Federal Budget, 25 October 2022

ESSSuper - 26 Oct 2022

On 25 October 2022, the Federal government handed down a Federal Budget, with a focus on reviewing expenditure, addressing supply chain weaknesses and providing tailored cost of living support. There were no significant changes to superannuation.

Superannuation measures

Amendment to eligibility age for Downsizer contributions

The Downsizer scheme allows individuals to contribute up to $300,000 to their super from the sale of their main residence. A Bill is currently before the Senate to reduce the eligibility age for downsizer contributions from 60 to 55.

If the Treasury Laws Amendment (2022 Measures No 2) Bill 2022 is passed, that change will be effective in the first quarter after it's legislated.

Our Downsizing contributions into super (FS032) fact sheet, available in the Fact sheets and brochures / Making the most of your super section of our Publications web page has more information you may find useful.

Unlegislated tax and superannuation measures

The Government has stated they will not proceed with a number of legacy tax and superannuation measures that were announced but not legislated by the previous Liberal Government.

Other measures

The Budget includes a range of additional measures which, while they do not directly impact superannuation, will have an impact on an individual's income and/or financial position in retirement.

For more information on these measures, please refer to budget documents on the Government's website: Budget October 2022-23

Paid Parental Leave Scheme

Paid parental leave will be expanded by six weeks through to 2026-27:

• From 1 July 2023 both parents will be able to share leave
• From 1 July 2024, two additional weeks to be added in each financial year - from 20 weeks in 2023-24 to 26 weeks in 2023-27.

Asset test exemption extended

Effective 1 July 2022, the assets test exemption will be extended from 12 months to 24 months for principal home sale proceeds.

An additional 12-month extension may also be available in particular circumstances, taking the maximum exemption period to 36 months in total.

Incentivise pensioners into the workforce

Age and veterans pensioners will be provided a once off credit of $4,000 to their Work Bonus income bank.

Effective 1 July 2022, this one-off credit will increase the amount in the hands of pensioners in 2022–23 from $7,800 to $11,800 (before their pension is reduced).

Lifting the Income Threshold for the Commonwealth Seniors Health Card

Effective April 2022, the income threshold for the Commonwealth Seniors Health Card will be increased from $61,284 to $90,000 for singles and from $98,054 to $144,000 (combined) for couples.

Social security deeming rates will be frozen for another two years until 30 June 2024.

Investment observations

Affordable and social housing

• Subsidising the gap between market rents and subsidised rents: The Federal government intends to subsidise the gap between market rents and subsidised rents to make investment in the sector viable for superannuation funds. Preliminary discussions have received support from the super and construction sectors. The viability of the plan will depend on the risk allocation between government vs super:
  • Who selects the tenants
  • Who pays for property damage and upkeep
  • Who takes development risk, and
  • What is the tax treatment versus private capital (i.e. negative gearing is not available to institutional investors).
• Housing Accord: The Government is bringing states and territories, the Australian Local Government Association, investors and representatives from the construction sector together under a new Housing Accord. The intention is to build one million homes over five years by partnering with states to expedite zoning, planning and land releases.

Climate change

In his speech, the Treasurer briefly referred to establishing a $20bn fund to build transmission infrastructure for renewable energy. Infrastructure assets are in high demand by super investors and $20bn is possibly insufficient for the nation's needs (i.e. there is a role for private capital).

National security

Over the coming years, the Government will put $15bn towards rebuilding Australian manufacturing (via the National Reconstruction Fund) and $120bn towards infrastructure spending to support increased manufacturing activity.

Geopolitics have fundamentally changed Australia's relationship with China – it is possible this policy may be related to a need to reduce Australia's dependence on China.

Changes to Income Tax thresholds

Effective 1 July 2024, previously legislated stage three tax cuts to proceed as scheduled:

This article is based on information currently available about the Federal Budget announced 25 October 2022, and is subject to change. ESSSuper has made reasonable efforts to ensure the accuracy of this information but does not accept liability for acts or omissions based on its content.

Emergency Services Superannuation Board (ABN 28 161 296 741) (ESSB), the Trustee of the Emergency Services Superannuation Scheme (ABN 85 894 637 037) (ESSSuper).

The information contained in this article is of a general nature only. It should not be considered as a substitute for reading ESSSuper's Product Disclosure Statement (PDS) that contains detailed information about ESSSuper products, services and features. Before making a decision about an ESSSuper product, you should consider the appropriateness of the product to your personal objectives, financial situation and needs. It may also be beneficial to seek professional advice from a licensed financial planner or adviser. An ESSSuper PDS is available at esssuper.com.au/pds or by calling 1300 650 161.