What assets are subject to deeming?

Financial investments and certain other assets have income determined based on the deeming rules. The most common examples include:

Will this change impact you?

This change will not in itself cause an increase in your entitlement to a payment or concession card. This is because the proposal is to freeze the deeming rates, rather than to decrease them. As a result your ‘income’ for certain social security purposes won’t decrease as a result of this proposal. However, as the income limits that apply to payments and concession cards are generally indexed each year, this could mean that you’re able to hold greater levels of financial investments without impacting your entitlement, compared to a situation where deeming rates were to increase.

Also, if your payment entitlement is currently determined under the assets test, this proposal won’t impact you.

What do you need to do?

You don’t need to do anything – Centrelink or the Department of Veterans Affairs (DVA) will automatically calculate your entitlement based on the information you’ve provided to them. If deeming rates change in the future, your entitlement will be automatically adjusted if applicable.

1.2 Increasing eligibility for the Commonwealth Seniors Health Card
(Proposed commencement: 1 July 2022)

Proposed change

What income is assessed?

Eligibility for the CSHC is based on an income test only. No assets test applies. The income test for the card is based on adjusted taxable income (ATI), plus deemed income from certain retirement income streams. Adjusted taxable income includes:

On Thursday 14 April 2022 we farewell a much loved staff member Vicki O’Connor.

Vicki has been providing stellar service to Integrity One and our clients for over 16 years. Vicki has decided that the time has come to spend more time with her family, in particular her grandchildren.

Vicki, on behalf of everyone at Integrity One (past and present) and our clients we wish you all the best in retirement and thank you for your many years of loyal and first-rate service, as well as your support & friendship!

A balancing act

Billed as a Budget for families with a focus on relieving short-term cost of living pressures, Treasurer Josh Frydenberg’s fourth Budget also has one eye firmly on the federal election in May.

At the same time, the government is relying on rising commodity prices and a forecast lift in wages as unemployment heads towards a 50-year low to underpin Australia’s post-pandemic recovery.

While budget deficits and government debt will remain high for the foreseeable future, the Treasurer is confident that economic growth will more than cover the cost of servicing our debt.

The big picture

The Australian economy continues to grow faster and stronger than anticipated, but the fog of war in Ukraine is adding uncertainty to the global economic outlook. After growing by 4.2 % in the year to December, Australia’s economic growth is expected to slow to 3.4 % in 2022-23.

Unemployment, currently at 4%, is expected to fall to 3.75% in the September quarter. The government is banking on a tighter labour market pushing up wages which are forecast to grow at a rate of 3.25% in 2023 and 2024. Wage growth has improved over the past year but at 2.3 % , it still lags well behind inflation of 3.5% .

The Treasurer forecast a budget deficit of $78 billion in 2022-23 (3.4% of GDP), lower than the $88.9 billion estimate as recently as last December, before falling to $43 billion (1.6% of GDP) by the end of the forward estimates in 2025-26.

Net debt is tipped to hit an eye-watering $715 billion (31% of GDP) in 2022-23 before peaking at 33% of GDP in June 2026. This is lower than forecast but unthinkable before the pandemic sent a wrecking ball through the global economy.

Rising commodity prices

The big improvement in the deficit has been underpinned by the stronger than expected economic recovery and soaring commodity prices for some of our major exports.

Iron ore prices have jumped about 75% since last November on strong demand from China, while wheat prices have soared 68% over the year and almost 5% in March alone after the war in Ukraine cut global supply.

Offsetting those exports, Australia is a net importer of oil. The price of Brent Crude oil prices have surged 73% over the year, with supply shortages exacerbated by the war in Ukraine.v Australian households are paying over $2 a litre to fill their car with petrol, adding to cost of living pressures and pressure on the government to act.

With the rising cost of fuel and other essentials, this is one of the areas targeted by the Budget. The following rundown summarises the measures most likely to impact Australian households.

Cost of living relief

As expected, the Treasurer announced a temporary halving of the fuel excise for the next six months which will save motorists 22c a litre on petrol. The Treasurer estimates a family with two cars who fill up once a week could save about $30 a week, or $700 in total over six months.

Less expected was the temporary $420 one-off increase in the low-to-middle-income tax offset (LMITO). It had been speculated that LMITO would be extended for another year, but it is now set to end on June 30 as planned.

The extra $420 will boost the offset for people earning less than $126,000 from up to $1,080 previously to $1,500 this year. Couples will receive up to $3,000. The additional offset, which the government says will ease inflationary pressures for 10 million Australians, will be available when people lodge their tax returns from 1 July.

The government will also make one-off cash payments of $250 in April to six million people receiving JobSeeker, age and disability support pensions, parenting payment, youth allowance and those with a seniors’ health card.

Temporarily extending the minimum pension drawdown relief

Self-funded retirees haven’t been forgotten. The temporary halving of the minimum income drawdown requirement for superannuation pensions will be further extended, until 30 June 2023.

This will allow retirees to minimise the need to sell down assets given ongoing market volatility. It applies to account-based, transition to retirement and term allocated superannuation pensions.

More support for home buyers

A further 50,000 places a year will be made available under various government schemes to help more Australians buy a home.

This includes an additional 35,000 places for the First Home Guarantee where the government underwrites loans to first-home buyers with a deposit as low as 5%. And a further 5,000 places for the Family Home Guarantee which helps single parents buy a home with as little as 2% deposit.

There is also a new Regional Home Guarantee, which will provide 10,000 guarantees to allow people who have not owned a home for five years to buy a new property outside a major city with a deposit of as little as 5%.

Support for parents

The government is expanding the paid parental leave scheme to give couples more flexibility to choose how they balance work and childcare.

Dad and partner pay will be rolled into Paid Parental Leave Pay to create a single scheme that gives the 180,000 new parents who access it each year, increased flexibility to choose how they will share it.

In addition, single parents will be able to take up to 20 weeks of leave, the same as couples.

Health and aged care

One of the Budget surprises in the wake of the Aged Care Royal Commission findings, was the absence of spending on additional aged care workers and wages.

Instead, $468 million will be spent on the sector with most of that ($340 million) earmarked to provide on-site pharmacy services.

The Pharmaceutical Benefits Scheme (PBS) is also set for a $2.4 billion shot in the arm over five years, adding new medicines to the list. PBS safety net thresholds will also be reduced, so patients with high demand for prescription medicines won’t have to get as many scripts.

A $547 million mental health and suicide prevention support package includes a $52 million funding boost for Lifeline.

And as winter approaches, the government will spend a further $6 billion on its COVID health response.

Jobs, skills development and small business support

As the economy and demand for skilled workers grow, the government is providing more funding for skills development with a focus on small business. It will provide a funding boost of $3.7 billion to states and territories with the potential to provide 800,000 training places.

In addition, eligible apprentices and trainees in “priority industries” will be able to access $5,000 in retention payments over two years, while their employers will also receive wage subsidies.

Small businesses with annual turnover of less than $50 million will be able to deduct 20% of the cost of training their employees, so for every $100 they spend, they receive a $120 tax deduction.

Similarly, for every $100 these businesses spend to digitalise their businesses, up to an outlay of $100,000, they will receive a $120 tax deduction. This includes things such as portable payment devices, cyber security systems and subscriptions to cloud-based services.

Looking ahead

With an election less than two months away, the government will be hoping it has done enough to quell voter concerns about the rising cost of living, while safeguarding Australia’s ongoing economic recovery.

The local economy faces strong headwinds from the war in Ukraine, the cost of widespread flooding along much of the east coast and the ongoing pandemic.

Much depends on the hopes for the rise in employment and wages to offset rising inflation, and the timing and extent of interest rate rises by the Reserve Bank.

If you have any questions about any of the Budget measures, don’t hesitate to call us.

Information in this article has been sourced from the Budget Speech 2022-23 and Federal Budget support documents.

It is important to note that the policies outlined in this publication are yet to be passed as legislation and therefore may be subject to change.

It seems like June 30 rolls around quicker every year, so why wait until the last minute to get your personal finances in order?

With all the uncertainty and special support measures of the past two years, it’s possible your finances have changed for better, or for worse. So it’s a good idea to ensure you’re on track for the upcoming end-of-financial-year (EOFY).

Starting early is essential if you want to make the most of the opportunities on offer when it comes to your super and tax affairs.

New limits for super contributions

A key task for EOFY is maximising your super contributions to boost your retirement savings and take advantage of the available tax benefits. Annual contribution limits for super rose this financial year, so this strategy is even more attractive.

From 1 July 2021, most people’s annual concessional contributions cap increased to $27,500 (up from $25,000). This allows you to contribute a bit extra into your super on a before-tax basis, potentially reducing your taxable income.

If you have any unused concessional contribution amounts from previous financial years and your super balance is less than $500,000, you may be able to “carry forward” these amounts to further top-up.

Another strategy is to make a personal contribution for which you claim a tax deduction. These contributions count towards your $27,500 cap and were previously available only to the self-employed. To qualify, you must notify your super fund in writing of your intention to claim and receive acknowledgement.

Non-concessional super strategies

If you have some spare cash, it may also be worth taking advantage of the higher non-concessional (after-tax) contributions cap. From 1 July 2021, the general non-concessional cap increased to $110,000 annually (up from $100,000).

These contributions can be a great help if you’ve reached your concessional contributions cap, received an inheritance, or have additional personal savings you would like to put into super. If you are aged 67 or older, however, you need to meet the requirements of the work test or work test exemption.

For those under age 67 (previously age 65) at any time during 2021-22, you may be able to use a bring-forward arrangement to make a contribution of up to $330,000 (three years x $110,000).

To take advantage of the bring-forward rule, your total super balance (TSB) must be under the relevant limit on 30 June of the previous year. Depending on your TSB, your personal contribution limit may be less than $330,000, so it’s a good idea to talk to us before making your contribution.

More super things to think about

If you plan to make tax-effective super contributions through a salary sacrifice arrangement, now is a good time to discuss this with your employer, as the ATO requires an effective arrangement to be documented prior to commencement.

Another option if you’re aged 65 and over and plan to sell your home is a downsizer contribution. You can contribute up to $300,000 ($600,000 for a couple) from the proceeds without meeting the work test.

And don’t forget making a contribution into your low-income spouse’s super account could score you a tax offset of up to $540. To take advantage of these super tax concessions, ensure your contributions meet all the eligibility rules and are received by your super fund well before June 30.

Get your SMSF shipshape

If you have your own self-managed super fund (SMSF), it’s important to check it’s in good shape for EOFY and your annual audit.

Administrative tasks such as updating the fund’s minutes, lodging any transfer balance account reports (TBARs), checking the COVID relief measures (residency, rental, loan repayment and in-house assets), and undertaking the annual market valuation of fund assets should all be started now.

It’s also sensible to review your fund’s investment strategy and check whether the fund’s assets remain appropriate.

Know your tax deductions

It’s also worth thinking beyond super, to see what else you can do to reduce tax.

If you’ve been working from home due to COVID-19, you can use the shortcut method to claim 80 cents per hour worked for your running expenses. But make sure you have detailed records of hours worked to substantiate your claim.

You also need to prepare supporting documents to claim work-related expenses such as car, travel, clothing and self-education.

Check whether you qualify for other common expense deductions such as tools, equipment, union fees, the cost of managing your tax affairs, charity donations and income protection premiums.

Review your investment portfolio

After a year of strong investment market performance, now is also a good time to do a thorough analysis of your finances outside super.

Review your investment strategy, benchmark your portfolio’s performance and check whether any assets need to be sold or purchased to rebalance the portfolio back into line with your strategy.

You might also consider realising any investment losses, as these can be offset against capital gains you made during the year.

There’s a lot to think about, so if you would like to discuss EOFY strategies and super contributions, call our office on 03 9723 0522.

2021-22 EOFY tips for business owners

• Ensure any Super Guarantee and employee salary sacrifice contributions you plan to claim a tax deduction for in 2021-22 are made prior to June 30.
• Consider whether to take advantage of the temporary full expensing regime that allows an immediate 100% write-off of eligible assets purchased and installed in the period 6 October 2020 to 30 June 2022.
• Ensure your quarterly BAS, GST returns and Single Touch Payroll reports are all up-to-date.
• Check whether your enterprise meets the eligibility rules for small business capital gains tax (CGT) concessions if you are contemplating winding up or selling your business soon.
• Consider bringing forward any expenses due early in the new financial year to reduce your taxable income. Small expense amounts under $1,000 can be claimed without triggering the prepayment rules.
• Write off any bad debts so you can claim a tax deduction