Last week, the Federal Government has handed down its 2022-23 Budget which further to the Federal Budget handed down on 29 March 2022, updates economic forecasts and identifies the priorities for the new Labor Government.

The Budget does not contain major tax changes. Below we’ve highlighted a couple of interesting items in relation to superannuation contributions and government grants, as well as some of the overall macro-economic forecasts.

If you would like to read a more detailed and comprehensive summary of all the key budget measures, we have 12 page guide available to share courtesy of our tax technical partners, Knowledge Shop.

If you would like to receive a copy of the Budget Guide, please send us a request by email to contact@gpgbusinessadvisory.com.au

Superannuation ‘Downsizer’ eligibility reduced to age 55

As previously announced, the Government will reduce the age an individual can make a ‘downsizer’ contribution to superannuation from the current 60 years to 55 years of age.

Currently, eligible individuals aged 60 years or older can choose to make a ‘downsizer contribution’ into their superannuation of up to $300,000 per person ($600,000 per couple) from the proceeds of selling their home.

Downsizer contributions can be made from the sale of your principal residence in Australia that you have owned for the past ten or more years. These contributions are excluded from the age test, work test, and your total superannuation balance (but not exempt from your transfer balance cap).

Legislation enabling the expanding eligibility for downsizer contributions is currently before Parliament. 

Energy efficiency grants for SMEs

The Government will provide $62.6m over 3 years from 2022-23 to help small and medium business fund energy efficient equipment upgrades. The funding will support studies, planning, equipment and facility upgrade projects that will improve energy efficiency, reduce emissions or improve the management of power demand. No details of the grants are currently available.

The Economy

In broad economic terms, the Budget estimates an underlying cash deficit of $36.9 billion for 2022-23 (and $44 billion for 2023-24). The economy is expected to grow by 3.25% in 2022-23, however, it is predicted to slow to 1.5% for 2023-24.

Inflation

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.

Unemployment and wages growth

Labour market conditions are expected to remain tight. The unemployment rate is forecast to rise to 4½ per cent by the June quarter of 2024.

Tight labour market conditions are expected to see annual wage growth pick up to 3¾ per cent by June 2023.

Energy

Electricity and gas prices are expected to rise sharply over the next 2 years, as the cost of energy market disruptions are passed through to households. Treasury has assumed retail electricity prices will increase by an average of 20% nationally in late 2022. Retail electricity prices are expected to rise by a further 30% in 2023-24.

Domestic gas prices remain more than double their average prior to Russia’s invasion of Ukraine. Retail prices are expected to increase by up to 20% in 2022-23 and 2023-24.