The October 2022 Budget was handed out on Tuesday 25 October. Unsurprisingly cost of living pressures continue to impact us all. With inflation expected to peak at 7.75% in December, challenging economic conditions ahead, relentless rain, and floods, a lot of the budget was aimed at bringing inflation under control and support for disaster recovery.
Labor’s first budget in 10 years did not have a lot in there for small businesses. With tight ongoing labour market conditions, we expect to see annual wage growth pick up to 3.75%, however with inflation so high, any wage increase will likely just be heading back to the shops, your electricity provider and spent at the petrol bowsers.
Electricity prices are also expected to increase nationally by an average of 20% in 2022 and increase a further 30% in 2023/2024. Ouch!! More solar panels anyone? But there is also a solar initiative in the budget which will see an additional $102m spent to establish a Community Solar Bank program. This initiative is aimed at regional communities, social housing, apartments etc that are traditionally unable to access rooftop solar. A quick shout out to the sun, for this to really work we need to see you more often please….
Here is a quick recap of some of the top categories:
For Small Businesses (SME’s)
- FBT Free Vehicles – Electric vehicles under the luxury car limit ($84,916) will be exempt from Fringe Benefits Tax and from import taxes.
- Environment and energy – $20 billion Rewiring the Nation plan including a National Energy Transformation Partnership, 400 community batteries and connecting the grid to renewable energy sources. Grants are also available for SMEs making energy-efficient equipment upgrades.
- Mental wellbeing & support – $15 mil set aside for tailored business mental health and financial counselling.
- Technology – The National Broadband Network will be upgraded with a $2.4 billion spend to extend full-fibre connections to an additional 1.5 million homes and businesses.
- Skills shortages – $42.2 million to speed up visa processing, handle the backlog and raise awareness of opportunities in Australia among skilled migrants and a 35,000 increase in the permanent migration cap. Locally there will be 480,000 free TAFE and vocational education places on offer.
Superannuation & Investors
- ‘Downsizer’ eligibility is reduced from 60 years of age to 55 years of age
- Legislation will be introduced confirming that Cryptocurrency isn’t a foreign currency, rather it is a capital asset for tax purposes
- The Low- and Middle-Income Tax Offset will not be continued (ends on 30 June 2022) however the stage 3 tax cuts proposed by the previous government have been kept.
- Child Care Subsidy cut off limit will be increased to $530,000 per family (currently it is $356,756)
- Paid Parental Leave is being extended by 2 weeks next year up to a full 26 weeks over the coming years to be taken by either parent/carer.
- $350 mil in funding over 5 years to deliver an additional 10,000 affordable homes and a target of 1 million new homes under a national Housing Accord.
- $1.4 bil for extra subsidies on the PBS and $2.5 bil for aged care reforms.
And for us country folk
The government is establishing the Regional First Buyers Guarantee (RFHBG) to support eligible Aussie’s who have lived regionally for more than 12 months buy their first home. A minimum 5% deposit will be required and there will be 10,000 places on offer per year to June 2026. This is a great incentive and hopefully will attract some city folk to move regionally and help out with some of the labour shortages in our regional areas.
The first homeowners guarantee will also still be available for 35,000 per year and the family home guarantee has 5,000 places per year for single parents with at least 1 dependent child (and a 5% deposit).
The Labor Government has also deferred $900 mil in funding for water projects, most noticeably the raising of the wall for Wyangala Dam. Our view is that deferral is political speak for its not going to happen on our watch.
So, not a budget to get too excited about, but with inflation running red hot and our country facing record levels of debt and future budget deficits (interest payments are the fastest growing payment in the Budget and are expected to increase by an average 14% per year over the next decade).
We couldn’t have expected too many handouts this budget round and some tough decisions will have to made in the future. The rising share of the Budget claimed by social and human services, including NDIS, is not sustainable. How will the Government address these needs while ensuring its election and Budget commitments can be met?