Federal Budget 2022-2023 – Impact For Individuals

The 2022/23 Budget was handed down on Tuesday, 25 October 2022 by the government.

The Budget estimates an underlying cash deficit of $36.9 billion for 2022-23 (and $44bn for 2023-24). While the economy is expected to grow by 3.25% in 2022-23, it is predicted to slow to 1.5% for 2023-24, a full percentage point lower than forecast in March 2022. Inflation is expected to peak at 7.75% later in 2022, but is projected to moderate to 3.5% through 2023-24, and return to the Reserve Bank’s target range in 2024-25.

While the headline for most people will be multinational tax changes, the real money is coming from you and me – individuals and small business in Australia through extra ATO enforcement.

They’re expecting to raise 2.1 billion over the next four years through giving extra funding to the ATO to support their shadow economy activities, and when you look at shadow economy activities that’s within the small business segment.


The headline measures for individuals included:

  • Personal tax rates unchanged for 2022-23; Stage 3 start from 2024-25 unchanged

In the Budget, the Government did not announce any personal tax rates changes.

  • Low income tax offsets
    • LMITO not extended to 2022-23
      The 2022-23 October Budget did not announce any extension of the low and middle income tax offset (LMITO) to the 2022-23 income year. The LMITO has now ceased and been fully replaced by the low income tax offset (LITO).

      The March 2022-23 Budget had increased the LMITO by $420 for the 2021-22 income year so that eligible individuals (with taxable incomes below $126,000) received a maximum LMITO up to $1,500 for 2021-22 (instead of $1,080).

      With no extension of the LMITO announced in the October Budget, 2021-22 was the last income year for which the offset was available. As a result, low-to-middle income earners may see their tax refunds from July 2023 reduced by between $675 and $1,500 (for incomes up to $90,000 but phasing out up to $126,000), all other things being equal.
    • Low income tax offset for 2022-23 (unchanged)
      No changes were made to the LITO in the 2022- 23 October Budget. The LITO will continue to apply for the 2022-23 income years and beyond. The LITO was intended to replace the former low income and low and middle income tax offsets from 2022-23, but the new LITO was brought forward in the 2020 Budget to apply from the 2020-21 income year.
Taxable IncomeAmount of Offset
$0 – $37, 500$700
$37, 501 – $45,000$700 – ((TI – $37, 500) x 5%)
$45,000 – $66, 667$325 – ((TI – $45,000) x 1.5%)

The maximum amount of the LITO is $700. The LITO is withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000 and then at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667.

  • Deductible gift recipients: two new entities added
    The Budget Papers state the following entities will be listed as deductible gift recipients (DGRs) for donations:
    • Australians for Indigenous Constitutional Recognition for donations made from 1 July 2022 to 30 June 2025;
    • Australian Women Donors Network for gifts made from 9 March 2023 to 8 March 2028.

Taxpayers may claim an income tax deduction for donations of $2 or more to DGRs.

Other measures

  • Regional First Home Buyers Guarantee Scheme; Housing Australia Future Fund; other housing measures
    The Government has announced that it will establish the “Regional First Home Buyers Guarantee”. Its aim will be to encourage home ownership in regional locations.

    It will apply to eligible citizens and permanent residents who have lived in a regional location for more than 12 months to purchase their first home in that location with a minimum 5% deposit. It aims to reach 10,000 places per year to 30 June 2026.

    It will fund this by redirecting funding from the Regional Home Guarantee component of the 2022-23 March Budget measure titled Affordable Housing and Home Ownership.

    In other measures, the Government will invest $10 billion in the newly created “Housing Australia Future Fund”, to be managed by the Future Fund Management Agency. Its aim will be to generate returns to fund the delivery of 30,000 social and affordable homes over 5 years and allocate $330 million for acute housing needs.

    The Government will also “broaden the remit” of the National Housing Infrastructure Facility to directly support new social and affordable housing in addition to financing critical housing infrastructure.
  • New Housing Accord endorsed by super funds: $350m in Government funding
    The Government announced that it has struck a new national Housing Accord between State and Territory governments, investors and other key stakeholders. The new Housing Accord sets an initial, aspirational target of 1 million new homes over 5 years from 2024.
  • Paid parental leave to be expanded
    The Government will expand the Paid Parental Leave (PPL) scheme from 1 July 2023 so that either parent is able to claim the payment and both birth parents and non-birth parents are allowed to receive the payment if they meet the eligibility criteria.

    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 2 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.

    The amount of PPL available for families will increase up to a total of 26 weeks from July 2026, benefiting over 180,000 families each year. An additional 2 weeks will be added each year from July 2024 to July 2026, increasing the overall length of PPL by 6 weeks.
  • Child care measures: increased CCS rate for household income up to $530,000
    The Government will provide $4.7bn over 4 years from 2022-23 (and $1.7bn per year ongoing) to deliver cheaper child care and reduce barriers to workforce participation.
  • Pension supplement changes for departures overseas will not proceed
    The Government will not proceed with the Pension Supplement changes announced by the previous Government in the 2016- 17 MYEFO to the payment of the Pension Supplement for permanent departures overseas and temporary absences.

Further information

The full Budget Papers can be found at https://budget.gov.au/

If you have any questions about what was contained in the Budget and how it may impact you or your business moving forward, contact your advisor. please contact our tax consultants from W Wen & Co on (02) 9871 3429 or (02) 8090 2449.

The information in this article is sourced from Federal budget provided by CAANZ & Thomson Reuters.

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