I am never sure why some people get so fascinated about the Federal Budget. For us accountants, economists and financial planners it is the equivalent of Christmas. We all get excited wanting to know what the Treasurer has given us in his box of goodies.
We all want the goodies and get extremely upset if we lose out, especially if others have gained.
It is in effect the AGM of the nation’s finances and so we should be interested. But to be quite honest I sometimes feel this can be a bit of a waste of time. And Tuesday was a waste of time because it was Diwali, the Hindu Festival of Lights. This meant I was a bit busy trying to empty a bottle of whiskey down my throat. In addition, I was consuming all that food I am not supposed to eat. But I won’t mention any of that to my GP.
Anyway, every year the media, and in particular my inbox, explodes with summaries and finance jargon that even I find discombobulating. It is surprising that we are given tables and calculators that tell the ‘average household’ (whatever that means) how much better off or worse off they are when it is, quite frankly, meaningless.
Technically, I am the equivalent of an average household with two teenage boys and let me tell you there is nothing average that happens in my household. So, when I am told I will be better off by $5 a week, which is the equivalent to a drop of fuel, it is not exactly exciting.
You may think that it is strange coming from an accountant who has constantly told you to keep an eye on the numbers.
I am not suggesting that, only that what we see and are told is never the full story. And as is the norm these days some proposals don’t happen till a few years later but are touted as a benefit today. It’s a bit like Netflix saying they are going to reduce your monthly subscription but not until 2025. It makes no difference to us now so why bother telling us?
Besides Netflix does not know what is going to happen in 2025, so when 2025 comes along you might find subscriptions go up not down which upsets us even more.
But the nation’s finances are important and that means reading between the lines. What is the Government’s core thinking? What do they know but not really telling us? At the end of the day, we all want to know how it really affects us.
So welcome to my jargon-free ‘What the Hell does the Budget Mean for Me’ guide.
All a Bit Boring.
I think our Federal Government had an eye on what was happening in the UK. They were a bit bold over there and all hell broke lose. Heads rolled and the place is a mess. 3 prime ministers in a space of a few months and no-one still knows if it will work out.
So, our government decided to be safe and boring.
And that is what they have given us. There are no major headlines. No major tax cutting ‘we are going to help’ calls. But then again there was nothing to suggest taxes were going up, which was a bit surprising.
In effect they have tinkered on the sidelines waiting to see what happens. If it all goes belly up they can blame the old government. If it works out they will take the credit. As I said safe but boring.
The problem is we don’t need safe and boring. We need to be a bit bold because there are some challenges coming our way.
For starters we have a bit of a debt pile. And the ATO is owed $40bn by taxpayers. Somehow it needs to be balanced. Add to this labour shortages and we have an inflation issue which increases interest rates. Not a time to be safe.
Superannuation – Downsizer
The Government will allow more people to make downsizer contributions to their superannuation, by reducing the minimum eligibility age from 60 to 55.
The downsizer contribution allows people to make a one-off post-tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home.
Is it a good thing? We think so.
Australia has a housing shortage with our elderly population living in homes that are not suited. These could be freed up if the elderly has an incentive to downsize.
The extra amounts put into superannuation can grow tax free.
Our issue? Not many 55 year old’s will be willing to downsize with kids still at home so we are not expecting this change is going to attract a lot of people.
Electric Car Discounts
This is the green part of the budget but was announced months ago so not new.
The Government will cut taxes on electric cars so that they are affordable for more Australians.
From 1 July 2022, they will exempt battery, hydrogen fuel cell and plug-in hybrid electric cars from fringe benefits tax and import tariffs below the luxury car tax threshold for fuel-efficient cars of $84,916.
But there is a catch. The car must not be used prior to 1 July 2022 so counts out used cars.
The other issue? If not in business or you do not receive as part of your employment package an electric car there is not much of a benefit. The problem is that in Australia we often travel large distances so need a charging network that can deal with the ‘range anxiety’ issue. Add to this that electric cars are still very expensive will mean that this proposal will take time to take effect.
Big Business & Taxes
Going after big business is always popular. Actually, doing it is another thing. Big business have deep pockets and can afford bigger cigar chewing lawyers than our government can so can drag out a legal fight.
But the Government has put in place some rules to make them pay up.
It will make no difference to you or me so we will not discuss it more than that.
Another one that had been announced before the budget but a good one. There was some confusion about grants and how there were taxed. The news is good. Grants will be tax free if they meet the rules:
- Payments is made by state and territory business grant programs prior to 30 June 2022 and;
- was formally declared by the minister.
- The entity receiving the grant carried on a business and had an aggregated turnover of less than $50 million The payment was received in
- the 2020–21 or 2021–22 financial year for eligible state or territory grants, or
- the 2021–22 financial year for eligible Australian Government programs.
Crypto Not Taxed as Foreign Currency
The Government will introduce legislation to clarify that digital currencies (such as Bitcoin) continue to be excluded from the Australian income tax treatment of foreign currency.
Why this is an issue I do not really know except that in El Salvador the government agreed to accept Bitcoin as legal tender.
For 99.9% of Australians this is meaningless. Told you this budget was boring but we accountants had to write about something.
Paid Parental Leave
The Government has announced it will introduce reforms from 1 July 2023 to make the Paid Parental Leave Scheme flexible for families so that either parent is able to claim.
Parents will also be able to claim weeks of the payment concurrently so they can take leave at the same time. From 1 July 2024, the Government will start expanding the scheme by two additional weeks a year until it reaches a full 26 weeks from 1 July 2026.
Both parents will be able to share the leave entitlement, with a proportion maintained on a ‘use it or lose it’ basis, to encourage and facilitate both parents to access the scheme and to share the caring responsibilities more equally. Sole parents will be able to access the full 26 weeks.