The Australian federal budget for the 2022-23 financial year has been delivered, and it’s clear that this is not a budget loaded with cash handouts or tax cuts.

Like most Federal Budgets, the devil is in the detail and it’s always important to remember that many of the measures included in the Budget are not yet law and must still pass through the Legislative process in Parliament.

There is a strong focus in this Budget on trying to relieve cost of living pressures by addressing structural factors in the economy.

So, what’s actually in the budget?

Check out our summary of the key points below:

Summary – What does this budget say about our economy?: The budget is warding off a weak economy before the next real budget. GDP has decreased from 3.25% to 1/4% this financial year, and it will drop to 1.5% by 2023/24. To make matters worse, wage growth is only at 2.6%, while inflation is predicted to jump up 7.75% in the December quarter, and a cost of living increase will be 6.1%. We won’t see any real growth in wages until 2024.

Taxation: No changes were announced to the personal income tax that was set to take effect on July 1st, 2024, or for the extension of the low and middle-income tax offset ending June 30th,2022. However, fringe benefits will be exempt from taxes for certain electric vehicles bought after July 1st ,2022.

Superannuation: The Government has promised to change the rules for self-managed superannuation funds so they can keep their concessional tax treatment when members move overseas. But this won’t occur until 1 July 2023 at the earliest. Downsizers aged 55 and over can contribute up to $300,000 per person to their superannuation on the sale of their principal residence from 1 January 2023. No changes were announced to limit the amount accumulated in super or transferred to the retirement phase, providing some welcome stability to the system.

Social Security and Welfare: Starting from July 2023, the Australian government will gradually raise the level of childcare subsidy paid to families. This will help reduce out-of-pocket costs and extend the government’s paid parental leave scheme to 26 weeks.

If you are a single person, the level of income you may earn and still be eligible for the Commonwealth Seniors Health Card will increase to $90,000. If you are in a couple, the combined level of income you may earn and still be eligible for the card will increase to $144,000. Other changes that will benefit pensioners and recipients of income support include extending the period during which proceeds from selling a home are exempt from assets tests by 12 months (to 2 years in total), freezing current deeming rates on financial assets and increasing Work Bonus levels.

What Else Is In the Budget?

Some of the most notable measures include $20 billion to upgrade Australia’s electricity grid to connect with renewable energy sources; a National Housing Accord which aims to build one million new houses over five years from 2024; more TAFE and university places; and reforms to childcare and paid parental leave. There will also be cheaper medicines and support for communities impacted by natural disasters.

If you want to better understand how the budget might affect your personal situation, get in touch with Wealth Architects today.

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