Josh Frydenberg delivered his fourth federal budget on 29 March 2022. The budget is normally delivered in early May but was brought forward this year due to the upcoming federal election.
The following announcements affect superannuation, tax and retirees.
SUPERANNUATION ANNOUNCEMENTS
Extension of minimum pension drawdown rate reductions
When you retire and start living off your superannuation savings in a super pension or annuity, a minimum amount must be withdrawn each financial year. The payment rate is a percentage of your account balance and depends on your age, as shown in the table below.
At the start of the pandemic the federal government halved the minimum pension drawdown rates for the 2019–20, 2020–21 and 2021–22 financial years and these reduced rates will now be extended for the 2022–23 financial year. This extension had already been announced by Josh Frydenberg on 25 March.
Age of beneficiary | Temporary percentage factor (2019–20 to 2022–23) | Normal percentage factor (2013–14 to 2018–19) |
---|---|---|
Under 65 | 2% | 4% |
65 to 74 | 2.5% | 5% |
75 to 79 | 3% | 6% |
80 to 84 | 3.5% | 7% |
85 to 89 | 4.5% | 9% |
90 to 94 | 5.5% | 11% |
95 or more | 7% | 14% |
Source: SIS Act
First Home Super Saver Scheme – Increasing the maximum releasable amount to $50,000
The First Home Super Saver Scheme (FHSSS) allows super contributions to be released for a deposit on a first home. The government will increase the maximum releasable amount of voluntary concessional and non-concessional contributions under the FHSSS from $30,000 to $50,000. The new $50,000 cap would apply from 1 July 2022.
This increase had already been announced in last year’s budget but presumably it features in this year’s announcements to tie in with announcements of expansions to the Home Guarantee Scheme and HomeBuilder.
The FHSSS is designed to increase the savings first home buyers can put towards a deposit, and treasury estimates this can mean of a boost of more than 30% compared with saving through a standard deposit account.
The budget papers provide a case study illustrating how a couple could use the FHSSS.
The budget papers also reveal that between 1 July 2018 and 28 February 2022, approximately 27,600 Australians have used the FHSSS, with approximately $382 million released. The average release amount is $13,900 and 71% of release requests were made by people aged 35 or younger.
Housing-related announcements
The government also announced an expansion of the Home Guarantee Scheme, which enables people to be approved for home loans with a 5% deposit, more than doubling the number of spaces available to 50,000 places per year. A new Regional Home Guarantee would be established from 1 October 2022, while the number of places under the Family Home Guarantee supporting single parents will double.
The 50,000 places per year would be comprised as follows:
First Home Guarantee | 35,000 places |
Regional Home Guarantee | 10,000 places |
Family Home Guarantee | 5,000 places |
HomeBuilder would also receive an estimated $2.7 billion funding to support the construction of around 96,000 new homes and substantial renovations to around 22,000 homes, representing over $40 billion in residential construction activity.
TAX ANNOUNCEMENTS
One-off cost of living tax offset for 2021–22
Over 10 million Australians will receive a one-off $420 ‘cost of living tax offset’ for 2021–22, which effectively increases the maximum offset for the low and middle income tax offset (LMITO) from $1,080 to $1,500.
The table below shows the value of tax relief from the increased LMITO for the 2021–22 financial year.
Taxable income | Value of tax relief | Approximate number of recipients |
---|---|---|
Up to $37,000 | Up to $675 | 1.8 million |
$37,001 to $48,000 | Between $675 and $1,500 | 1.6 million |
$48,001 to $90,000 | $1,500 | 4.8 million |
$90,001 to $125,999 | Between $420 and $1,500 | 1.9 million |
The LMITO will be received on assessment after individuals lodge their tax returns for the 2021–22 income year.
Increasing the Medicare levy low-income thresholds
The government will increase the Medicare levy low-income thresholds for singles, families, seniors and pensioners from 1 July 2021 to take account of recent movements in the CPI so that low-income taxpayers generally continue to be exempt from paying the Medicare levy.
- The threshold for singles will be increased from $23,226 to $23,365.
- The family threshold will be increased from $39,167 to $39,402.
- For single seniors and pensioners, the threshold will be increased from $36,705 to $36,925.
- The family threshold for seniors and pensioners will be increased from $51,094 to $51,401.
- For each dependent child or student, the family income thresholds increase by a further $3,619 instead of the previous amount of $3,597.
Temporary reduction in fuel excise
The government will halve the excise and excise-equivalent customs duty rate that applies to petrol and diesel from 30 March until 28 September 2022.
This should result in a 22.1 cent drop in fuel prices and the ACCC will monitor the price behaviour of retailers to ensure that the lower excise rate is fully passed on to consumers.
ANNOUNCEMENTS AFFECTING OLDER AUSTRALIANS
One-off Cost of Living Payment to pensioners and others
The government announced a one-off, income tax-exempt payment of $250 to approximately 6 million Australians. Eligible couples will receive $500 but payments are only available to Australian residents who are eligible on 29 March 2022.
The payments will be made progressively from late April 2022 to eligible recipients of the following payments and to concession card holders:
- 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 Card (PCC) holders
- Commonwealth Seniors Health Card holders
- Veterans’ Affairs payment recipients and Veteran Gold card holders.
The payments are exempt from taxation and will not count as income support for the purposes of any income support payment. A person can only receive one economic support payment, even if they are eligible under two or more of the categories outlined above.
Lowering the safety net threshold for the Pharmaceutical Benefits Scheme
From 1 July 2022, the government is reducing the PBS safety net thresholds.
- For concessional patients, the safety net threshold will be lowered by 25% from $326.40 to $244.80 – an $81.60 reduction for concessional patients. This means when a concession card holder reaches the safety net threshold, after 36 full-priced concessional scripts, they will receive PBS medicines at no charge for the rest of the year.
- For general patients, the general safety net threshold will reduce from $1,542.10 to $1,457.10 – an $85 reduction for non-concessional patients, which means that after the equivalent of about 34 full-priced general co-payments, general patients pay only the concessional co-payment of $6.80 per PBS script for the balance of the year.
As a result, patients will reach the safety net with around 12 fewer scripts for concessional patients and two fewer scripts for general patients in a calendar year. It is estimated around 2.4 million Australians will benefit from reducing the concessional and general PBS safety net thresholds.
There would also be funding for new and amended listings to reduce out-of-pocket costs. This includes treatments for dermatitis, cystic fibrosis, spinal muscular atrophy and bowel cancer.
Increased funding for aged care
The government will provide $468.3 million over five years from 2021–22 to further implement the government’s response to the Royal Commission into Aged Care Quality and Safety, to improve transparency and regulatory standards, and continue ongoing reforms announced in the 2021–22 Budget.
The majority of the funding ($345.7 million) is allocated to improve the administration of medication management for residential aged care residents.
The budget papers mention that there are almost 218,000 people now on Home Care Packages, and another 40,000 new Home Care Packages are expected to be released over the next financial year. The waiting time for a package has reduced by 25% in the year to September 2021.
Greg says
I live as part of a couple, my wife not yet old enough for the aged pension. I get $744.40 a fortnight. We live in a caravan and help a cancer sufferer, as a volunteer, on a farm. We are almost broke. You cannot live on the pension.
Marion Becker says
I love the SuperGuide. It provides so much useful information which is well explained, easy to access and keeps you abreast of all new or relevant information. Great for a self funded retiree.