Australian Federal Treasurer Josh Frydenberg handed down his fourth budget on Tuesday 29 March. There’s been speculation this budget was his hardest one yet. With a very healthy unemployment rate, strong company balance sheets, oil at near all-time highs, and property prices roaring ahead, fuelling the inflationary fire was one issue the government had to consider when preparing budget 2022-23. On top of inflation problems, the Coalition are also trying to win an election. This time, the Government cannot simply throw cash around to entice votes.
With budget repair on the backburner, the theme of this year’s budget is to help Australians combat the rising cost of living. Here we will look at some of the Government’s proposed measures to help tackle this issue.
Increase to the low and middle income tax offset
The 2021/22 financial year will be the last year the low and middle income tax offset (LMITO) will be available. The current maximum LMITO is $1,080 for individuals and $2,160 for couples combined. The Government has announced the LMITO will be increased by a one-off non-refundable $420 ‘cost of living tax offset’ for the 2021/22 financial year. This one-off tax offset will increase the maximum LMITO to $1,500 per individual or $3,000 for couples combined. Your eligibility for LMITO is calculated automatically when you lodge your tax return. The LMITO will depend on your income as shown below:
| Taxable income | Proposed Offset | Current Offset |
| Up to $37,000 | $675 | $255 |
| $37,001 to $48,000 | $675 and $1,500 | $255 to $1,080 |
| $48,001 to $90,000 | $1,500 | $1,080 |
| $90,001 to $125,999 | $420 and $1,500 | $0 to $1,080 |
Extension of minimum pension payment drawdowns
The temporary reduction in minimum drawdown rates for super pensions will be extended for 2022/23. The reduction applies to account-based and term allocated pensions. It also applies to transition to retirement pensions, but there is no change to the maximum drawdown limit. The below table summarises the reduced annual minimum pension payment factors for account-based pensions (including transition to retirement pensions).
| Age on 1 July | Reduced minimum
for 2022/23 |
Minimum for 2023/24
and future years |
| 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 older | 7% | 14% |
Cost of Living Payment
A $250 Cost of Living Payment will be paid in April 2022 to eligible recipients to help with the increased cost of living. The $250 payment will not count towards your income test for payments and is not taxable. The payment will be made to eligible recipients of the following payments and concession card holders:
| Age Pension | Carer Allowance | Double Orphan Pension |
| Disability Support Pension | Jobseeker Payment | Special Benefit |
| Parenting Payment | Youth Allowance | Farm Household Allowance |
| Carer Payment | Austudy and Abstudy Living Allowance | Pensioner Concession Card holders |
| Commonwealth Seniors Health Card holders | Veterans’ Affairs payment recipients | Veteran Gold card holders |
Enhanced Paid Parental Leave scheme
Currently, primary carers may be eligible to receive Parental Leave Pay of $772.55 per week, for up to 18 weeks. Eligible recipients of Dad and Partner Pay also receive $772.55 per week but for a maximum of two weeks. Unused amounts are not transferable between members of a couple.
The enhanced Paid Parental Leave scheme will provide greater flexibility between couples as to how they share care and work responsibilities for newborn or adopted children. The Dad and Partner Pay Scheme will be rolled into Parental Leave Pay to create a single scheme of up to 20 weeks. Paid Parental Leave can also be taken any time within two years of the birth or adoption of a child. The income test will also be broadened to have an additional household income threshold of $350,000. Couples can now choose how the 20 weeks of fully flexible leave is allocated between each member of the couple. Eligible single parents can also access an additional two weeks (for a total of 20 weeks) of Paid Parental Leave under the scheme.
Temporary cut in fuel excise tax
From 30 March 2022 onward the excise that applies to petrol and diesel will be temporarily reduced by half to 22.1 cents per litre for six months. This measure aims to help individuals, families and businesses with cost of living pressures resulting from the increases in fuel costs which flow through to higher transport costs including the cost of goods and services.
Damian Gibson
Partner & Financial Adviser, Elevate Wealth
Information in this article is of a general nature only. Information in this article reflects our understanding of relevant regulatory requirements and laws etc as at the date of issue, which may be subject to change. Please seek personal advice prior to acting on this information.
