What does the future hold after the 2022 ‘safe space’ budget?
8 April 2022
Following the 29 March 2022 Budget, Labor delivered their Budget reply on 31 March 2022. If Labor wins the upcoming election, this budget reply as well as other policy statements Labor is expected to release between now and the election, will form the basis of a new Budget Labor will deliver later in 2022.
Labor’s budget reply
The two main issues in Labor’s budget reply focus on how to boost productivity and aged care.
Labor plans to boost productivity by:
Investing in renewable energy through their Powering Australia plan;
Growing the Australian manufacturing sector through their Future Made in Australia plan;
Investing in road, rail, port and high-speed broadband infrastructure;
Increasing opportunities for training and workplace skills; and
Making childcare cheaper.
Labor plans to boost aged care by lifting healthcare, nutrition and general care standards while supporting pay rises for workers in the aged care sector.
Labor’s tax proposals
On a tax front, Labor proposes to provide a Fringe Benefits Tax (FBT) exemption from 1 July 2022 for employers who provide their employees with electric cars costing less than the luxury car threshold, which is currently $79,659.
So far, there has been no mention of the previous tax policies announced by Labor in the 2019 election such as the no cash refund of excess franking credits for individuals and superfunds; reduction of Capital Gains Tax (CGT) discount rate from 50% to 25%; and taxation of discretionary trust distributions at 30%. Labor did, however, scrap their proposal to put a $3,000 cap on deductions for the cost of managing tax affairs.
Likelihood of Budget proposals passing both houses of Parliament
As at 7 April 2022, only the cost of living measures, such as the temporary six month 50% reduction in fuel excise and one-off $420 cost of living tax offset, have passed both houses of Parliament (House of Representatives and Senate), received Royal Assent and are now law.
The small business support, such as 120% skills and training and technology investment boost, and innovation measures, such as the extension of patent box regime to other sectors, have not yet been introduced into Parliament.
As there are no Senate sitting days left before the 16 April 2022, which is the last day the election must be called, it is almost certain that these measures will lapse. The sitting days on 11, 12, 13 and 14 April 2022 are only House of Representatives sitting days.
Only time will tell when the election will be called and who will eventually win the election. But with Australia in a rebuilding phase after the COVID-19 pandemic, it is expected that tax policies adopted by whoever wins the election will focus on sustainable economic growth in the long term.
Check out the full coveragefrom the Federal Budget 2022-23.