In this pre-election campaign budget, a number of measures have been announced to assist in reducing the pressure caused by increased costs of living and the problem of housing affordability. Please see below for a summary of this year’s Federal Budget, noting that the changes are proposals only at this stage and have not yet passed through parliament, though are expected to do so.
- Cost of living tax offset: The Low and Middle Income Tax Offset (LMITO) will increase, providing an additional $420 to reduce tax payable for eligible taxpayers in the 2021/22 financial year. This offset is non-refundable and available to those earning up to $126,000 per annum. However, individuals earning over $126,000 per annum will not benefit. Further, LMITO was not extended, meaning it will not apply for the 2022/23 or later financial years at this stage (election promises pending!).
- Halving of fuel excise: For six months from 12:01am 30 March 2022, the excise on fuel and petroleum-based products has been halved. Whilst not a direct tax, the expectation is this should result in lower fuel prices during this period. Half the current excise on fuel and diesel is 22.1 cents per litre.
- Indexation of the Medicare Levy thresholds: The Medicare Levy low-income thresholds are indexed each year. From 1 July 2021, the thresholds are expected to be as follows – For singles $23,365 (increased from $23,226) – For families $39,402 (increased from $39,167) plus $3,619 per dependent (increased from $3,597) – For single seniors and pensioners $36,925 (increased from $36,705) – For family seniors and pensioners $51,401 (increased from $51,094) plus $3,619 per dependent (increased from $3,597).
Continuation of the reduced minimum pension drawdown: The budget proposes to extend the minimum amount that needs to be drawn from account-based income streams to the 2022/23 financial year. As mentioned in our most recent post, this means individuals with account-based pensions or term allocated pensions will be required to draw less from their savings, in line with the current year minimums.
By Ben Hancock