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.
Superannuation Extension of temporary reduction in superannuation minimum drawdown rates From 1 July 2022.
The government has announced a 12-month extension of the temporary 50% reduction in superannuation minimum drawdown rates for account-based pensions and similar products to cover the 2022-23 income year.
Halving the minimum drawdown rates was originally announced as part of the response to the Coronavirus pandemic. The government stated that even though Australia has entered a period of economic recovery, there is still significant volatility in financial markets due to the ongoing impacts of Coronavirus and the war in Ukraine.
Social security $250 Cost of Living Payment Effective April 2022
The government will provide a once-off Cost-of-Living Payment of $250 in April 2022 to eligible recipients of the following payments and to concession card holders:
• Age Pension
• Disability Support Pension
• Parenting Payment
• Carer Payment
• Carer Allowance (if not in receipt of a primary income support payment)
• Jobseeker Payment
• Youth Allowance
• Austudy and Abstudy Living Allowance
• Double Orphan Pension
• Farm Household Allowance
• Pensioner Concession Card (PCC) holders
• Commonwealth Seniors Health Card holders
• Eligible Veterans’ Affairs payment recipients and Veteran Gold card holders.
The payments are exempt from taxation and won’t count as income support 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 of the categories outlined above. The payment will only be available to Australian residents.
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.
Expansion of Home Guarantee Scheme Effective 1 July 2022
The Home Guarantee Scheme is being expanded to help more first home buyers purchase their first home. In addition, a new Regional Home Guarantee Scheme for non-first home buyers is being introduced. This allows the purchase of a home with a smaller deposit without needing to pay Lender’s Mortgage Insurance. Under the expanded Home Guarantee Scheme, the government will make available:
• 35,000 guarantees each year (up from the current 10,000) from 1 July 2022 under the First Home Guarantee. This supports eligible first homebuyers to purchase a new or existing home with a deposit as low as 5%.
• 10,000 guarantees each year from 1 October 2022 to 30 June 2025 under a new Regional Home Guarantee. This supports eligible homebuyers, including non-first home buyers and permanent residents, to purchase or construct a new home in regional areas.
• 5,000 guarantees each year from 1 July 2022 to 30 June 2025 to expand the Family Home Guarantee announced in last year’s Budget. This scheme assists eligible single parents with children to either buy their first home or re-enter the housing market with a deposit as little as 2%.
Individual tax One-off cost of living tax offset For 2021-22 income year only
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.
Currently, the LMITO amount is between $255 and $1,080 and is available for the 2018-19, 2019-20, 2020-21 and 2021- 22 financial years. There was no further announcement to extend the LMITO. Therefore, the LMITO is currently due to end after the 2021-22 financial year.
The LMITO for the 2021-22 income year will be paid from 1 July 2022 when individual taxpayers submit their tax returns for the 2021-22 income year.
Temporary reduction in fuel excise From 12.01am on 30 March to 11.59pm on 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. 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.
Status of May 2021 Federal Budget superannuation announcements
The following table summarises key superannuation announcements from the 2021-22 Federal Budget and whether the changes have been implemented or remain pending.
As always if you have have any questions on how this budget relates to your personal circumstances or would like more information please do not hesitate to contact us.
