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. Following are a few proposals we feel are important to note;

Superannuation

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. This will apply to:

• Account-based pensions and annuities
• Transition-to-retirement pensions
• Term allocated pensions and annuities (also known as market-linked income streams).

Note: 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.

Personal taxation

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. The amount of offset is calculated by the ATO based on the individual’s taxable income.

Indexation of the Medicare Levy thresholds:

The Medicare Levy low-income thresholds are indexed each year. From 1 July 2021, the thresholds are expected to be as follows

• For singles $23,365 (increased from $23,226)
• For families $39,402 (increased from $39,167) plus $3,619 per dependent (increased from $3,597)
• For single seniors and pensioners $36,925 (increased from $36,705)
• For family seniors and pensioners $51,401 (increased from $51,094) plus $3,619 per dependent (increased from $3,597)

Social Security

• Cost of living payment: Eligible social security recipients in Australia will receive a one-off $250 payment in April 2022. Eligible payments include the Age Pension, Disability Support Pension, Carer Payment and Allowance, JobSeeker Payment (and equivalent DVA payments), as well as individuals holding a Pensioner Concession Card or Commonwealth Seniors Health Card. Like previous relief, the payments will not be means tested and will be tax-free. Individuals will only receive one payment even if they receive multiple qualifying benefits.
• Paid parental leave changes: Parental leave pay is proposed to be combined with Dad and Partner Pay resulting in a single scheme of up to 20 weeks leave which can be shared between parents as they see fit. This leave can be taken at any time within two years of birth or adoption. The new payment is proposed to be subject to an additional household income test designed to increase eligibility. Single parents are also expected to be able to access an additional two weeks of leave.
• Lowering the Pharmaceutical Benefits Scheme (PBS) safety net: From 1 July 2022, the Government proposes the PBS safety net to come into effect earlier, with 12 fewer scripts being required for concessional patients and 2 fewer scripts for general patients each calendar year before the safety net activates. Once within the safety net, concessional patients do not pay for PBS medicines whilst general patients only pay the concessional co-payment rate (currently $6.80 per script).

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.

As always, we continue to monitor the progress of these proposals and their impact to you. Should you have specific questions, feel free to call or email.