2022 Federal Budget Summary

Tahni Davison is a Financial Adviser with Gilkison Group.

The 2022 Federal Budget focuses on key spending measures to drive Australia’s economic recovery in a conflicted, post-pandemic international environment. There are also a number of measures which will take effect immediately or soon, that are aimed at addressing the cost-of-living challenges currently facing Australians.

The Government’s message in the lead up to the election has centred around job creation, temporary stimulus to low- and middle-income Australians, as well as infrastructure and regional recovery spending measures.

The Budget position has improved dramatically, largely due to a much stronger rebound in employment than what was expected at the height of the pandemic last year. The deficit for 2022-23 is now expected to be $67.5 billion (down from $161 billion).

The below are our highlights and not the full list of measures announced. The full 2022 Federal Budget can be found here.

Cost of Living Tax Offset

There is no change to the personal tax rates.

The Government will increase the low- and middle-income tax offset (LMITO) for the 2021-22 income year. LMITO is targeted at low- and middle-income earners that are most susceptible to cost of living pressures.

The LMITO for the 2021-22 income year will be paid from 1 July 2022 when Australians submit their tax returns for the 2021-22 income year. This proposal will increase the LMITO by $420 for the 2021-22 income year.

Paid Parental Leave

The Government is investing $346.1 million over five years from 2021-22 to introduce Enhanced Paid Parental Leave (PPL), which is fairer and provides full flexibility for eligible working families. These changes will provide increased choice for families to decide how best to manage work and care. Eligibility for the scheme is also being expanded.

Paid parental leave measures include:

$346.1 million over 5 years to introduce an enhanced Paid Parental Leave scheme for eligible working families by integrating Dad and Partner Pay and Parental Leave Pay to provide eligible families access to up to 20 weeks leave to use in ways that suit their specific circumstances.
Broadening the income test to include an additional household income threshold of $350,000 to further support workforce participation, particularly for women who are the primary earner.
Eligible single parents will be able to access an additional 2 weeks of Paid Parental Leave and also benefit from the household income threshold test.

Changes to the scheme also mean dads and partners will be able to access the Government’s scheme at the same time as any employer-funded leave, in the same way mothers currently can.

Enhanced Childcare Support

In last year’s Federal Budget, the Government announced that it would increase the Child Care Subsidy (CCS) available to families with more than one child aged five years and under in care, by 30 per cent to a maximum subsidy of 95 per cent of fees paid for their second and subsequent children. This increase was scheduled to commence from 1 July 2022, but in an announcement before this current Budget, the start date was brought forward by almost four months to apply from 7 March 2022. This follows on from the recent removal of the CSS annual cap of $10,560 per child per year for families earning over $190,015 (in 2021-22 terms) with effect from 10 December 2021.

Supporting Women’s Economic Security and Leadership – facilitating job options

Measures include:

$56.2 million to support more women into a greater array of occupations and jobs of the future. $38.6 million over 4 years from 2022-23 to provide wrap-around support for women commencing in trade occupations on the Australian Apprenticeships Priority List.
Building on the $147 million of investments to support gender equity in STEM, additional funding is being provided to encourage women to consider taking up careers in manufacturing and the technology workforce.
Support is also being provided to further enable more women to develop entrepreneurial skills.
$40.4 million to create pipelines for women to progress into board and leadership positions, including as sporting coaches and managers.

Supporting Retirees – extension of the temporary reduction in superannuation minimum drawdown rates

The Government has extended the 50 per cent reduction of the superannuation minimum drawdown requirements for account-based pensions and similar products for a further year to 30 June 2023.

The minimum drawdown requirements determine the minimum amount of a pension that a retiree has to draw from their superannuation in order to qualify for tax concessions. Given ongoing volatility, this change will allow retirees to avoid selling assets in order to satisfy the minimum drawdown requirements.

Cost of Living Payment

The Government will provide $1.5 billion in 2021-22 to provide a $250 economic support payment to help eligible recipients with higher cost of living pressures. The payment will be made 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
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

The payments are exempt from taxation and will not 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 2 or more of the categories outlined above. The payment will only be available to Australian residents.

Addressing Cost of Living Pressures – temporary reduction in fuel excise

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 per cent for 6 months.

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.

The rate of excise and excise-equivalent customs duty currently applying to petrol and diesel is 44.2 cents per litre. This measure will halve the rate on petrol and diesel to 22.1 cents per litre from 30 March 2022, with the price faced by consumers expected to be reduced by a larger magnitude given GST will be levied on the lower excise rate.

The Australian Competition and Consumer Commission will monitor the price behaviour of retailers to ensure that the lower excise rate is fully passed on to Australians.

The key measures that we feel will impact the majority of our clients are:

The extension of the reduced minimum pension drawdowns. This will be beneficial to those of you who do not need the full minimum payment to meet your living costs. Allowing you to keep more of your wealth in the tax-free environment of superannuation pension.

The increase in the low- and middle-income tax offset of $480 to a total of $1,500 and the one off $250 payment to recipients of government support payments are the other measures that will benefit a lot of our clients.

If you have any questions about any of the measures proposed in the Budget, please reach out to your adviser to discuss.