Last night’s Federal Budget contained several proposals that will impact personal financial planning advice.

Importantly, these proposals require the passage of legislation before they are implemented.

SUPERANNUATION

Superannuation Extension of temporary reduction in superannuation minimum drawdown rates from 1 July 2022.

The government has announced a 12-month extension of the temporary 50% reduction in superannuation minimum drawdown rates for account-based pensions and similar products to cover the 2022-23 income year. This will apply to:

• Account-based pensions and annuities
• Transition-to-retirement pensions
• Term allocated pensions and annuities (also known as market-linked income streams).

Halving the minimum drawdown rates was originally announced as part of the response to the Coronavirus pandemic. The government stated that even though Australia has entered a period of economic recovery, there is still significant volatility in financial markets due to the ongoing impacts of Coronavirus and the war in Ukraine.

The following table summarises the reduced minimum payment requirements for account-based pensions.

Age	2019-22019-20 to 2022-23 financial years inclusive	From 1 July 2023
Under 65	2	4
65 - 74	2.5	5
75- 79	3	6
80 – 84	3.5	7
85-89	4.5	9
90-94	5.5	11
95 +	7	14

 

INDIVIDUAL TAX ONE-OFF COST OF LIVING TAX OFFSET

For 2021-22 income year only.

The government will provide a one-off $420 cost of living tax offset via an increase to the existing low- and middle-income tax offset (LMITO) for 2021-22. Combined with the existing LMITO, eligible low- and middle-income earners will receive a tax offset of up to $1,500 for the 2021-22 income year.

Currently, the LMITO amount is between $255 and $1,080 and is available for the 2018-19, 2019-20, 2020-21 and 2021- 22 financial years.

There was no further announcement to extend the LMITO. Therefore, the LMITO is currently due to end after the 2021-22 financial year.

The LMITO for the 2021-22 income year will be paid from 1 July 2022 when individual taxpayers submit their tax returns for the 2021-22 income year. The amount of offset is calculated by the ATO based on the individual’s taxable income.

 

INCREASING THE MEDICARE LEVY LOW-INCOME THRESHOLDS

PROPOSED EFFECTIVE DATE: 1 JULY 2021

The Medicare levy low-income thresholds for singles, families, and seniors and pensioners will be increased effective from 1 July 2021 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,
• Families, will be increased from $39,167 to $39,402,
• Single seniors and pensioners, will be increased from $36,705 to $36,925, and
• Families (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.

 

ENHANCING THE PAID PARENTAL LEAVE SCHEME

PROPOSED EFFECTIVE DATE: 1 JULY 2023

Currently, the Paid Parental Leave scheme comprises of two payments for eligible carers of a newborn or recently adopted child:

• Parental Leave Pay of up to 18 weeks at a rate based on the national minimum wage
• Dad and Partner Pay of up to 2 weeks at a rate based on the national minimum wage for fathers and partners.

The Government proposes to provide eligible working families with greater choice by integrating Dad and Partner Pay into Parental Leave Pay to create a single scheme of up to 20 weeks, fully flexible and shareable for working parents as they see fit within two years of their child’s birth or adoption.

Additionally, the income test will also be broadened. Parents who do not meet the individual income threshold (currently $151,350) can still qualify for payment if they meet a family income threshold of $350,000 per annum.

 

LOWERING THE PHARMACEUTICAL BENEFITS SCHEME THRESHOLD

EFFECTIVE DATE: 1 JULY 2022

The Government will, from 1 July 2022, reduce the Pharmaceutical Benefits Scheme (PBS) Safety Net thresholds. Individuals and families will reach the Safety Net sooner each year, with approximately 12 fewer scripts for concessional patients and 2 fewer scripts for general patients in a calendar year.

On reaching the PBS Safety Net, concessional patients will receive their PBS medicines at no cost for the rest of the calendar year, and general patients will receive their PBS medicines at the concessional co-payment rate (currently $6.80 per prescription).

 

SOCIAL SECURITY – INTRODUCING A ONE-OFF COST OF LIVING PAYMENT

PROPOSED EFFECTIVE DATE: 28 APRIL 2022 ONWARDS

The Government will provide a one-off cost of living payment of $250 each to eligible income support recipients and certain concession cardholders. The payment will be made on 28 April 2022.

Recipients of the following social security payments or concession cards on 29 March 2022 are eligible:

• Age Pension
• Disability Support Pension
• Carer Payment
• Carer Allowance (not in receipt of a primary income support payment)
• Parenting 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 card

The payment is exempt from taxation and will not count as income for the purposes of any income support payment/concession card.

 

EXPANDING THE HOME GUARANTEE SCHEME

PROPOSED EFFECTIVE DATE: 1 JULY 2022 OR 1 OCTOBER 2022 (DEPENDING ON SPECIFIC SCHEME)

The Government is expanding the Home Guarantee Scheme which allows first home buyers to build or purchase a newly built home with a low deposit, replacing the need for commercial Lenders’ Mortgage Insurance.

Under the expanded Home Guarantee Scheme, the Government will make available:

• 35, 000 guarantees each year (up from the current 10,000) from 1 July 2022 under the First Home Guarantee, to support eligible first home buyers to build or purchase a newly built home with a deposit as low as 5%.
• 10,000 guarantees each year from 1 October 2022 to 30 June 2025 under a new Regional Home Guarantee, to support eligible homebuyers (including non-first home buyers and permanent residents), to purchase or construct a new home in regional areas with a deposit as low as 5%; and
• 5,000 guarantees each year from 1 July 2022 to 30 June 2025 to expand the Family Home Guarantee. This program enables eligible single parents with dependents to enter or re-enter the housing market with a deposit of as little as 2%