The Budget sets out the next stage in the Government’s economic plan to provide Australians with relief from cost of living pressures stemming from a strong rebound as the country reopens following COVID-19 restrictions.
Last night, Treasurer Josh Frydenberg tabled the 2022-23 Federal Budget. The key focus of this Budget is to provide Australians with relief from cost-of-living pressures stemming from a strong rebound in the Australian economy as we reopen following COVID-19 restrictions, as well as supply chain issues caused by the Russia/Ukraine war. The Budget also aims to provide young Australians greater access to the property market, increase important infrastructure funding across all states of Australia, while working towards an employment rate below 4% to stimulate future wage growth.
Please note, as with any release on Federal Budget night, the measures outlined below are only proposals at this point. Further legislative review is required prior to any changes becoming law.
Some of the key economic points of the Federal Budget include:
- The deficit for 2022-23 is now projected to be $78 billion (a $20.9 billion improvement from the previous deficit forecast, as estimated in the Mid-Year Economic and Fiscal Outlook).
- The deficit is expected to halve as a share of the economy over the forward estimates to $43.1 billion (1.6 per cent of GDP) in 2025-26 and continue to decline to 0.7 per cent of GDP by 2032-33.
A once off ‘Cost of Living Tax Offset’ will combine with the existing low and middle income tax offset (LMITO) available to taxpayers earning up to $126,000 for the 2021-22 financial year. Together, these tax offsets now provide a reduction in tax of up to $1,500 for eligible individuals (increased from $1,080 from the LMITO alone), to be received as a tax offset in their 2021-22 financial year tax return. An estimate of the resulting tax savings from the ‘Cost of Living Tax Offset’ combined with the existing LMITO is as follows:
A once off, tax-exempt cash payment of $250 will be made to those currently receiving income support. It will be paid automatically to all eligible pensioners, welfare recipients, veterans and eligible concession card holders in April 2022.
Additionally, from 1 July 2022, the Government is reducing the Pharmaceutical Benefits Scheme Safety Net thresholds. For general patients, thresholds will reduce from $1,542.10 to $1,457.10. For concessional patients, a reduction from $326.40 to $244.80 will apply, allowing earlier access to medicines at a cheaper price, or free of charge for the rest of that year.
A temporary cut to the Fuel Excise will help combat rising fuel prices. Currently the excise is 44.2 cents on each litre of petrol. This is to be cut by 50% down to 22.1 cents for the next 6 months. This cut should start flowing through in the next few weeks, reducing the current burden of higher petrol prices on families and businesses.
An expansion of the Home Guarantee Scheme to 50,000 places per year. These places will be allocated as below:
- The First Home Guarantee (formerly the First Home Loan Deposit Scheme) to be increased to 35,000 in 2022-23 to allow eligible first home buyers to build a new home, or purchase a newly constructed home sooner, with a deposit of as little as 5 per cent.
- An expansion of the Family Home Guarantee with 10,000 places from 2022-23 to support single parents with dependants to enter, or re-enter, the housing market with a deposit of as little as 2 per cent.
- A new Regional Home Guarantee that will support eligible citizens and permanent residents who have not owned a home for 5 years to purchase a new home in a regional location with a minimum 5 per cent deposit.
An extension of the temporary reduction in superannuation minimum drawdown rates. This existing measure was scheduled to cease on 30 June 2022 but has been extended another year to 30 June 2023. This means that retirees will have another 12 months where they can choose to draw a reduced 50% of the normal annual superannuation pension withdrawal rate, minimising the likelihood they will need to sell assets during a time of volatile investment markets.
An additional $17.9 billion funding commitment to infrastructure projects across all states of Australia as part of the Federal Government’s 10-year infrastructure investment pipeline. This brings total funding commitments to $120 billion across the 10 year period, focusing on reducing inner city congestion, improving connection of regional areas and creating further jobs.
An additional $2 billion commitment to the Northern Australia Infrastructure Facility, bringing total funding to $7 billion.
Enhancing the Paid Parental Leave scheme by rolling Dad and Partner Pay into Parental Leave Pay to create a single scheme of up to 20 weeks, fully flexible and shareable for eligible working parents as they see fit.
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