Federal Budget 2022 – 23 Overview
Federal Budget 2022 – 23 Overview
We have just been handed over a new Federal Budget 2022 – 23.
The main goal of this budget is to assist with the pandemic recovery as well as help with the rising cost-of-living.
As my service is dedicated to pre and post retirement clients, I will go over those measures that might impact you, if you are in this stage of life. I will also confirm which of the last year’s budget measures have passed through the parliament, when they start to apply and when you can utilise them for your retirement benefit.
1. One-off $420 tax-break
If you are a recipient of a low and middle- income tax offset (LMITO) in the financial year 2021-22, you will benefit from this One-off $420 tax-break.
With combination of Low & Middle-income tax offset the total benefit will be up to $1,500 for a single income household and up to $3,000 for a dual income household.
It is estimated that over 10mil individuals will benefit from this measure and the benefit will be paid on 1st July 2022, providing of course, that you submit your tax return for 2021-22.
2. Temporary reduction in fuel excise
Due to an incredible increase in petrol prices, the government introduced a 6-month 50% reduction in excise and excise-equivalent custom duty rates for petrol and diesel. This will decrease the excise from 44.2 cents per litre to 22.1 cents. This measure commenced on 30 March 2022 and will operate until 28 September 2022.
So what does it mean for you in real life, what type of savings can you make when buying petrol:
- Small Hatch-back (40 litres) – saving per tank is $9.72
- Mid-sized SUV (60 litres) – saving per tank is $14.59
- Large 4WD (80 litres) – saving per tank $19.45
3. Medicare levy low-income threshold increase
This increase applies to 2021-22 financial year and will see this threshold increase for singles to $23,365 and for families with no children to $39,402.
For retirees receiving the Seniors and Pensioners Tax Offset (SAPTO), this threshold will increase for singles to $36,925 and for families with no children to $51,401.
4. One-off $250 Cost of Living Payment
This is an additional one-off payment to eligible recipients to help deal with the rising cost of living. This payment will be made on 28 April 2022 and the payment is not taxed and is not included in any Social Security tests.
Who will receive this extra cost of living relief payment?
If on 29 March 2022 you were in a receipt of any of the following benefits, you will automatically receive the payment, however you have to be an Australian resident and only one payment will be made per person:
- Age Pension
- Disability Support Pension
- Parenting Payment
- Career Payment
- Career Allowance
- Jobseeker Payment
- Youth Allowance
- Austudy and Austudy Living Allowance
- Double Orphan Pension
- Special Benefit
- Farm Household Allowance
- Pensioner Concession Card
- Commonwealth Seniors Health Card
- Eligible Veteran’s Affairs payment recipient
- Veteran Gold Card
5. Lowering the safety net threshold for PBS
From 1st July 2022 there will be a reduction of PBS (Pharmaceutical Benefits Scheme) safety net threshold from $326.40 to $244.80 for concessional patients and from $1,542.10 to $1,457.10 for general patients.
But what does the threshold really mean?
As a concessional patient, once you reach PBS threshold, your medicine is provided to you at no cost for the rest of the calendar year.
For a general patient, once PBS threshold is reached, the medicine is provided at the concessional co-payment rate, currently at $6.80 per prescription.
Therefore, the reduction of this threshold is very beneficial for everyone, as it will introduce approximately 12 fewer scripts for concessional patients and 2 for general patients in a calendar year.
6. 50% reduction in superannuation minimum income payments
This measure is being extended again, originally commenced due to Covid-19 pandemic market drop in 2019-20 financial year, then extended for 2021-22 and now also for 2022-23. I have previously created an article explaining how this reduction works and what are your benefits in implementing it: “Changes to retirement income streams“
Minimum drawdown rates are age based and increase with your age, however just like in prior 2 years the minimum can be halved, but please remember this is your choice, recommended if you can afford it, but still subject to your decision:
General idea is that by you drawing a smaller income payment in 2022-23 financial year, you are able to prolong life of your income stream, therefore be provided with income from your own sources for longer. Kind of short pain for a long gain approach.
7. Previous announcements that are now legislated to commence from 1st July 2022
Watch my video: “Proposed Superannuation changes in 2022 and more“ that will explain all those changes, that at the time of the creation for the video were at the proposal stage and how have passed parliament and have become a new legislation that if appropriate you could benefit from:
- If you are aged 67 – 75 and wish to make non-concessional contributions to super or salary sacrifice to super, you are no longer required to meet the work test. However, this does not apply to personal deductible contributions.
- Another big benefit commencing on 1st July 2022 is the bring-forward arrangement, that now can be used if you are below the age of 75, however it is subject to superannuation balance limits.
You can read the explanation of this rule: “Superannuation bring-forward contribution“, however as I’ve just explained, keep in mind that the age restrictions have been changed.
- And a big one for retirees or if you are preparing for this big change in your life – the downsizer contribution age limit has been reduced from 65 to 60. Therefore now, so many more people can use this smart strategy to improve superannuation balance. If you don’t fully understand this strategy, read: Downsizer Contribution to Super – Part 1 and then Part 2, but again, keep in mind the change of age that I’ve just explained.
- Removal of $450 per month threshold of SG (Superannuation Guarantee) eligibility, which will benefit all part-timers.
So how do you find this year’s budget? Do you think you can benefit from those new measures?
If you would like to benefit from the budget changes and superannuation strategies, but you are unsure how exactly to apply them to your retirement planning to optimise those benefits for your income, assets, tax, or Age Pension, feel free to contact me.
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