Personal tax and superannuation

Federal Budget Tax | analysis and insights

From an income tax perspective, this Budget saw no significant announcements to current or future personal tax rates, nor any additional direct support through the tax system to help with the rising cost of living. There was however an announcement which will affect the after-tax outcomes for shareholders of listed public companies whereby their ability to access franking benefits from participating in an off-market share buy-back at any time from 7:30pm AEDT on 25 October 2022 will be limited due to proposed changes to align the tax treatment with on-market share buy-backs (see the Business taxes section for further details).

Personal income tax rates and thresholds

As widely expected, no changes were announced in relation to existing personal tax rates and the already legislated stage 3 tax cuts which apply from 1 July 2024.

It is also relevant to note that the 2021-22 income year was the final year that the Low and Middle Income Tax Offset (LMITO) applied. However, the Low Income Tax Offset (LITO) remains in place for the 2022-23 financial year.

Under stage 3 of the personal income tax plan, all taxpayers earning over $45,000 and up to $200,000 will pay a marginal rate of tax of 30 per cent. This rate band extension effectively removes the current 37 per cent tax bracket, while taxpayers earning over $200,000 will be subject to a 45 per cent marginal rate of income tax.

For a comparison between current income tax rates and the changes that will occur under the stage 3 measures, refer to the below table.

Table 1: Income tax rates for Australian tax residents

  Thresholds from 1 July 2020 to 30 June 2024 Thresholds from 1 July 2024

Rate

(%)

Income range

($)

Income range

($)

Nil 0 - 18,200 0 - 18,200
19 18,201 - 45,000 18,201 - 45,000
30 N/A 45,001 - 200,000
32.5 45,001 - 120,000 N/A
37 120,001 - 180,000 N/A
45 > 180,000 > 200,000

Rates exclusive of Medicare Levy of 2%.

Paid parental leave

As confirmed ahead of the updated 2022-23 Federal Budget, paid parental leave (PPL) is to increase by six weeks to a total amount of payable leave of 26 weeks (i.e. six months).

This extension will be introduced over three years starting from 1 July 2024, where the scheme will expand by an extra two weeks per year, until the full 26 weeks of leave becomes available from 1 July 2026.

Eligibility will be expanded through the introduction of a $350,000 family income test, which families can be assessed under if they do not meet the individual income test.

PPL will continue to be paid at the rate of the national minimum wage, with no superannuation. 

The extended PPL will be a welcome announcement to those planning to start or grow their families in the coming years, but unfortunately does not offer any additional support for any families that are expecting in this income year.

Residency rules

Individuals

The updated 2022-23 Budget makes no mention of potential reforms to the individual tax residency rules, which had initially been announced by the previous Government in its 2021-22 Federal Budget.  It is worth noting that the Australian Taxation Office (ATO) recently issued a draft taxation ruling (TR 2022/D2) regarding individual residency, which in the absence of any legislative reforms, would make the new taxation ruling, once finalised, the primary source of guidance regarding the ATO’s interpretation of the individual residency rules.

For further information on the recent draft taxation ruling, see our separate publication.

Self-managed superannuation funds

As part of the 2021-22 Federal Budget, the previous Government had announced that it would relax the residency requirements for self-managed superannuation funds (SMSFs).

The updated 2022-23 Federal Budget confirmed it will defer the start date of this proposed measure from 1 July 2022 to the income year commencing on or after the date of Royal Assent of the enabling legislation which is yet to be introduced into Parliament.

Separately, the updated 2022-23 Federal Budget confirmed the proposed changes from the 2018-19 Budget to the annual audit requirement for certain SMSFs will no longer proceed.

Superannuation

The updated 2022-23 Federal Budget confirmed the Government’s election commitment to allow more people to make downsizer contributions to their superannuation, by reducing the minimum eligibility age from 60 to 55 years. This measure is currently before Parliament.

Otherwise, there were no new tax-related superannuation changes announced in this Budget, although we do know that the Government will be focussing on a review of the objectives of superannuation. This may inform any future decisions or directions when it comes to how superannuation will be taxed.

Contact us

Glen Frost

Glen Frost

PwC | Private | National Partner - Family Office, PwC Australia

Tel: +61 408 616 990

Naree Brooks

Naree Brooks

PwC | Private | Partner - Family Office Tax, PwC Australia

Tel: +61 413 960 882

Norah Seddon

Norah Seddon

Workforce Leader, PwC Australia

Tel: +61 2 8266 5864

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