Last night, the government handed down the October Federal Budget for 2022-23. The announcements focused on easing the cost of living over the coming years, addressing the challenges of a slowing economy, and introducing investments designed to place Australia in a stronger position for the future. There were very few changes to superannuation & taxation, but a number of Social Security, Aged Care, Housing and other measures.
Please note that these proposals are not yet legislated, and as always, the team at AGS Financial Group are well placed to advise you on your strategic options as these proposals progress.
Key elements of the budget include:
Reducing the qualifying age for downsizer contributions to 55
Currently, downsizer contributions to superannuation can only be made by individuals age 60 or older (prior to 1 July 2022, the minimum qualifying age was 65). The Government is proposing to (further) lower this age to 55.
Confirmed – Relaxing residency requirements for SMSFs
The previous Government announced in the 2021-22 Federal Budget the proposal to relax the residency requirements for self-managed superannuation funds (SMSFs), however, this was not legislated. The current Government has affirmed their intention to proceed with this measure.
Proceeding with previously legislated changes to tax rates
No change was announced to the previously legislated tax cuts, including ‘Stage 3’, which are to become effective from 1 July 2024.
Personal tax rates and thresholds
(excluding 2% Medicare levy, and excluding Low Income Tax Offset and Low & Middle Income Tax Offset)
|Marginal tax rate (%)
|Thresholds – income range 2022/23 ($)
|Marginal tax rate (%)
|Thresholds – income range 2023/24 ($)
|0 – 18,200
|0 – 18,200
|18,201 – 45,000
|18,201 – 45,000
|45,001 – 120,000
|45,001 – 200,000
|120,001 – 180,000
Social Security, Aged Care, Families
Enhancing the Paid Parental Leave scheme
The Government proposes to introduce greater flexibility to the Paid Parental Leave Scheme from 1 July 2023 by combining Parental Leave Pay and Dad and Partner Pay into a single 20 week payment, and adding a number of other changes to increase flexibility. 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.
Increasing the Child Care Subsidy (CCS)
The CCS is a percentage-based subsidy based on family income that assists with the cost of child care.
The Government proposes to increase the maximum CCS rate from 85% to 90% for families earning less than $80,000, as well as increase the subsidy rate (reduce the tampering) for families earning above this level.
Lifting the income threshold for the Commonwealth Seniors Health Card
As previously announced, the Government has proposed increasing 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.
Freezing of Income Test deeming rates
The Government will freeze social security deeming rates at their current levels until 30 June 2024. The lower deeming rate will remain frozen at 0.25%, and the upper rate will remain at 2.25%, providing some certainty on deeming of income in an environment of rising interest rates.
Encouraging workforce participation by pensioners
A number of proposals were announced to incentivise pensioners to engage in paid employment, including temporarily increasing the Work Bonus income bank; extending the qualification period for Pensioner Concession Cards (after payments cease due to employment); and suspending, instead of cancelling, benefits and entitlements for up to two years.
Incentivising pensioners to downsize
Legislation before Parliament is intended to 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. The measures include extending the social security assets test exemption for principal home sale proceeds from 12 months to 24 months for income support recipients; and amending the social security income test, to apply only the lower deeming rate to the proceeds when calculating deemed income for up to 24 months.
Lowering the Pharmaceutical Benefits Scheme (PBS) general co-payment
The Government will reduce the maximum general co-payment for medications on the PBS from $42.50 per script to $30 per script.
Increasing funding to and improving aged care
The Government has announced additional funding and reform for the aged Care sector, including 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.
National Housing Accord
The Government announced the National Housing Accord, a landmark agreement to address the supply and affordability of housing. The Accord will align for the first time the efforts of all levels of government, institutional investors and the construction sector to help tackle the nation’s housing problem.
Under the Accord, the Australian Government is committing to deliver 10,000 affordable dwellings over five years, in addition to the 30,000 new social and affordable dwellings delivered through the Housing Australia Future Fund. The shared ambition is to build one million new, well-located homes over five years from 2024.
Establishing the Regional First Home Buyer Guarantee
Proposal to support 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, with 10,000 places per year to 30 June 2026.
Other programs and measures include:
- Establishing a ‘Help to Buy’ scheme to assist low and middle income earners to purchase a new or existing home using equity supplied by the Government;
- Funding for research into the provision of affordable housing and developing the housing supply;
- $10 billion to be invested in the newly created Housing Australia Future Fund, to fund construction and repairs of housing in remote Indigenous communities; transitional and crisis accommodation for women and children fleeing domestic and family violence and housing for older women; and housing and specialist services for veterans who are at risk of homelessness.
Small & Medium Business
Reversal of depreciation self-assessment of effective life
The Government will not proceed with the measure to allow taxpayers to self-assess the effective life of intangible depreciating assets, announced in the 2021-22 Budget. Reversing this decision will maintain the status quo – effective lives of intangible depreciating assets will continue to be set by statute.
Powering Australia – Electric Car Discount
From 1 July 2022, the measure will exempt new 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 ($84,916 in 2022‑23), increasing affordability and incentivising salary packaging.
480,000 fee-free TAFE and community-based vocational education places
Contact us for advice and assistance
Naturally, as these measures become law, we are on hand to assist you with understanding and responding to the changes. As always, please contact us should you require any advice or assistance with your plans.
Disclaimer and Acknowledgement
Prepared from briefings gratefully received from: AMP, Colonial First State, the Financial Planning Association, Macquarie and BT.
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Published : 26 Oct 2022