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The Treasurer, Josh Frydenberg, delivered the Morrison government budget for 2022/2023 last night with many coining it as a bid to win back voters at the looming election
The Coalition plans to splash $8.6 billion to drive the Australian economic recovery in a post-pandemic, natural disaster, and conflicted international environment.
I watched Frydenberg deliver the budget last night, which was quite dull viewing for a Tuesday evening, although I watched it so you wouldn’t have to. Here are my key takeaways.
From a financial advice perspective, the major measure was the extension of minimum pension drawdown rates. The 50 percent reduction of the superannuation minimum drawdown requirements for account-based pensions and similar products is extended for a further year to 30 June 2023. Given ongoing volatility, this change will reduce the need for retirees to sell assets in order to satisfy the minimum drawdown requirements.
The government’s low- and middle-income tax offset (LMITO) will be increased for the 2021-2022 income year to assist with the costs of living pressures. This will provide workers earning under $126,000 an extra $420 in their tax returns than they did last year. This increases the maximum LMITO benefit in 2021-22 to $1,500 for individuals and $3,000 for couples.
The Coalition announce several measures to address the increasing cost of living.
Frydenberg announced the tax on petrol and diesel will be halved for six months to reduce the burden of higher fuel prices. The measures will commence from 12.01 am on 30 March 2022, reducing the tax from 44.2 cents to 22.1. We can expect that these price reductions will flow (pun) through to the pumps in a few weeks. The Australian Competition and Consumer Commission (ACCC) will monitor the price behaviour of retailers to ensure that the lower excise rate is fully passed on to Australians. The government estimated an average car would be $15 cheaper to fill up, saving a regular driver who fills up weekly $350 in six months.
Pensioners, welfare recipients, and concession card holders — about 6 million Australians — will also receive a one-off, $250 tax-free payment automatically in April.
The government will also spend $2.8 million on increasing the number of government-supported apprenticeships by 2500 places.
New apprentices will receive $5,000 payments over two years as they complete their training in key areas where there are workforce shortages, while employers will also receive wage subsidies of up to 10 percent to hire new trainees.
Small businesses will be able to deduct an additional 20 percent of expenditure incurred on external training courses provided to their employees. The 20 percent will also apply to costs incurred on business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems, or subscriptions to cloud-based services.
With rising house prices, many Australians are struggling to get into the housing market. Under the Home Guarantee Scheme, there are 50,000 spots available to allow homebuyers to purchase a home with a 5 percent deposit, rather than the usual 20 percent banks require.
The places are broken up into 35,000 for your conventional first-home buyers, 10,000 for those in the regions, and 5000 for single parents. The single-parent option only requires a 2 percent deposit.
This will come at a cost of $8.6 million over 4 years from 2022-23.
Another $1.3 billion will be spent tackling violence against women and children in this budget, building on the $1.1 billion spent in last year’s budget to improve women’s health, safety, and economic security – a package that was unveiled after fierce criticism the 2020 budget had largely ignored women. The new spending is on front-line services, emergency accommodation, access to legal advice, and more.
After committing to net zero emissions by 2050, the government has made no major promises in this budget about how to get Australia to that target. There’s $247 million over five years to back in private sector investment in hydrogen, $148 million for so-called microgrid projects in regional areas and $50 million for gas infrastructure.
The budget will stay in deficit for at least the next decade. Overall, the stimulus strategy won’t hurt, either at the polling booth or the Australian’s hip pocket. My only concern is ongoing deficits will need to be financed with additional debt. Not only is the amount of debt rising, but the price also (interest rates) of that debt is rising along with it. Any new debt taken on; will be at a much high-interest rate than previously. Will this stimulus drive inflation and consequently, raise interest rates, only time will tell?
Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email firstname.lastname@example.org or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.