You get some money, they get some money, everyone gets some money!
There are a couple of major one-off handouts within this budget:
- The Low & Middle Income Tax Offset (LMITO or ‘lamington’ as some media outlets are calling it) is a one off tax offset available to all taxpayers with taxable incomes of $126,000 per year or less. This offset has been around for a couple of years, though has just been increased with the maximum benefit now $1,500 for individuals and $3,000 for couples. This benefit is not a direct payment and is delivered via your tax return by way of a bigger refund (or smaller payable). Come 30 June 2022, make sure you get your return in early to capture the benefit.
- Around 6 million people will receive a one-off payment of $250 during April 2022 to provide economic support to assist with cost of living pressures. Eligible persons will be current recipients of one of the following benefits: Age Pension, Disability Support Pension, Parenting Payment, Carer Payment, Carer Allowance, 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, eligible Veterans’ Affairs payment recipients and Veteran Gold card holders. Note: given that Australia’s population is currently, 25.7 million, the numbers involved confirm that 23% (nearly one in four) of our population is currently on some form of welfare.
Depreciation is back
Traditionally, when a business purchased a piece of equipment of more than $1,000, that item was depreciated over the ‘useful life’ of that item. This limit has been increased quite significantly over a number of years with different thresholds for different sized businesses. In October 2020, the treasurer introduced ‘temporary full expensing’ for all businesses with annual turnover of $5billion or less (which was practically every Australian Business) and calculating depreciation for tax purposes effectivity became redundant. Though as I’ve mentioned in previous budget’s, the amount you could claim never changed you just received the whole deduction at once instead of stretching it out over a number of years. The scheme was subsequently extended in last year’s budget until 30 June 2023.
The treasurer was completely silent on any further extension in this year’s budget papers, which effectively signals that this scheme will die a natural death on 30 June 2023… it was good while it lasted.
COVID Tests Deductible
The government has confirmed that the costs of taking a COVID test to attend a place of work are tax deductible from 1 July 2021 (i.e. able to be included within your 2022 tax return). This presumably covers the cost of Rapid Antigen Tests (RATS), so you had better have been keeping receipts.
The government has also (very sensibly) confirmed that the cost of buying RATS to be provided to staff will not be subject to Fringe Benefits Tax (FBT) for employers.
The quite popular Apprentice scheme announced during the height of the pandemic has already been extended twice. It is now about to be revamped and extended again.
From 1 July 2022 employers in “priority occupations” (the list will be updated annually based on national demand) will receive 10 per cent wage subsidy for first and second-year apprentices and 5 per cent for third years. The subsidy caps out at $15,000. In a significant change, the apprentices themselves will be eligible for $1,250 every six months for two years, up to a total of $5,000. I assume that the six monthly payments will all be made to apprentices at the same time, and I predict that segments of the hospitality industry will notice a nice bounce twice a year, for the next couple of years.
Lending & Finance Update
Australian property prices grew more than 22% in 2021 with Sydney increasing over 28%. Naturally housing affordability was on the table for the 2022 budget.
The government has announced an additional $2 billion for affordable housing with increased spending to the National housing finance and investment corporation that assists community housing providers.
For first home owners the government has increased the amount of places in the first home guarantee scheme to 35,000 places from 20,000 previously. A further 10,000 places will be available for first home buyers and previous home buyers in regional Australia under the new regional home guarantee. This scheme is for new homes only and will help drive a boost to regional home building.
In both schemes a borrower can purchase or build a property with a 5% deposit and no lenders mortgage insurance as the government guarantee’s the remaining amount to the bank.
Unfortunately, there has been no change to the price caps and given the growth in property prices the options for first home buyers is limited for most areas. However it offers a great opportunity to achieve home ownership sooner rather than later.
Housing affordability is complex and difficult issue and an outcome which pleases everyone is difficult to achieve. No government wants prices to contract too much because it puts the nation’s banks at risk. ‘Just build more houses’ is one option but that’s a whole other complex issue between state and local governments, planning timeframes, etc. Schemes like the first home guarantee make home ownership more accessible and sooner for many Australians seeking home ownership.
Ultimately, housing affordability is a supply and demand issue, and like most supply and supply issues, the market should naturally correct itself over time. Given the complexities noted above, this natural correction is not quick nor automatic as it might be with lower priced commodities or more simple markets, and many people are adversely impacted in the interim. I expect housing affordability to remain a hot topic in Australia for some time, with lots of noise about the topic though few effective solutions.
Enhanced Paid Parental Leave
The Paid Parental Leave (PPL) scheme is to be enhanced by integrating Parental Leave Pay and Dad and Partner Pay into a single scheme of up to 20 weeks leave, which can be shared between eligible parents. The aim of the enhancements is to provide more flexibility for families to decide how to best manage work and care. The enhanced PPL scheme can be taken any time within two years of the birth or adoption of their child.
The existing PPL scheme comprised two payments:
• Parental Leave Pay – paid up to 18 weeks at a rate based on the national minimum wage. This payment is currently available to the primary carer who is either the natural mother, the initial primary carer of an adopted child, or another carer under exceptional circumstances.
• Dad and Partner Pay – paid up to two weeks at a rate based on the national minimum wage to fathers and partners.
The income test will also be broadened to include a household income eligibility test. Currently, mothers who have adjusted taxable income up to $151,350 can access PPL even if their partner earns a high income. However, a mother who earns more than $151,350 has no entitlement to PPL even if their partner has no or low income. The income test will be broadened to include a household income threshold of $350,000 a year. The scheme will be effective no later than 1 March 2013.