On 25 October 2022, the new Labor Government handed down its October 2022/23 Federal Budget. It would be fair to say that this was not a typical Budget, both from a timing and content perspective
From a wealth perspective, the October 2022 Budget announcements were limited and, largely, had all been communicated prior to the formal Budget speech.
Key proposals include:
Note: These changes are proposals only and may or may not be made law.
There were no changes announced to the previously legislated personal income tax measures:
Date of effect: 30/6/2022
The LMITO was a maximum of:
Clients with taxable income up to $126,000 (in 2022/23) may feel the impact of the abolished LMITO when completing their tax return, or notice increased tax payable compared to the previous financial year. You can help manage your client’s expectations by explaining to them that the additional tax payable may be due to the removal of LMITO.
Date of effect: 1/7/2024
The Stage 3 tax cuts are already legislated. From 1 July 2024, the 37% marginal tax rate is abolished and the 32.5% rate reduces to 30%. Furthermore, the threshold for the top marginal tax rate increases from $180,000 to $200,000.The table below summaries the current personal tax rates and the changes from 1 July 2024:
|Tax rate||Current personal tax rates||Personal tax rates from 1 July 2024|
|Nil||0 – $18,200||0 – $18,200|
|19%||$18,201 – $45,000||$18,201 – $45,000|
|30%||–||$45,001 – $200,000|
|32.5%||$45,001 – $120,000||–|
|37%||$120,001 – $180,000||–|
Note: applies to resident taxpayers and ignores Medicare levy.
The first column in the table below outlines the additional tax payable in the current financial year due
to the abolition of LMITO. The second column outlines the tax cuts available from 1 July 2024 compared to the current financial year (without LMITO) under the Stage 3 changes.
|Taxable income||Additional tax payable – removal|
of LMITO^ in 2022/23
|Tax savings from 1 |
– change in thresholds and tax rates
|$200,000 or more||$0||$9,075|
^ Additional tax payable in 2022/23 compared to 2021/22 financial year
^^ Tax savings in 2024/25 compared to 2022/23 financial year
Charlotte earns $100,000 taxable income for the current financial year. She will pay $1,200 more tax compared to the 2021/22 financial year as LMITO is abolished. However, Charlotte receives a $1,375 tax savings per annum from 1 July 2024 due to the Stage 3 tax cuts.
Date of effect: 1/7/2021
Legislation will be introduced to clarify that digital currencies, including Bitcoin, are not included in the Australian income tax treatment of foreign currency. This measure ensures digital currencies are considered CGT assets, where held as an investment. This measure will be backdated to 1 July 2021 and is focused on maintaining the current tax treatment of digital currencies.
Date of effect: 1/7/2022
Fringe benefits tax will not apply under salary packaging arrangements for battery, hydrogen fuel cell and plug-in hybrid electric cars if these have a first retail price below the luxury car threshold ($84,916 for 2022/23) for fuel-efficient cars. The car must not have been held or used before 1 July 2022. This measure does not apply to hybrid electric cars without the capacity to plug into the electrical grid.
Date of effect: At the earliest 1/1/2023 Currently before Parliament
The Government has reconfirmed the intention to change the eligibility age for downsizer contributions from 60 to 55. However, the legislation has not passed at time of writing. The commencement date change will take effect on the first 1 January, 1 April, 1 July, or 1 October after the Bill receives Royal Assent. Contributions cannot be made prior to the commencement date.
All other eligibility requirements for downsizer contributions remain unchanged.
New contribution opportunities arise with the age reduction to 55 for downsizer contributions. However, the contribution may not be accessed if the client is below preservation age or does not meet a condition of release. It is the individual’s age at the time the contribution is made that is tested.
Downsizer contributions must be made within 90 days after settlement. This means that the date the contract of sale is exchanged or settled does not need to have been after the commencement date of the measure.
Date of effect: 1 July after legislation receives Royal Assent
The Government has indicated it will support the previously announced measure to relax certain residency requirements that currently apply to SMSFs and small APRA funds (SAFs) to determine eligibility for tax concessions. However, the commencement date will be deferred from the original expected commencement date of 1 July 2022 to 1 July after the legislation receives Royal Assent.
The details originally proposed, but not yet confirmed by the current Government, included:
Extending the central management and control safe harbour to five years allows decisions to continue to be made while the trustees are temporarily outside of Australia for a longer period of time.
The active member test can limit the ability for members temporarily overseas to contribute to the fund. The removal of the active member test will allow all members of SMSFs and SAFs to continue to make contributions to their fund while overseas.
Trustees should consider whether it is appropriate to appoint an Enduring Power of Attorney during an absence overseas.
Date of effect: Measure will not proceed
The Government will not proceed with the former Government’s proposal to allow SMSFs with a good record keeping and compliance history to move from having an audit on an annual basis to a three-year cycle. SMSFs will continue to require annual audits.
Extending the period of paid Parental Leave Pay
Date of effect: 1/7/2024
The Government will increase the number of weeks of paid Parental Leave Pay (PLP) by two weeks each 1 July, until it reaches a total of 26 weeks.
The following table illustrates the progressive increase in the number of weeks of PLP:
|Date||Weeks of Parental Leave Pay*|
|1 July 2024||22|
|1 July 2025||24|
|1 July 2026||26|
*Includes 2 weeks Dad and Partner Pay.
Currently, PLP includes a continuous payment of up to 12 weeks and an additional six weeks of flexible leave, which must be used within two years of the child’s birth or adoption. PLP is a taxable payment of
$812.45 per week (based on the national minimum wage).
Date of effect: 1/7/2023
The Government will introduce the following measures to increase PLP flexibility:
Date of effect: 1/7/2023
A new family income test will be introduced for PLP. An individual will be able to qualify for PLP if either:
The reference year for the income test is the financial year before the earlier of:
In addition, either parent can be the primary claimant and both parents can take weeks of leave at the same time. Under the current rules, the birth parent or initial primary carer of an adopted child must be the primary claimant and then transfer PLP to the other parent if they want to share it.
Clients with a newborn or newly adopted child should consider entitlement to PLP. The increased number of weeks and flexibility will assist the primary carer with returning to work.
Date of effect: 1/7/2023 Currently before parliament
Child Care Subsidy (CCS) assists families with the cost of child care. The following measures will generally increase the amount of subsidy and reduce the cost of child care:
The amount of subsidised child care that can be accessed per fortnight applies to each child and depends on:
Higher subsidies will reduce the cost of child care for eligible families. The Government estimates that:
The cost of medications under the Pharmaceutical Benefits Scheme reduced
Date of effect: 1/1/2023
The maximum general co-payment for prescriptions under the Pharmaceutical Benefits Scheme (PBS) will reduce to $30 per script (down from $42.50) for general patients.
Under the PBS, the Government subsidises the cost of PBS medicines and individuals make a co-payment towards the cost. In some cases, individuals may pay more than the co-payment. The scheme is generally available to all Australian residents who hold a current Medicare card.
Once an individual or their family pays a certain amount on PBS medicines (known as the PBS Safety Net threshold) the co-payment for PBS medicines is reduced ($6.80 per script for general patients).
It is estimated that someone taking one medication a month could save up to $150 pa (two medications
= $300 and three medications = $450 pa).
Reducing the co-payment to $30 per script does not assist concession card holders (they currently pay
$6.80 per script and then free once the PBS safety net is attained).
Date of effect: 1/1/2023
The annual rate of DVA’s Totally and Permanently Incapacitated Payments will be increased by $1,000. This includes the Special Rate of Disability Compensation Payment, Temporary Special Rate Payment and the Special Rate Disability Pension.
Date of effect: 1/7/2022
Deeming rates are frozen at their current levels until 30 June 2024. Deeming rates are currently 0.25% (lower rate) and 2.25% (higher rate).
Despite increasing interest rates, Centrelink clients won’t be impacted by increasing deeming rates.
Date of effect: At the earliest on 1/12/2022 Currently before Parliament
A one-off $4,000 income credit will be added to the Work Bonus income bank of those at least pension age and in receipt of an Age Pension, Disability Support Pension or Carer Payment. Under the Work Bonus, the first $300 of fortnightly income from work is not assessed under the pension income test. Any unused part of the $300 fortnightly Work Bonus accrues in the Work Bonus income bank and can be used to offset future income from work.
Currently, the Work Bonus income bank is capped at $7,800. This will temporarily be increased to $11,800 until 30 June 2023. Effective 1 July 2023, any amount in the Work Bonus income bank that exceeds $7,800 will be removed and no longer available to offset future income from work.
The following table outlines the impact on clients (assuming no change to their client scenario):
|Client scenario||Will they benefit from an increase in the Work Bonus income bank?|
|Income from work of less than $300 pf||No|
|Income tested and earning income from work of more than $300 pf||Yes*|
*Assumes a nil balance in the Work Bonus income bank before this change.
For income tested clients (eligible for the Work Bonus), those earning:
Date of effect: Commences seven days after legislation is passed and has received Royal Assent. Currently before Parliament
The Commonwealth Seniors Health Card (CSHC) income thresholds are set to increase in accordance with the following table:
|Client scenario||Current limit (20 Sept 2022)||New limit|
|Couple (combined income)||$98,054||$144,000|
|Couple separated by illness, respite care or prison (combined income)||$122,568||$180,000|
The increase for each child is unchanged at $639.60.
Benefits of the CSHC include:
Self-funded retirees who don’t hold the CSHC should review their eligibility under the new income limits. Those that become eligible can start taking advantage of all the benefits associated with the card.
Date of effect: At the earliest on 1/1/2023 Currently before Parliament
The portion of the home sale proceeds intended to be used to purchase, build, rebuild, repair or renovate a new principal home:
|Assets Test||Exempt under the assets test for up to 12 months||Exempt under the assets test for up to 24 months|
|Income Test if held in a financial asset||Added to other financial investments and deemed||Quarantined from other financial investments and deemed at the lower deeming rate. Other financial assets which will continue to receive the benefit of the lower rate up to the threshold.|
If special circumstances exist, Centrelink may exempt the home sale proceeds for an additional 12 months.
The new rules will apply to eligible sale proceeds, even where a property was sold before the commencement date.
Centrelink clients transitioning between homes will have greater flexibility and potentially a reduced impact on their entitlements. Those clients that have already sold their home should consider whether the new rules can apply to their situation.
With the lower deeming rate applying, reconsider the benefit of any strategy that parked the sale proceeds in a non-financial asset to reduce the impact of deeming, such as temporarily parking the sale proceeds in a spouse’s super account that is less than pension age but has access to their super funds.
Date of effect: 1 October 2022 – 30 June 2023
The Regional First Home Buyer Guarantee Scheme is part of the Home Guarantee Scheme and will provide support for 10,000 first home buyers to purchase a home in regional Australia per financial year until 30 June 2026. This measure was part of the Government’s Federal election announcements.
The Government will guarantee up to 15% of the eligible purchase price. Individuals will need to have a deposit of at least 5%, which when combined with the Government guarantee, would allow mortgage insurance to be avoided. Eligibility to participate in the scheme includes that the person must:
Property price thresholds will also apply based on the region in which the property is located.
The scheme applies to existing properties as well as house and land packages, off-the-plan apartments and land purchased with contract to build.
Date of effect: 2022/23
The Government has proposed to introduce the Help to Buy scheme, which is a shared equity scheme. Support will be available for up to 10,000 people each year. Limited detail was provided in the budget, the following information is based on pre-election announcement. The scheme will provide equity support to eligible homebuyers for up to 40% of the purchase price of a new home, and up to 30% for an existing home. Homebuyers must have at least a 2% deposit and will avoid Lenders Mortgage Insurance. Eligibility for the Help to Buy Scheme includes that the person must:
After the initial purchase, the homeowner can purchase additional interests in the property from the Government (minimum of 5%).
It is important for clients to understand that where a homebuyer’s income exceeds the annual income cap for two consecutive years, this will trigger a requirement to either fully or partially repay the Government’s contribution. It is not currently clear how this will be determined and the way in which a partial liability to repay would be calculated, particularly considering a person’s capacity to pay. Care should be taken to understand how payment receipts such as bonuses, taxable termination payments, taxable social security payments as well as the assessable component of a withdrawal under the First Home Super Saver Scheme could impact this requirement.
This 2022 Federal Budget Summary was prepared by Calibre Private Wealth Advisers and is current as at 25th October 2022. Any advice in this Federal Budget Summary has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on any advice, consider whether it is appropriate to your objectives, financial situation and needs. Any tax estimates provided in this publication are intended as a guide only and are based on our general understanding of taxation laws. They are not intended to be a substitute for specialised taxation advice or a complete assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent.
This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial and tax/or legal advice prior to acting on this information. Before acquiring a financial product a person should obtain a Product Disclosure Statement (PDS) relating to that product and consider the contents of the PDS before making a decision about whether to acquire the product. The material contained in this document is based on information received in good faith from sources within the market, and on our understanding of legislation and Government press releases at the date of publication, which are believed to be reliable and accurate. Opinions constitute our judgment at the time of issue and are subject to change. Neither, the Licensee or any of the Oreana Group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Gordon Thoms and David Conte of Calibre Private Wealth Advisers are Authorised Representatives of Oreana Financial Services Limited ABN 91 607 515 122, an Australian Financial Services Licensee, Registered office at Level 7, 484 St Kilda Road, Melbourne, VIC 3004. This site is designed for Australian residents only. Nothing on this website is an offer or a solicitation of an offer to acquire any products or services, by any person or entity outside of Australia.