The Federal Budget announced on 26th October which focuses on providing relief for those with children, homebuyers, SMSF members and social security recipients.
- Reducing the eligibility age to make downsizer contributions: Legislation has been introduced to further reduce the downsizer eligibility age from 60 to 55. This change will take effect from the first of the first quarter after it is passed into law, which is anticipated to be 1 January 2023.
- SMSF and tax residency: Confirmed intention to continue with the 2021/22 Budget announcement of extending the temporary trustee absence period from 2 years to 5 years, along with removing the 'active member' test. Implementing these changes will help SMSFs to continue to maintain their Australian tax residency, even while members are overseas, and allow them to continue to contribute to their funds even if they become non-tax residents.
- Three-year audit cycle for SMSFs not proceeding: Originally announced as part of Liberal's 2018/19 Budget, Labor has confirmed that they will not proceed with this change and will retain the current audit cycle for SMSFs.
- No additional changes to personal income tax: There were no new announced changes to personal income tax measures. This includes:
- no changes to the Liberal Government announced Stage 3 tax cuts which were proposed to take effect from 1 July 2024
- no extension of the Low- and Middle-Income Tax Offset (LIMTO), which ended 30 June 2022.
- Support for fuel-efficient vehicles: For purchases of battery, hydrogen, or plug-in hybrid cars with a retail price below $84,619 (the luxury car tax threshold for fuel efficient vehicles) after 1 July 2022, fringe benefits tax and import tariffs will not apply. However, employers will still need to account for the cost in an employee's reportable fringe benefits.
- Childcare subsidy changes: The maximum childcare subsidy is proposed to increase from 1 July 2023 to 90% for families earning less than $80,000. For every $5,000 earned over this threshold the subsidy will reduce by 1% – tapering off to zero for families with income above $530,000. This is a much simpler subsidy calculation than the current system.
- Paid parental leave increases: It is proposed that from 1 July 2024 the Paid Parental Leave Scheme will increase the maximum period of leave by two weeks each year, to reach a maximum of 26 weeks by 1 July 2026. In addition, from 1 July 2023, both parents will be able to access leave at the same time or enter more flexible arrangements than currently available under the limited 'Dad and Partner Pay' limits. The paid parental leave income test will also be extended to include a $350,000 family income test.
- Work Bonus deposit for older Australians: As previously announced, age pensioners and veterans over service pension age are expected to receive a one-off credit of $4,000 into their Work Bonus income bank. The Work Bonus typically offsets $300 per fortnight of income earned from employment or self-employment activities. In effect, this will allow pensioners to earn more income without impacting their age pension entitlements.
- Increased income thresholds for Commonwealth Seniors Health Card: Labor has committed to increasing the income thresholds for the Commonwealth Seniors Health Card up to $90,000 for singles and $144,000 combined for couples when assessing eligibility.
- Extension of deeming rate freeze: The Government has confirmed its intention to retain the current level of deeming rates until at least 30 June 2024.
- Reducing the cost of medicine: From 1 January 2023, the general patient co-payment for Pharmaceutical Benefits Scheme treatments is expected to reduce from $42.50 to a maximum $30.
- Housing affordability measures: This budget has focused on increasing access to housing for Australians. This is expected to occur largely via the Housing Accord, combining the efforts of Federal, State, and Local Governments to work on housing affordability and reducing homelessness. Measures announced include:
- A commitment to the 'Help to Buy' scheme, to assist first home buyers in buying a home with the Federal Government being a part owner.
- A Regional First Home Buyer Guarantee, effective from 1 October 2022 which is expected to assist up to 10,000 first home buyers with mortgage guarantee, removing the need for lenders mortgage insurance and allowing them to buy with a lower deposit sooner.
Sources: MLC, Macquarie,BT
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Halle Yilmaz is a financial adviser and business consultant. As a financial adviser, she gives solid advice that can create rapid and lasting results for her clients. Sign up for her free E-Book and download “7 Steps to Healthy Wealth Management.