Federal Budget 2022-23

The reduced minimum requirements do not apply to non-account-based income streams such as fixed term annuities and lifetime annuities. The following table summarises the reduced minimum payment requirements for account-based pensions.

Table 1: Reduced minimum requirements for account-based pensions

Advice considerations

Individuals with account-based pensions can consider taking the reduced minimums as a pension payment and withdraw an appropriate amount as a lump sum to meet cash flow requirements. Lump sum withdrawals from an account-based pension are debits for the purposes of an individual’s transfer balance account, and as such can increase their available cap space to be used in the future, for example, to help maximise the amount they can receive as a death benefit income stream. 

Tax

One-off cost of living tax offset for low and middle-income tax offset recipients

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 2021-22 financial year. All other features of the current LMITO remain unchanged. 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. All LMITO recipients will benefit from the full $420 increase.

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. 

Table 2: Eligibility for LMITO and cost of living tax offset for 2021-22 

Source: Budget Overview 'Cost of Living', ATP 'Low and middle-income earner tax offsets'

Advice consideration

Individuals with expected taxable income at or near the cut-off of $126,000 can consider making personal deductible contributions to reduce taxable income below $126,000 to at least qualify for $1 of the LMITO. This will allow them to also qualify for the one-off $420 cost of living tax offset. 

Allowing tax deductibility of COVID-19 test expenses 

From 1 July 2021, expenses incurred on COVID-19 tests (both Polymerase Chain Reaction and Rapid Antigen Tests) in order to attend work are allowed as a tax deduction. This applies to employees who are required to attend work as well as those who have the option to work remotely. Fringe Benefit Tax (FBT) will also not apply to businesses where COVID-19 tests are provided to the employees for work-related purposes. This measure is ongoing and applies to future years as well. 

Employee share schemes – expanding access and further reducing red tape 

The Government will expand access to employee share schemes and further reduce red tape. Where employers make offers in connection with employee share schemes in unlisted companies, participants can invest up to: 

• $30,000 per participant per year, an increase from the current $5,000 per year limit, accruable for unexercised options for up to five years, plus 70% of dividends and cash bonuses; or 
• any amount, if it would allow them to immediately take advantage of a planned sale or listing of the company to sell their purchased interests at a profit. 

The Government will also remove regulatory requirements for offers to independent contractors, where they do not have to pay for interests. 

At this time, the effective date of this measure is not yet known. 

Reduction to the GDP uplift factor for tax instalments 

Each year GST and pay as you go (PAYG) instalment amounts are adjusted using a formula known as the gross domestic product (GDP) adjustment. 

For 2022-23 income year, the GDP uplift factor will be set to 2% instead of 10% (under the statutory formula) for PAYG and GST instalments. This reduction will help small businesses, sole traders, and individuals with investment income to improve their cash flow. 

This measure will apply to those small to medium businesses who are eligible to use the instalment methods. These include businesses having annual aggregated turnover of up to $10 million for GST instalments and those having annual aggregated turnover of up to $50 million for PAYG instalments. The reduced rate will apply to instalments that related to 2022-23 income year and will fall due once the measure receives Royal Assent. 

Temporary reduction in fuel price

There will be a temporary reduction of 50% in excise and excise-equivalent custom duty rates for all fuel 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 (AEDT) on 30 March 2022 until 11:59 pm (AEST) 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.

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.

Table 3: Medicare levy thresholds

This update is issued by Challenger Life Company Limited ABN 44 072 486 938, AFSL 234670 (Challenger) and is current as at 30 March 2022. It does not constitute financial product advice and is intended solely for licensed financial advisers or authorised representatives of licensed financial advisers. It must not be given to a retail client except where it is included as part of the financial adviser’s own advice, provided that the financial adviser’s advice does not state or imply that the advice is provided by Challenger. It is a guide only and based on Challenger’s 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. 

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