Federal Budget 2022-23: Cost of Living Relief
The pre-election Budget was designed to help individuals cope with rising living costs. Australians have seen rising bills at the grocery and bowser. This problem was exacerbated by the global COVID-19 pandemic and Australian floods, which all contributed to the skyrocketing input and transport costs. The CPI estimate of 4.25 percent for the year is not keeping pace with the predicted 2.75 percent national wage growth.
The cost of living relief will be in the form of a $420 rise to the Low and Medium Income Tax Offset for this year, a $250 bonus payment for social security recipients and a six-month halving the fuel excise. Many soon-to-be parents, including single parents, will also benefit from the proposed enhancements of the Paid Parental Leave Scheme (PPL), increasing eligibility and flexibility.
Businesses are not likely to receive any big-ticket announcements. However, eligible businesses could be eligible for additional deductibility for technology and training investments, increased access to employee share plans, greater support for apprenticeships, and other improvements in tax compliance.
These are the key economic forecasts from the Budget papers:
Legislated budget measures
Australians can take measures to cope with rising living costs.
The cost of living tax offset — A $420 increase to LMITO
Schedule 6 of the Bill contains amendments to increase LMITO by 420 in the 2021-22 income years. The maximum LMITO benefit is now $1500, an increase from the $1,080 previously.
All LMITO recipients will receive the $420 increase unless the taxpayer is required to offset all their tax liabilities to zero. Other features of the LMITO are unchanged, such as the requirement that the income is below $126,000.
By current arrangements, the LMITO is received upon assessment of an individual’s 2022 tax return. The LMITO will be increased this year, and recipients will have to pay a higher income tax bill in 2022-23. Stage 3 tax cuts will be implemented in 2024-25.
The cost of living tax relief and LMITO tax relief
The $250 cost-of-living payment
Schedule 8 of the Bill introduces the 2022 cost-of-living payment. To help with rising living costs, the Government will pay $250 as a one-off tax-exempt support payment to eligible recipients.
The following payment recipients and holders of eligible concession cards will receive the payment:
- Age Pension
- Disability Support Pension
- Parenting Payment
- Carer Payment
- Carer allowance (if you are not receiving a direct income support payment).
- Jobseeker Payment
- Youth Allowance
- Living allowance for Austudy or Abstudy
- Double Orphan Pension
- Special Benefit
- Allowance for Farm Households
- Pensioner Concession Card (PCC) holders
- Commonwealth Seniors Health Card Holders
- Eligible Veteran’s Affairs recipients and Veteran Gold cardholders
Recipients must reside in Australia and be receiving one or more qualifying payments.
These payments are not income support and will not be considered income support. Even if a person is eligible under more than one category, they can only receive one type of economic support payment.
In April 2022, eligible recipients will receive $250 automatically.
Temporary reduction of fuel excise
Fuel Excise Bills temporarily relieve rising fuel prices by halving the excise-equivalent customs duties rate applicable to petrol or diesel for six months.
This 50% reduction will be applied to the excise or excise-equivalent rates, which apply to:
- petrol and diesel;
- All other fuels and petroleum-based products except aviation fuels
- The existing policy settings for fuel excise and excise equivalent customs duty will be maintained, but the rates will be halved.
- At the end of the six months, the excise and excise equivalent customs duty rates will revert to the previous rates, including indexation, that would have occurred during the six months.
- The Australian Competition and Consumer Commission will monitor the price behavior of retailers to ensure the Australians receive lower excise rates.