income taxThe Treasurer, Mr Josh Frydenberg, handed down the Federal Budget for 2022-23 on 29th March 2022. In an election year, the focus of Budget was inevitably on pleasing the electorate, with large amounts spent on lower and middle income earners, pensioners and welfare recipients and a 50% reduction in fuel duty all geared towards capturing the votes of “Middle Australia”.

For individuals, the centrepiece was the increase in the low and middle income tax offset, which is welcome. People earning up to $126,000 will get a rebate of $420 in excess of what they would have got anyway through the existing tax offset. All you have to do to get it is lodge a tax return for 2021-22 – so funds should start to flow to taxpayers from 1 July 2022.

Unfortunately, this is just a short term measure. Next year, the low and middle income tax offset disappears completely – meaning that people earning up to $126,000 will see a tax rise of up to $1,080. It’s hard to see how that will do anything to help cost of living pressures over the medium and long term. Worse, just as most Australians will experience this tax rise, the wealthiest Australians will be anticipating a tax cut of up to $9,075 in 2024/25.

Individuals: Low and Middle Income Tax Offset increased for 2021-22 but not extended to 2022-23. The low and middle income tax offset (LMITO) will be increased by $420 for the 2021-22 income year so that eligible individuals will receive a maximum LMITO benefit up to $1,500 for 2021-22 (up from the current maximum of $1,080).

This one-off $420 cost of living tax offset will only apply to the 2021-22 income year. The Government did not announce an extension of the LMITO to 2022-23 so it remains legislated to only apply until the end of the 2021-22 income year (albeit up to $1,500 instead of $1,080). The LMITO for 2021-22 will be paid from 1 July 2022 to more than 10 million individuals when they submit their tax returns for the 2021-22 income year.

Eligible taxpayers with income up to $126,000 will receive the additional one-off $420 cost of living tax offset for 2021-22 on top of their existing LMITO benefit. Taxpayers with incomes of $126,000 or more will not receive the additional $420.

One-off $250 cost of living payment: The Government will make a $250 one-off cost of living payment in April 2022 to 6 million eligible pensioners, welfare recipients, veterans and eligible concession card holders. The $250 payment will be tax-exempt and not count as income support for the purposes of any Government income support. A person can only receive one economic support payment, even if they are eligible under 2 or more of the categories outlined below. The payment will only be available to Australian residents who are 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
• Special Benefit
• Farm Household Allowance
• Pensioner Concession Card (PCC) holders
• Commonwealth Seniors Health Card holders
• Eligible Veterans’ Affairs payment recipients and Veteran Gold card holders.

Business taxation

Personal Tax Rates: The Government did not announce any personal tax rates changes in the Budget. Further tax cuts are due to be implemented from 1 July 2024 when the 32.5% marginal tax rate will be cut to 30% for one big tax bracket between $45,000 and $200,000. The 37% tax bracket will be entirely abolished at this time. Therefore, from 1 July 2024, there will only be 3 personal income tax rates – 19%, 30% and 45%.

Medicare Levy: For the 2021-22 income year, the Medicare levy low-income threshold for singles will be increased to $23,365 (up from $23,226 for 2020-21). For couples with no children, the family income threshold will be increased to $39,402 (up from $39,167 for 2020-21). The additional amount of threshold for each dependent child or student will be increased to $3,619 (up from $3,597). For single seniors and pensioners eligible for the SAPTO, the Medicare levy low-income threshold will be increased to $36,925 (up from $36,705 for 2020-21). The family threshold for seniors and pensioners will be increased to $51,401 (up from $51,094), plus $3,619 for each dependent child or student.

COVID-19 test expenses to be deductible: The costs of taking a COVID-19 test to attend a place of work are tax deductible for individuals from 1 July 2021. In making these costs tax deductible, FBT will not be incurred by businesses where COVID-19 tests are provided to employees for this purpose. The changes take effect retrospectively from 1 July 2021.

Superannuation: Superannuation pension drawdowns – 50% reduction extended to 2022-23. The temporary 50% reduction in minimum annual payment amounts for superannuation pensions and annuities will be extended by a further year to 30 June 2023. The 50% reduction in the minimum pension drawdowns, which has applied for the 2019-20, 2020-21 and 2021-22 income years, was due to end on 30 June 2022. However, the Government announced that the SIS Regulations will be amended to extend this temporary 50% reduction for minimum annual pension payments to the 2022-23 income year.

Temporary reduction in fuel excise: The Government will reduce the excise and excise-equivalent customs duty rate that applies to petrol and diesel for 6 months by 50%. The excise and excise-equivalent customs duty rates for all other fuel and petroleum-based products, except aviation fuels, will also be reduced by 50% for 6 months. The Treasurer said this measure will see excise on petrol and diesel cut from 44.2 cents per litre to 22.1 cents. The measure will commence from 12.01am on 30 March 2022 and will remain in place for 6 months, ending at 11.59pm on 28 September 2022.

selling propertyFirst Home Guarantee Scheme: additional places announced. The Government has announced that it will expand the Home Guarantee Scheme in the 2022-23 Budget to make available up to 50,000 places each year, including 10,000 places for a new Regional Home Guarantee open to non-first home buyers. Under the expanded Scheme, the Government said it will make available:
• 35,000 guarantees each year (up from the current 10,000), from 1 July 2022 under the First Home Guarantee, to support 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, to support eligible homebuyers (including non-first home buyers and permanent residents, to purchase or construct a new home in regional areas), subject to the passage of enabling legislation; and
• 5,000 guarantees each year (from 1 July 2022 to 30 June 2025) to expand the Family Home Guarantee to help eligible single parents with children to buy their first home or to re-enter the housing market with a deposit of as little as 2%.

Still have questions 

South East Access can help individuals and businesses understand these changes so if you need any support give us a call. 

Our team provide assistance with accounting, personal and business tax, financial management, payroll services and bookkeeping.

Suite 25, 44 Deering St Ulladulla 2539
Phone: (02) 4454 4444
Office hours are 9.00am to 5:00 pm