaceutical Benefits Scheme treatments is expected to reduce from $42.50 to $30.

What should you do?

Before making any decisions around your own circumstances as a result of budget announcements it is always important to reach out and discuss these changes with a suitably qualified and educated professional. Feel free to reach out to our adviser to discuss these changes and how they may impact you and your families.

More to come….

While this provides an overview of some of the headline Budget announcements, we will be providing more in-depth analysis into some of the more niche areas of the budget, such as changes in the Aged Care sector, Small Business, and announcements around training and education

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