Well last night’s budget is all about an Election and what we don’t speak about Inflation.
Before we look at the typical pre-election budget boosts let’s consider (without mentioning trillion dollar debts) the very obvious day to day inflation we are all feeling. Inflation is what this budget hopes to partly alleviate but will likely instead accelerate so where might it take us?
We can see 4 scenarios for growing inflation:
- The Governments and Reserve banks have no real idea and they are just kicking debt and inflation further down the road to see what happens.
- Alternatively, they are playing a dangerous game of deflating debt by running up inflation. Our 2-minute view on this is here: https://www.youtube.com/watch?v=RGX7JWjIhGk
- We end up like Japan with high debt combined with low interest rates for decades to come. Our 2-minute view on this is here: https://www.youtube.com/watch?v=gRXVgebd2qQ
- Allowing inflation to run significantly ahead of interest rates to crash out (at worst) the current paper currency or at least make it more attractive (at best) to hasten in the era of digital currency which is eventually inevitable with more budget resources this year being tipped that way.
However for the moment we remain economically optimistic (as no one really knows) and what we do know with inflation is that those holding assets (or looking at taking on further assets) will likely do well for the run up on in inflation (as cash loses value) then after that history repeats so keep your eye on the investment clock cycle: https://www.youtube.com/watch?v=hiHK00LVqQE
Let’s enjoy (for most) some (election) budget night relief.
Fuel Costs
In a bid to relieve cost of living pressures for millions of Aussies the government pledged to temporarily reduce the 44.2 cents a litre fuel excise by cutting it in half.
“For the next 6 months, Australians will save 22 cents a litre every time they fill up their car.”
Cost of living tax relief
The LMITO was a one-off tax offset worth up to $1,080 available to those earning from $48,000 to $126,000 a year. “Mr Speaker, tonight I also announce a new one‑off $420 cost of living tax offset for more than 10 million low‑and‑middle income earners, Individuals already receiving the low- and middle-income tax offset will now receive up to $1,500 and couples up to $3,000 from 1 July this year”
LMITO will, however, end in the 2022 financial year.
Cost of living payments
The Government proposes to provide a $250 economic support payment to help eligible recipients with higher cost of living pressures. The payment will be made in April 2022 to eligible recipients of the following payments and to concession card holders:
• Age Pension • Disability Support Pension • Parenting Payment • Carer Payment • Carer Allowance (if not in receipt of a primary income support payment) • Jobseeker Payment • Youth Allowance • Austudy and Abstudy Living Allowance • Double Orphan Pension • Special Benefit • Farm Household Allowance • Pensioner Concession Card (PCC) holders • Commonwealth Seniors Health Card holders • Eligible Veterans’ Affairs payment recipients and Veteran Gold card holders. The payments are exempt from tax.
Superannuation
The federal government is extending the 50 per cent reduction to minimum superannuation drawdown requirements for retirees into the 2023 financial year.
Under the reduced minimum drawdown rates, self-funded retirees aged between 65 and 74 must withdraw 2.5 per cent of their account balance each year to be eligible for tax-free status on their earnings.
The minimum drawdown rate is currently 3 per cent for ages 75 to 79; 3.5 per cent for ages 80 to 84; 4.5 per cent for ages 85 to 89; 5.5 per cent for ages 90 to 94; and 7 per cent for ages 95 and above, while a rate of 2 per cent applies to those under 65.
Tax deductibility and FBT exemption for COVID-19 test expenses
The Government proposes to make the costs of taking a COVID-19 test to attend a place of work tax deductible for individuals from 1 July 2021. The Government also proposes to ensure Fringe benefits tax (FBT) will also not be incurred.
For small businesses (turnover under $50m)
Skills and Training Boost will provide a new 20% bonus deduction for eligible external training courses for upskilling employees from Budget night. In addition, businesses will receive a similar 20% bonus deduction for expenditure on digital technologies (e.g. cloud computing, eInvoicing, cyber security and web design) for investments of up to $100,000 per year.
Well, that’s the 2022/3 highlights
There are plenty of other lesser budgetary gems around employee share schemes, digitisation of the economy, first homeowners and our GDP to Debt levels amongst other industry specific changes that can all be found here: https://budget.gov.au/index.htm