On Tuesday 29 March 2022, with the next federal election looming, the Treasurer, Josh Frydenberg delivered his fourth Federal Budget. This Budget is focused on providing relief from increasing cost of living pressures and continuing to support the economy in the context of ongoing geopolitical pressures.
No changes to super or contributions
There were no changes announced to the superannuation system and no alterations to existing contributions caps. A reminder that the concessional contribution limit was previously increased from $25,000 per financial year to $27,500 per financial year from 1 July 2021.
Extension of minimum pension drawdown reduction by 50%
The minimum drawdown requirements determine the minimum amount of a pension that a retiree has to draw from their superannuation in order to qualify for tax concessions. There is no maximum amount which must be paid (unless it is a transition to retirement pension).
The Treasurer has extended the 50% reduction of the pension minimum drawdown requirements for account-based pensions and similar products for a further year to 30 June 2023.
|Age on 1 July or commencement of pension||Minimum % of account balance to be withdrawn for 2021/22 and 2022/23 years||Minimum % of account balance to be withdrawn for 2023/24 year and beyond|
|Below age 65||2.0%||4.0%|
|Age 65 to 74||2.5%||5.0%|
|Age 75 to 79||3.0%||6.0%|
|Age 80 to 84||3.5%||7.0%|
|Age 85 to 89||4.5%||9.0%|
|Age 90 to 94||5.5%||11.0%|
|Age 95 plus||7.0%||14.0%|
Cost of living increases
The Budget headline was a “temporary and targeted cost of living package”, with minor changes in super and pensions. The package includes:
- a $420 cost of living tax offset for low- and middle-income earners,
- a $250 cost of living payment for eligible Australian pensioners, welfare recipients, veterans and concession card holders,
- a 50% reduction of petrol and diesel excise of 44.2 cents per litre to 22.1 cents per litre providing relief from higher fuel prices.
Paid parental leave
The Treasurer announced the Budget contained an investment of $346 million over five years to introduce an enhanced Paid Parental Leave scheme for eligible working families by integrating “Dad and Partner Pay and Parental Leave Pay to provide eligible families access to up to 20 weeks leave to use in ways that suit their specific circumstances”.
First home buyers
The number of people able to access the First Home Guarantee Scheme will double to 50,000 places per year. This scheme has been utilised in previous years and is designed to help people buy their first home with a deposit of just 5%, or 2% for single parents.
Incentives to hire apprentices
The government will spend $2.8bn to increase the take-up and completion rates of apprenticeships, partly through $5,000 payments to new apprentices and up to $15,000 in wage subsidies for employers who hire apprentices.
Forecast GDP growth
Regarding economic fundamentals, the Budget estimated real GDP is forecast to grow by 3.5% in 2022-23 and 2.5% in 2023-24, with broad based growth in consumption, business investment and exports. Real GDP is forecast to remain above the previous 2021-22 MYEFO profile over the forecast period, growing by 2.5% in 2024-25 and 2025-26.
The Budget papers revealed, “The ongoing pandemic, Russian invasion of Ukraine, strained supply chains and rising inflationary pressures all present risks to the global and domestic outlooks. Nonetheless, the resilience of the Australian economy throughout the pandemic demonstrates that the economy is well placed to adapt to these new developments.” This resilience helped the Australian share market stay positive during the past 12 months.