You’ve heard about it on the radio & you’ve seen it on the news – the 2022 Federal Budget has just landed. So how, you may ask, does this directly affect you? We’re here to help make sense of it all.
To sum it up very simply, the Budget is the Government announcing how it plans to spend our hard-earned taxes (as well as some money they don’t actually have yet). Whilst they don’t make it too easy to find exactly how much the whole budget is, to give you an idea, the 2020/21 Budget covered $507 billion. The only thing is that it’s just that – a plan. And it’s strategically announced just before the Federal Election. It’s the current government’s opportunity to essentially tell the country what they can do for the people of Australia, and why they should be re-elected.
Some things you’ll never even begin to consider would be in the budget, let alone costing so much money (like the $20.3 million they’ve put aside to plant trees for the Queen’s platinum jubilee) but there are a lot of incredibly important things the budget covers, which can directly affect the day to day lives of Australians.
The catch? Just because they announce it in the Budget, doesn’t guarantee it will happen. All the big promises all have to get passed through government to be made official.
This year the Government have outlined 5 Main groups they are focusing on to “plan for a stronger future”
Here we’ve put together a small list of the main factors that can affect you directly, in simple talk:
at the moment, fuel is about $2/L. Approx. 40c of that, is TAX. What the government is suggesting they will do, is reduce the tax they slug us with, taking less money off of us at the fuel bowser.
Cost of Living
This is where the $420 comes into play that everyone has been talking about. What is commonly misunderstood with this talk of ‘tax offset increases’, is that you aren’t going to get a cheque for $420. What happens is if you are in the ‘low-middle income bracket’ your tax just gets reduced. If you don’t pay tax, you don’t get anything back. If you’re in that income bracket, your tax return will be up to $420 better off.
At the moment a woman can take up to 18 weeks off for paid parental leave & a father, can take 2 weeks. What they’re suggesting now, is instead of making it easier financially for the mother to stay home & the father go to work, the total 20 weeks can be split however the parents choose. A single parent can also take the full 20 weeks if needed.
PBS (Pharmaceutical Benefits Scheme)
The government gives Australians with ongoing health issues support with the cost of necessary medications. In summary – they’re suggesting this help will come into affect earlier than previously, so you don’t have to spend as much money on medication before help kicks in.
You don’t have to have as much savings to get a mortgage (deposits reduced to 2% of the loan)
Previously there was support for up to 10,000 Australians looking to buy a home (various restrictions applied). They are now increasing this to 50,000. This support is the government backing or guaranteeing the loan, on behalf of the people – to the banks. This is essentially the government, providing loan insurance to the bank, on behalf of 50,000 Australians. So, if any of these mortgage holders encounter financial problems, the government takes the fall.
If you’ve spent money on Covid tests, hand sanitiser, face mask/shields for work purposes, KEEP THOSE RECEIPTS. They haven’t made it law yet, but if they do, you can claim it all on your tax return.
Summary in Numbers & Tax Talk:
- Cost of living tax offset: The Low and Middle Income Tax Offset (LMITO) will increase, providing an additional $420 to reduce tax payable for eligible taxpayers in the 2021/22 financial year. This offset is non-refundable and available to those earning up to $126,000 per annum. However, individuals earning over $126,000 per annum will not benefit. Further, LMITO was not extended, meaning it will not apply for the 2022/23 or later financial years.
- Halving of fuel excise: For six months from 12:01am 30 March 2022, the excise on fuel and petroleum-based products will be halved. Whilst not a direct tax, the expectation is this should result in lower fuel prices during this period. Half the current excise on fuel and diesel is 22.1 cents per litre.
- Indexation of the Medicare Levy thresholds: The Medicare Levy low-income thresholds are indexed each year. From 1 July 2021, the thresholds are expected to be as follows
- Singles $23,365 (increased from $23,226)
- Families $39,402 (increased from $39,167) plus $3,619 per dependent (increased from $3,597)
- Single seniors and pensioners $36,925 (increased from $36,705)
- Family seniors and pensioners $51,401 (increased from $51,094) plus $3,619 per dependent (increased from $3,597)
- Cost of living payment: Eligible social security recipients resident in Australia will receive a one-off $250 payment in April 2022. Eligible payments include the Age Pension, Disability Support Pension, Carer Payment and Allowance, JobSeeker Payment (and equivalent DVA payments), as well as individuals holding a Pensioner Concession Card or Commonwealth Seniors Health Card. Like previous relief, the payments will not be means tested and will be tax-free. Individuals will only receive one payment even if they receive multiple qualifying benefits.
- Paid parental leave changes: Parental leave pay is proposed to be combined with Dad and Partner Pay resulting in a single scheme of up to 20 weeks leave which can be shared between parents as they see fit. This leave can be taken at any time within two years of birth or adoption. The new payment is proposed to be subject to an additional household income test designed to increase eligibility. Single parents are also expected to be able to access an additional two weeks of leave.
- Lowering the Pharmaceutical Benefits Scheme (PBS) safety net: From 1 July 2022, the Government proposes the PBS safety net to come into effect earlier, with 12 fewer scripts being required for concessional patients and 2 fewer scripts for general patients each calendar year before the safety net activates. Once within the safety net, concessional patients do not pay for PBS medicines whilst general patients only pay the concessional co-payment rate (currently $6.80 per script).
Affordable housing measures: The First Home Loan Deposit Scheme and Family Home Guarantee allow eligible individuals to purchase a home with as little as a 2% deposit, and the Government will guarantee the loan, removing the need for lenders mortgage insurance. Currently, guarantees are limited to 10,000 per year. From 1 July 2022, changes to the existing home guarantee schemes will be made by allocating a total of 50,000 guarantees as follows:
- 35,000 places under the First Home Guarantee (formerly the First Home Loan Deposit Scheme)
- 5,000 places under the Family Home Guarantee targeting single parents regardless of any previous home ownership
- 10,000 places under a new Regional Home Guarantee targeting individuals who have not owned a home in five years who relocate to a regional location and can supply a 5% deposit.
The Family Home Guarantee and Regional Home Guarantee places are provided until 30 June 2025, whilst the 35,000 First Home Guarantee places are proposed to continue indefinitely.
Coronavirus tests to be tax deductible
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. Keep those receipts handy and ready for tax time to claim this back!