30 Mar Federal Budget Update – March 2022
With the federal election only a couple of months away, it was no surprise to see a Budget filled with announcements that will appeal to voters – such as cost-of-living relief payments, tax cuts, improved parental leave, small business incentives, and investing in healthcare and essential services. While superannuation was largely untouched, there were several proposed changes to both individual and business taxation. Overall, the government focused on continuing its path to economic recovery through creating job opportunities, spending on large infrastructure projects, and encouraging business investment.
It’s worth remembering we’ve had strong equity markets, record house price growth, record stimulus and the lowest interest rates the country has seen. There’s $250 billion sitting in household savings accounts and the unemployment rate is projected to fall below 4%. The idea that a large number of people in the middle class need a boost from government after such a boom is an interesting one.
Below are what we feel are the key take outs from the Federal Budget 2022:
Superannuation Minimum Drawdown Reduction Extension: The 50% reduction of superannuation minimum drawdown requirements for account-based pensions has been extended until 30 June 2023. This has been done to ensure retirees have certainty and don’t have to draw down on assets and potentially sell at a loss. Thankfully this was the only superannuation change or non-change as it were. It’s not a bad one, but it does pose a question: if we’re going to change drawdown rates every time there’s a market upset or scary world event, why not just lower drawdown rates permanently?
Low and Middle Income: The low and middle income tax offset has been retained and increased for the current financial year. Those earning up to $126,000 will see up to a $1,500 offset when they file their tax return for this financial year.
However, workers should be aware the low and middle income tax offset has been omitted from the next financial year. If you’re filing your tax return in July 2023, there will be no more relief unless it is extended at the next budget.
Cost of Living Payment: This is a $250 economic support payment to help eligible social security recipients with higher cost of living pressures. The payment will be made in April 2022 to eligible social security recipients such as pensioners, carers, veterans, job seekers, eligible self-funded retirees and concession card holders.
Pharmaceutical Benefits Scheme Lower Safety Net Threshold: From 1 July 2022, the Government is reducing the PBS Safety Net threshold, from $1,542.10 to $1,457.10 for general patients and from $326.40 to $244.80 for concessional patients.
Additional Cost of Living Relief
Temporary Reduction in Fuel Excise: 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. The excise (and excise-equivalent customs duty rate) that applies to all other fuel and petroleum-based products (including LPG and Biodiesel), except aviation fuels, will also be reduced by 50% for six months. The government says this will result in a reduction in excise on petrol and diesel from 44.2 cents per litre to 22.1 cents per litre, which 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.
Superannuation Thresholds from 1 July 2022 to 30 June 2023 (changes only)
Status of May 2021 Federal Budget superannuation announcements
This represents general information only. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs.