2022/23 Federal Budget: What it means for you

A couple considers their financial options after seeing the 2022 federal budget

Treasurer Josh Frydenberg delivered the 2022/23 Commonwealth Budget last night. With a bit over a month before the next federal election, the government will look to cut down on national debt while also providing immediate support for the people that need it. 

With runaway inflation on everyone’s mind, this budget contains a number of measures aimed at helping Australians manage rising costs of living, whether at the petrol pump or on a first home loan. 

But the government is also hoping to stabilise the amount of debt the country has built up during the pandemic years, which it plans to do by fuelling economic growth — rather than cutting spending or raising taxes.

Below, we look at some of the key measures contained in the budget and what they mean for you.

Tax savings? LMITO to be boosted ahead of phase out

The Low and Middle Income Tax Offset (LMITO) will be phased out at the end of this financial year, but the government has decided to put an extra $420 back in taxpayers’ pockets before it wraps up.

Since 2019, the LMITO has provided tax cuts between $255 and $1,080 to Australians with annual incomes below $126,001.

The tax system that will be replacing it comes as a bit of a controversy.

Beginning 1 July 2024, the tax rate for those earning between $45,001 and $200,000 will be flattened to just 30 per cent. The 45 per cent tax bracket will also be lifted to apply to those earning between $180,001 to $200,001. 

According to The Australia Institute, that means Australians with incomes above $200,000 will be looking at a tax cut of $9,075 per year, while low and middle income earners will receive little to nothing.

$250 cost of living payment

The government will also make a one-off payment of $250 to current government payment recipients and concession card holders. 

This will be paid out automatically in April (meaning eligible Australians won’t need to apply for anything), and is intended to ease some of the pressure many are currently facing due to rising costs of living.

More support for first home buyers

The government has decided to expand the First Home Loan Deposit Scheme, which gives eligible first home buyers the chance to purchase a home with a deposit of as little as 5 per cent.

Typically, home buyers are required to have a deposit worth 20 per cent of a property’s value, otherwise they will be required to spend thousands of dollars on Lender’s Mortgage Insurance (LMI).  

A total of 50,000 places will be made available, with 10,000 reserved for home buyers in regional and rural areas as part of the new Regional Home Guarantee.

The program has been welcomed by industry groups such as the Housing Industry Association, which said it has the chance to support home building in rural areas while also eliminating one of the largest barriers to home ownership for Australians.

An extra 5,000 places will also be available under the Family Home Guarantee, which allows single parents with dependent children to purchase a home with a deposit of just 2 per cent.

Easing petrol prices: Fuel Excise to be temporarily cut

In an effort to bring down the skyrocketing price of fuel, the Government will reduce the fuel excise by 50 per cent for 6 months. The fuel excise is a flat tax that motorists have to pay at the petrol station.

This will bring it down from 44.2 cents per litre down to 22.1 cents per litre. Over the next 6 months, the cuts to this tax should help motorists to save significantly on petrol prices.

The savings of 22 cents per litre probably won’t be reflected at the pump for another two weeks. After that, the ACCC will be keeping a close eye on petrol retailers to make sure they actually pass on the savings.

Petrol prices are one of the highest household expenses after food and rent, while there is some doubt about the long-term economic impacts of this decision, the relief to petrol prices will be welcomed by drivers across the country.

Estimated Savings After the fuel excise has been lifted
Source: Australian Government estimated household savings in excise and GST per tank of fuel

See the Australian Government's budget page on cost of living, for more information.

Improving inequality: Bettering Women's health

The last year has seen growing pressure on the government to support women and address inequality in workplaces and women’s health. The 2022/23 budget has a range of policies aimed at improving women’s health and safety.

The government is investing a further $330.6 million to improve health outcomes for women and girls in a range of priority areas. This includes new support for women dealing with endometriosis or breast cancer.

The government has also pledged to spend $1.3 billion over the next six years towards ending violence against women and children. They’re looking to improve prevention and recovery programmes for women and children who have been affected by violence and abuse.

There have also been major changes to the structure of parental leave which should give new parents more flexibility to take time off work.

Paid Parental Leave payments will be streamlined to allow couples greater choice over which parent takes the leave and when.

More support for mental health

The government will pour more funding into Australia’s mental health care services, allocating $547 million over the next five years to support and expand the National Mental Health and Suicide Prevention Plan.

As a part of this investment, anyone who is currently on a mental health plan through Medicare will get ten more subsidised visits to a psychologist. The cost of mental health care can often push people away from getting the help they need, so these subsidies could make a big difference for many Australians.

The expanded mental health plan was announced at the onset of the coronavirus pandemic, and will be continued into the future.

Funding will be split between national and local programmes, and includes $42.3 million over four years for Lifeline and $14.8 million over five years for Headspace.

Find out more about the wins for women and mental healthcare in the 2022 budget!

Taking care of our elderly - aged care focus

With the aged care sector coming under increasing strain over the last few years, this year's budget hopes to give more support to older Australians and the people who look after them.

This comes after an earlier announcement that workers in aged care would be given bonus payments of $800 over two instalments.

This budget has allocated close to $50 million to subsidise 33,000 new places in education and training for the aged care sector. The government hopes that these investments will encourage people to enter the industry and stay there.

A total of $340 million has also been earmarked to help embed pharmacy services in residential aged care homes — streamlining the process of managing medication for the nation's elders.

With the federal budget offering some easing tax burdens and small payments, now is a good time to consider how these fit into your personal budget. If you’re looking to tighten your belt and get a better savings plan in place, check out our guide for the best bank accounts in 2022.

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