Federal Budget 2022 Key Points

Posted 25 Oct '22

Individual

Tax Rates Stage 3 Tax Cuts

• The Government did not announce any changes to the previously legislated Stage 3 personal income tax cuts, which are set to commence from 1 July 2024.
• As a result, approximately 94% of Australians will face a marginal tax rate of 30% or less and only three personal income tax rates will apply from 1 July 2024.

A summary of the current and legislated tax rates is included below:

LMITO - Low and Middle Income Tax Offset (LMITO) and Low Income Tax Offset (LITO)

• The Budget did not announce any extension of the LMITO, which means that the offset will no longer be available after the 2021-22 income year. The LMITO provided low and middle income taxpayers (with taxable incomes up to $126,000) with a tax offset of up to $1,500.
• No extension to the LMITO means individual taxpayer refunds for 2022-2023 may be decreased by up to $1,500 compared to the 2021-22 income year.
• No change has been made to the existing LITO which will continue to apply for the 2022-23 income years and beyond. The maximum amount of the LITO is $700. The LITO is withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000 and then at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667.

FBT exemption on electric vehicles

• The Government has reiterated its commitment to creating greater pathways for Australians to drive zero or low emissions vehicles through the proposed introduction of an exemption from fringe benefits tax for the use of electric vehicles (as outlined in the Treasury Laws Amendment (Electric Car Discount) Bill 2022). There was no commentary indicating a change to the application of this Bill.

Regional First Home Buyers Guarantee Scheme; Housing Australia Future Fund; other housing measures

The Government has announced that it will establish the "Regional First Home Buyers Guarantee". Its aim will be to encourage home ownership in regional locations.

It will apply to eligible citizens and permanent residents who have lived in a regional location for more than 12 months to purchase their first home in that location with a minimum 5% deposit. It aims to reach 10,000 places per year to 30 June 2026. It will fund this by redirecting funding from the Regional Home Guarantee component of the 2022-23 March Budget measure titled Affordable Housing and Home Ownership.

Support for the workforce

Aged Pension:

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.

Paid Parental Leave:

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.

New Energy Apprenticeships:

The Government will provide $95.6 million over 9 years from 2022–23 to support 10,000 people to complete a New Energy Apprenticeship. Eligible apprentices will be able to claim a New Energy Apprentice Support Payment of up to $10,000 over the duration of the apprenticeship, comprising $2,000 on commencement, $2,000 per year for up to 3 years, and $2,000 on completion.

New Energy Skills Program:

The Government will provide $9.6 million over 5 years from 2022–23 to support Australia’s workforce to transition to a clean energy economy. This funding will support a new mentoring program to help train and support new energy apprentices, the development of fit-for-purpose training pathways, and a capacity study by Jobs and Skills Australia to evaluate Australia’s workforce needs to transition to a clean energy economy.

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, including increasing the maximum Child Care Subsidy rate from 85 per cent to 90 per cent.

If you would like to discuss any points raised in the above update or other elements relating to the October 2022 Federal Budget not mentioned, please feel free to contact your Accountant at PinnacleHPC Pty Ltd.