What it means for you
The Government recently announced its 2022-23 Budget. Like most years, the Budget announcement occupied the news cycle in the days leading up to its release and you may recall news coverage of a range of proposed measures to help in rebuilding our economy as we continue pandemic recovery and other measures targeted at assisting with cost-of-living pressures.
The good news is that this Budget is unlikely to significantly impact your pre and/or post-retirement planning. To the extent that the changes announced do impact you, they will be factored into the ongoing advice you receive.
That said, there were a number of interesting measures announced that could impact pre and post retirees and these measures are highlighted for you in the following analysis. If you are in any doubt about exactly what these measures mean for you, please don’t hesitate to contact your financial adviser.
It is also important to note that at this time, these proposed measures are not yet law and could change as they make their way through the Parliamentary process.
A one-off $420 tax-break
The Government stated that it will implement a one-off $420 cost of living tax offset for low- and middle-income tax offset (LMITO) recipients in the current (2021-22) financial year. When combined with LMITO, this will mean eligible low- and middle-income earners will receive up to $1,500 for a single income household, or up to $3,000 for a dual income household.
The Government estimates this will benefit over 10 million individuals. The LMITO for the 2021-22 financial year will be paid from 1 July 2022 when individuals submit their tax returns.
Low and middle-income tax offset
Added one-off tax break
$37,000 or less
From $37,001 to $48,000
$255 plus 7.5 cents for every dollar above $37,000, up to a maximum of $1,080
From $48,001 to $90,000
From $90,001 to $126,000
$1,080 minus 3 cents for every dollar of the amount above $90,000
Temporary reduction in fuel price
There will be a temporary reduction of 50% in excise and excise-equivalent custom duty rates for all petrol and diesel for six months. The excise and excise-equivalent customs duty rate for all other fuel and petroleum-based products (excluding aviation fuels) will also be reduced by 50% for a period of six months. This will decrease excise on petrol
and diesel from 44.2 cents per litre to 22.1 cents per litre. This measure will commence from 12:01 am on 30 March 2022 until 11:59 pm on 28 September 2022.
To ensure that the reduced rates are passed on to the end consumer, the Australian Competition and Consumer Commission will monitor the price behaviour of retailers.
No change to the Government’s previously announced personal income tax cuts
The Government’s legislated ‘Stage 3’ personal income tax cuts will continue as planned from 1 July 2024. These changes will mean anyone earning between $45,000 p.a. and $200,000 p.a. will pay a maximum tax rate of 30%.
Increase to Medicare levy low-income thresholds
The 2021-22 financial year Medicare levy low-income thresholds will be indexed for individuals and families. The threshold for singles will increase to $23,365 per annum and, for families with no children, increase to $39,402 per annum.
For individuals and couples who are eligible for the Seniors and Pensioners Tax Offset (SAPTO), the thresholds will increase to $36,925 per annum and $51,401 per annum respectively. The additional threshold amount for each dependent child or student will increase to $3,619 per annum.
Medicare levy thresholds
|Single eligible for SAPTO||$36,925||$36,705|
|Couple eligible for SAPTO||$51,401||$51,094|
|Additional threshold for each dependent child||$3,619||$3,597|
Social security measures
$250 Cost of Living Payment
The Government will make a one-off $250 Cost of Living Payment to eligible recipients to help them deal with the cost of living. The payment will be made from 28 April 2022. The payment will not be taxable and will not be counted as income for Social Security purposes.
The Cost of Living Payment will be made to people in receipt of the following on 29 March 2022:
- Age Pension
- Disability Support Pension
- Parenting Payment
- Carer Payment
- Carer Allowance (if not in receipt of a primary income support payment)
- Jobseeker Payment
- Youth Allowance
- Austudy and Abstudy Living Allowance
- Double Orphan Pension
- Special Benefit
- Farm Household Allowance
- Pensioner Concession Cardholders
- Commonwealth Seniors Health Cardholders
- Eligible Veterans’ Affairs payment recipients and Veteran Gold Cardholders
Only one Cost of Living Payment can be received per person. The payment will only be available to Australian residents.
Lowering the safety net thresholds for the Pharmaceutical Benefits Scheme
The Government will reduce the Pharmaceutical Benefits Scheme (PBS) safety net thresholds from 1 July 2022. The thresholds will reduce from $326.40 to $244.80 for concessional patients and from $1,542.10 to $1,457.10 for general patients. These reduced thresholds are a good news story meaning eligible persons will reach the safety net sooner, with approximately 12 fewer scripts for concessional patients and two fewer
scripts for general patients in a calendar year. On reaching the PBS safety net threshold, concessional patients receive their PBS
medicines at no cost for the rest of the calendar year and general patients receive their medicines at the concessional co-payment rate which is currently $6.80 per prescription.
Superannuation and retirement income streams
Extension of the 50% reduction to the superannuation minimum
The Government has announced the extension of the current 50% reduction to the superannuation minimum drawdown requirements for account-based income streams for a further year until 30 June 2023.
The following table summarises the reduced minimum payment requirements for account-based income streams:
|Age||2019–20 to 2022–23
financial years (inclusive)
|From 1 July 2023|
These rules may allow you to draw a smaller amount from your superannuation account-based income stream if you choose. A reduced level of drawdown could help sustain your retirement savings for a longer period, but this would come at the cost of reduced income for you.
Pre and post-retirement advice outcomes
The advice you receive from your financial adviser is unique to you. Your financial adviser is best placed to determine how these measures may, or may not, affect you. These measures, and many others, will be considered as part of your ongoing advice. Should you have any questions regarding these measures, or your pre and/or post-retirement plans more broadly, please don’t hesitate to reach out to your adviser today.
This update is issued and current as at 30 March 2022. It does not constitute financial product advice, taxation advice or advice on social security laws. The information in this update is general only and has been prepared without taking into account any person’s objectives, financial situation or needs. Before making a decision about a financial product, we strongly recommend that prospective investors obtain financial product advice, as well as taxation and applicable social security advice, from qualified professional advisers who are able to take into account the investor’s individual circumstances. This update is a guide only and based on a personal understanding of the 2022-23 Federal Budget Report and current taxation and (where relevant) social security laws. These laws may change and the proposals mentioned in the 2022-23 Federal Budget Report may not become law.