2022-2023 Federal Budget Summary for Individuals

Low and middle income tax offset to be increased by $420

The low and middle income tax offset (LMITO) will include a cost of living tax offset in the 2021–22 income year. The cost of living tax offset is a flat $420 to be applied to all recipients of LMITO when they lodge their tax return.

The minimum LMITO for 2021–22 will be $675 for all individuals with a taxable income up to $37,000.

Individuals between $37,000 and $48,000 will receive $675 plus 7.5% of the amount of the income that exceeds $37,000.

Individuals between $48,000 and $90,000 will receive the increased maximum of $1,500.

Individuals over $90,000 in taxable income will have the maximum amount reduced by 3 cents for every dollar above $90,000, tapering off to an offset of $420 at $126,000 taxable income.

The LMITO is a non-refundable tax offset.

Source: Budget Paper No 2, p 16; Glossy “Australia’s plan for a stronger future — Overview”, p 26.

One-off payment to ease cost of living pressures

Individuals who are currently in receipt of an Australian government allowance or pension will receive a one-off payment of $250 in April 2022 to ease the cost of living pressures. Certain concession card holders will also get the payment.

The cost of living payment will be exempt from tax and will not count towards an individual’s income for social security income test purposes.

The payment will cover individuals in receipt of the 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 and eligible Veterans’ Affairs payments.

The payment will also go to individuals who hold a Pensioner concession card, a Commonwealth seniors health card or a Veteran Gold card.

However, if an individual receives multiple pensions or allowances, they will only receive the one-off payment once.

Source: Budget Paper No 2, p 167.

COVID-19 response package — aged care

There will be a further $458.1 million in funding over 5 years to support older Australians in aged care and aged care workers to manage the impact of COVID-19.

Part of the funding will be directed as follows:

Approximately $215 million over 2 years from 2021-22 to provide bonuses of up to $800 to aged care workers in residential aged care and home care.
Just under $125 million in 2022-23 to extend and expand funding for the Aged Care Preparedness program that supports aged care providers to manage and prevent outbreaks of COVID-19 and prepare providers to transition to living with COVID-19.

The funding will also be used to increase the capacity for vaccination services to residents and staff and extend PCR testing in residential facilities for a further 3 months to 30 September 2022.

Source: Budget Paper No 2, p 88-89.

Work-related COVID-19 tests tax deductible from 1 July 2021

Costs of taking a COVID-19 test to attend a place of work will be tax deductible for individuals and exempt from fringe benefits tax from 1 July 2021.

Legislation will be introduced to clarify that work-related COVID-19 test expenses incurred by individuals are tax deductible. Employers will not incur fringe benefits tax if they provide COVID-19 testing to their employees for work-related purposes.

The amendments will take effect from the beginning of the 2021–22 tax year.

Source: Budget Paper No 2, p 18; Assistant Treasurer’s press release “Tax deductibility of COVID-19 test expenses”, 8 February 2022.

Paid Parental Leave scheme enhancements

The Paid Parental Leave scheme will be overhauled by combining the current Parental Leave Payment (18 weeks paid leave for the primary carer) and the Dad and Partner leave payment (2 weeks paid leave) into a single combined Paid Parental Leave pay scheme of up to 20 weeks.

Leave will be fully flexible and both parents will be able to choose how they split the leave periods between themselves.

The Paid Parental Leave can be taken any time within 2 years of the birth or adoption of their child.

The income test will also be broadened to have an additional household income eligibility test.

Source: Budget Paper No 2, p 169.

Medicare low-income thresholds for 2021–22

The CPI indexed Medicare levy low-income threshold amounts for singles, families, and seniors and pensioners for the 2021–22 year of income have been announced. The new thresholds are:

	Medicare levy low income threshold (at or below which no Medicare levy payable) 2021–22 (2020–21)
Class of people	Single	Family
Individual	$23,365 ($23,226)	$39,402 ($39,167)
Senior Australians and eligible pensioners	$36,925 ($36,705)	$51,401 ($51,094)
Threshold increment for each additional dependent child/student	$3,619 ($3,597)

Source: Budget Paper No 2, pp 24–25.

Increased support for affordable housing and home ownership

The number of guarantees under the Home Guarantee Scheme will be increased to 50,000 per year for 3 years from 2022–23 and then 35,000 a year thereafter to support home buyers to purchase a home with a lower deposit.

The guarantees will be allocated to provide:

35,000 guarantees per year ongoing for the First Home Guarantee (formerly the First Home Loan Deposit Scheme)
5,000 places per year to 30 June 2025 for the Family Home Guarantee
10,000 places per year to 30 June 2025 for a new Regional Home Guarantee that will support eligible citizens and permanent residents who have not owned a home for 5 years to purchase a new home in a regional location with a minimum 5% deposit.

Source: Budget Paper No 2, p 170.

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About the Author: David McKeller

David McKellar is a Chartered Accountant and Director of Allied Business Accountants, an accounting firm specialising in providing strategic advice and taxation services to business owners, investors and Self Managed Superannuation Funds.