In Josh Frydenberg’s fourth Federal Budget, it was 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
A review of the specifics of these changes for individuals can be found below.
One-off cost of living tax offset
For 2021-22 income year only
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. Currently, the LMITO amount is between $255 and $1,080, and will therefore increase up to $1,500. It will phase out to nil for individuals with incomes between $90,001 and $126,000.
Paid parental leave
Effective no later than 1 March 2023
The Paid Parental Leave (PPL) scheme is to be enhanced by integrating Parental Leave Pay and Dad and Partner Pay into a single scheme of up to 20 weeks leave, which can be shared between eligible parents. The aim of the enhancements is to provide more flexibility for families to decide how to best manage work and care. The enhanced PPL scheme can be taken any time within two years of the birth or adoption of their child. The existing PPL scheme comprised two payments:
• Parental Leave Pay – paid up to 18 weeks at a rate based on the national minimum wage. This payment is currently available to the primary carer who is either the natural mother, the initial primary carer of an adopted child, or another carer under exceptional circumstances.
• Dad and Partner Pay – paid up to two weeks at a rate based on the national minimum wage to fathers and partners
The income test will also be broadened to include a household income eligibility test. Currently, mothers who have adjusted taxable income up to $151,350 can access PPL even if their partner earns a high income. However, a mother who earns more than $151,350 has no entitlement to PPL even if their partner has no or low income. The income test will be broadened to include a household income threshold of $350,000 a year.
Corona Virus Tests
To be tax deducible – Expected to be 1 July 2021
The government restated its intention to introduce legislation to ensure that Coronavirus tests (including PCR and Rapid Antigen Tests) are tax deductible when purchased for work-related purposes. By making these tests tax deductible, it also ensures that businesses will not be subject to fringe benefits tax (FBT) on tests that are provided to employees for this purpose. This measure is expected to be applicable from the beginning of the 2021/22 tax year
Free RATS for concession card holders Effective until 31 July 2022
Effective until 31 July 2022 The Rapid Antigen Test Concessional Access Program will deliver up to 20 free RATs over seven months until 31 July 2022 to all Australians with a concession card, including Department of Veterans’ Affairs card holders.
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.
$250 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.
Affordable Housing and Home Ownership
The Government will increase the number of guarantees under the Home Guarantee Scheme to 50,000 per year for 3 years from 2022-23 and then 35,000 a year ongoing to support homebuyers to purchase a home with a lower deposit. The guarantees will be allocated to provide:
- 35,000 guarantees per year ongoing for the First Home Guarantee (formerly the First Home Loan Deposit Scheme)
- 5,000 places per year to 30 June 2025 for the Family Home Guarantee
- 10,000 places per year to 30 June 2025 for a new Regional Home Guarantee that will support eligible citizens and permanent residents who have not owned a home for 5 years to purchase a new home in a regional location with a minimum 5 per cent deposit.
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 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 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
Safety net threshold lowered for the Pharmaceutical Benefits Scheme
Effective 1 July 2022
The Pharmaceutical Benefits Scheme (PBS) safety net threshold will be lowered, which will allow patients to reach the safety net sooner. Concessional patients will require approximately 12 fewer scripts and general patients will require approximately two fewer scripts. On reaching the PBS safety net, concessional patients receive their PBS medicines at no cost for the rest of the calendar year and general patients receive their PBS medicines at the concessional co-payment rate, which is currently $6.80 per prescription.