Budget 2022 – 23

Last night Treasurer Josh Frydenberg delivered his third budget in 18 months, the result of Covid related disruption to regular Budget cycles.

As is the usual case the morning after Budget night, at Empire we’re busy scanning the details and determining any opportunities or constraints budget announcements have on the strategies we manage for our clients.

In a pre-election Budget, the government was not expected to be introducing any radical or controversial measures, and that has been the case.

Instead, in an environment where war is raging in Ukraine, natural disasters have impacted the east coast of Australia and we emerge from the strictest of pandemic related measures, this Budget has a focus on key spending measures to drive economic recovery in Australia. The narrative of the Government leading to the upcoming Federal election has been based on job creation, temporary stimulus to low and middle income Australians, as well as infrastructure and regional recovery spending measures.

This year there has been very little by way of superannuation or retirement income rule changes.  This means there is practically no disruption to any of the existing strategies in place for Empire clients in that respect.

You can click to download a copy of the Budget prepared by the Financial Planning Association of Australia after our summary below. While we encourage you to read and familiarise yourself with the areas that may be of interest to you, rest assured we will be in touch to discuss any areas that may have a direct impact on your personal strategy, and any opportunities or concerns resulting from the Budget announcements.

In the meantime, we’ve summarised some of the key points that impact on the services Empire provides:

Superannuation

• The federal government is extending the 50 per cent reduction to minimum superannuation drawdown requirements for retirees into the next financial year. Originally announced in March 2020 as part of the government’s response to the pandemic, the Treasurer said the reduction would now remain in place until 30 June 2023. Under the reduced minimum drawdown rates, self-funded retirees aged between 65 and 74 must withdraw 2.5 per cent of their account balance each year to be eligible for tax-free status on their earnings. The minimum drawdown rate is currently 3 per cent for ages 75 to 79; 3.5 per cent for ages 80 to 84; 4.5 per cent for ages 85 to 89; 5.5 per cent for ages 90 to 94; and 7 per cent for ages 95 and above, while a rate of 2 per cent applies to those under 65. Given ongoing market volatility, this welcome relief will reduce the need for retirees to sell assets in order to satisfy the minimum drawdown requirements

Tax 

• While there has been no change to personal or company tax rates announced in this year’s budget, the low and middle income tax offset (LMITO) will be increased for the 2021-22 income year to assist with 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 financial year. This proposal will result in a one-off increase to the LMITO of $420.
• The Medicare levy low-income thresholds for seniors and pensioners, families and singles will be increased from 1 July 2021. The increase in thresholds takes account of recent movements in the consumer price index so that low-income individuals continue to be exempt from paying the Medicare levy.

Cost of Living

• The government announced a new one‑off $250 Cost of Living Payment, delivered within weeks to 6 million Australians, aimed at pensioners, carers, veterans, job seekers, eligible self‑funded retirees and concession card holders.
• The fuel excise that applies to petrol and diesel will be halved for 6 months to reduce the burden of higher fuel prices. This measure will halve the rate on petrol and diesel to 22.1 cents per litre from 30 March 2022

Paid Parental Leave

• 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. 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, and the income test will be broadened to include a household income threshold of $350,000 a year.

Small Business Support

• The government has announced that it will introduce a technology investment boost to support digital adoption by small businesses. The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 (Budget night) until 30 June 2023. Small businesses (with aggregated annual turnover of less than $50 million) will be able to deduct an additional 20% of eligible expenditure incurred on business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud-based services.  In effect this means that a business can claim $1.20 for every $1 spent, up to a cap of $100 000 in each qualifying income year.

As always, the team here at Empire is on hand to assist and answer any of your queries.  Please feel free to call us anytime on 9323 3000 to discuss any of these matters further. Otherwise, we will address any opportunities for you at your next scheduled review, or sooner if appropriate.

Kind regards,

The Empire Team