Federal Budget 2022
Treasurer Jim Chalmers delivered his first budget last night. Here are a few items that caught the eye of our specialist Tax team:
Superannuation
Expanding eligibility for downsizer contributions
The Government will allow more people to make downsizer contributions to their superannuation, by reducing the minimum eligibility age from 60 to 55 years of age. The measure will have effect from the start of the first quarter after Royal Assent of the enabling legislation.
The downsizer contribution allows people to make a one off post tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home. Both members of a couple can contribute and contributions do not count towards non concessional contribution caps.
Pensioners
Incentivising Pensioners to Downsize
The Government will provide $73.2 million over 4 years from 2022–23 (and $0.4 million per year ongoing), including:
• extending the assets test exemption for principal home sale proceeds from 12 months to 24 months for income support recipients
• changing the income test, to apply only the lower deeming rate (0.25 per cent) to principal home sale proceeds when calculating deemed income for 24 months after the sale of the principal home.
This measure will reduce the financial impact on pensioners looking to downsize their homes in an effort to minimise the burden on older Australians and free up housing stock for younger families.
Jobs and Skills Summit
Incentivise pensioners into the workforce
The Government will provide $61.9 million over two years from 2022–23 to provide age and veterans pensioners a once off credit of $4,000 to their Work Bonus income bank.
The temporary income bank top up will increase the amount pensioners can earn in 2022–23 from $7,800 to $11,800, before their pension is reduced, supporting pensioners who want to work or work more hours to do so without losing their pension.
Lifting the Income Threshold for the Commonwealth Seniors Health Card The Government will provide $69.6 million over 4 years from 2022–23 to increase the income threshold for the Commonwealth Seniors Health Card from $61,284 to $90,000 for singles and from $98,054 to $144,000 (combined) for couples. The Government will also freeze social security deeming rates at their current levels for a further two years until 30 June 2024, to support older Australians who rely on income from deemed financial investments, as well as the pension, to deal with the rising cost of living.
Aged Care
Fixing the Aged Care Crisis
The Government will provide $2.5 billion over 4 years from 2022–23 to reform the aged care system. Funding includes:
• $2.5 billion over 4 years from 2022–23 to improve the quality of care in residential aged care facilities by requiring all facilities to have a registered nurse onsite 24 hours per day, 7 days a week from 1 July 2023 and increasing care minutes to 215 minutes per resident per day from 1 October 2024
The Government will also:
• improve continuity of care by requiring aged care providers to preference direct employment for their staff
• improve governance in the aged care sector by strengthening regulation of aged care providers, including through new civil penalties to better protect whistle blowers and ordering providers to pay compensation to care recipients where loss or damage has occurred due to neglect
• cap administration and management fees charged by providers in the Home Care Packages Program.
Medicines
Plan for Cheaper Medicines
The Government will provide $787.1 million over 4 years from 2022–23 (and $233.4 million per year ongoing) to decrease the general patient co payment for treatments on the Pharmaceutical Benefits Scheme from $42.50 to $30.00 on 1 January 2023.
Investing in Front Line Service Delivery
The Government will provide $500.2 million over 4 years from 2022–23 (and $145.6 million per year ongoing) for an additional 1,080 staff to improve the delivery of Government services, including 200 staff for Services Australia to support timely access to government services, 500 staff for the Department of Veterans’ Affairs to help eliminate the claims backlog, and 380 staff for the National Disability Insurance Agency to improve front line service delivery.
Childcare
Plan for Cheaper Child Care
The Government will provide $4.7 billion over 4 years from 2022–23 (and $1.7 billion per year ongoing) to deliver cheaper child care, easing the cost of living for families and reducing barriers to greater workforce participation. This includes $4.6 billion over 4 years from 2022–23 to:
• increase the maximum Child Care Subsidy (CCS) rate from 85 per cent to 90 per cent for families for the first child in care and increase the CCS rate for all families earning less than $530,000 in household income
• maintain current higher CCS rates for families with multiple children aged 5 or under in child care, with higher CCS rates to cease 26 weeks after the older child’s last session of care, or when the child turns 6 years old
Parental Leave
Boosting Parental Leave to Enhance Economic Security, Support and Flexibility for Australia’s Families
The Government will enhance economic security, improve gender equality, and enhance and provide more flexibility for shared care arrangements at a cost to the budget of $531.6 million over 4 years from 2022–23 (and $619.3 million per year ongoing).
The Government will introduce reforms from 1 July 2023 to make the Paid Parental Leave Scheme flexible for families so that either parent is able to claim the payment and both birth parents and non birth parents are allowed to receive the payment if they meet the eligibility criteria. Parents will also be able to claim weeks of the payment concurrently so they can take leave at the same time.
From 1 July 2024, the Government will start expanding the scheme by two additional weeks a year until it reaches a full 26 weeks from 1 July 2026.
Both parents will be able to share the leave entitlement, with a proportion maintained on a “use it or lose it” basis, to encourage and facilitate both parents to access the scheme and to share the caring responsibilities more equally. Sole parents will be able to access the full 26 weeks.
Delivery of a First Nations Voice to Parliament Referendum – preparatory work
The Government will provide $75.1 million over two years from 2022–23 to prepare for the delivery of a referendum to enshrine a First Nations Voice to Parliament in the Constitution. Funding includes:
• $52.6 million over two years from 2022–23 to the Australian Electoral Commission and other agencies to commence preparations and support work to deliver the Referendum
• $16.1 million over two years from 2022–23 to the Australian Electoral Commission to increase First Nations enrolment and participation in future electoral events
• $6.5 million over two years from 2022–23 to the National Indigenous Australians Agency to support the Referendum, including the establishment of a governance structure to support the special advisory groups that will engage with stakeholders and provide advice to Government.
Infrastructure
Building a Better Future through considered Infrastructure Investment
In addition to existing infrastructure investment the Government will provide $8.1 billion over 10 years from 2022–23 for priority rail and road infrastructure projects across Australia to support economic growth and development. Funding includes:
• $2.6 billion for projects in Victoria, including $2.2 billion for the Suburban Rail Loop East
• $2.1 billion for projects in Queensland, including $866.4 million for the Bruce Highway, $400.0 million for the Inland Freight Route (Mungindi to Charters Towers) upgrades, $400.0 million for Beef Corridors and $210.0 million for the Kuranda Range Road upgrade
• $1.4 billion for projects in New South Wales, including $500.0 million for planning, corridor acquisition and early works for the Sydney to Newcastle High Speed Rail, $268.8 million for the New England Highway – Muswellbrook Bypass and $110.0 million for the Epping Bridge
• $634.8 million for projects in Western Australia, including $400.0 million for the Alice Springs to Halls Creek Corridor upgrade and $125.0 million for electric bus charging infrastructure in Perth
• $460.0 million for projects in South Australia, including $400.0 million for the South Australian component of the Freight Highway Upgrade Program
Powering Australia
Electric Car Discount
The Government will cut taxes on electric cars so that more Australians can afford them.
From 1 July 2022, the measure will exempt battery, hydrogen fuel cell and plug in hybrid electric cars from fringe benefits tax and import tariffs if they have a first retail price below the luxury car tax threshold for fuel efficient cars. The car must not have been held or used before 1 July 2022.
Employers will need to include exempt electric car fringe benefits in an employee’s reportable fringe benefits amount.
Driving the Nation Fund – establishment
The Government will provide $275.4 million over 6 years from 2022–23 as part of its election commitment to double the Commonwealth’s investment to $500 million and establish the Driving the Nation Fund (the Fund) to invest in cheaper and cleaner transport. Funding includes:
• $89.5 million over 6 years from 2022–23 for the Hydrogen Highways initiative to fund the creation of hydrogen refuelling stations on Australia’s busiest freight routes, in partnership with states and territories, including $5.5 million to LINE Hydrogen Pty Ltd for its George Town green hydrogen heavy transport project
• $39.8 million over 5 years from 2022–23 to establish a National Electric Vehicle Charging Network to deliver 117 fast charging stations on highways across Australia, in partnership with the NRMA.
And finally
Development of Australia’s Seaweed Farming
The Government will provide $8.1 million over 3 years from 2022–23 to support commercialisation of seaweed as a low emissions feed and support projects that lower barriers to market entry.
To find out more about any of the measures outlined above and how they might impact you, please contact your client relationship or trust manager directly. If you're not already a client of Equity Trustees Contact Us
This article was written by Chris Holloway, Senior Manager of our Taxation Services team.