Helping Australians with the cost of living

The pandemic, the conflict in Ukraine and extreme weather events are putting upward pressure on the cost of goods.

The Government is helping Australians deal with these cost of living pressures as part of our plan for a stronger future by:

  • delivering more jobs and putting upward pressure on wages
  • providing a one-off cost of living tax offset and a one‑off cost of living payment for Australians most in need
  • reducing the pressure of high fuel prices on household budgets
  • reducing out-of-pocket expenses for child care
  • delivering more affordable energy
  • helping aspiring home buyers
  • reducing the cost of and increasing access to medicines

One-off cost of living tax offset

Easing cost of living pressures through the tax system

From 1 July this year, over 10 million individuals will receive a one-off $420 cost of living tax offset. Combined with the low and middle income tax offset (LMITO), eligible low- and middle-income earners will receive up to $1,500 for a single income household, or up to $3,000 for a dual income household.

This builds on the estimated $40 billion in tax relief under the Personal Income Tax Plan that has flowed to households since the start of the pandemic, and will help individuals meet rising cost of living pressures.

Tax relief from the cost of living tax offset and LMITO

This infographic shows how many taxpayers are estimated to benefit from the one-off cost of living tax offset and low and middle income tax offset and by how much, split by taxable income. The first bar shows that 1.8 million people with taxable income up to $37,000 will benefit from tax relief up to $675. The second bar shows that 1.6 million people with taxable income of $37,001 to $48,000 will benefit from tax relief between $675 to $1,500. The third bar shows 4.8 million people with taxable income of $48,001 to $90,000 will benefit from tax relief of $1,500. The fourth bar shows that 1.9 million people with taxable income of $90,001 to $125,999 will benefit from tax relief between $420 to $1,500.

Kate and Dan live together in their house in Toowoomba. Dan works in construction and is earning $63,000 in 2021‑22, and Kate works as an emergency nurse earning $90,000 in 2021‑22. With the one‑off cost of living tax offset, Kate and Dan will receive a total reduction in their tax liability of $3,000 when they lodge their tax return, $840 more than they would have received without the increase. With the cost of living tax offset, and the Government’s Personal Income Tax Plan, Kate and Dan will pay $5,295 less tax when compared to 2017‑18 tax settings.

One-off cost of living payment

Income support to relieve pressure on hip pockets

To help Australians meet cost of living pressures, the Government is providing a one‑off, income tax-exempt payment of $250.

This payment will help 6 million people, at a cost of $1.5 billion.

More than half of those who will benefit are pensioners.

It will be paid automatically to all eligible pensioners, welfare recipients, veterans and eligible concession card holders in April 2022.

This is on top of the higher income support payments from existing indexation arrangements. Income support payments increased by 2.1 per cent in March 2022, benefiting almost 5 million Australians. The Age Pension, Disability Support Pension and Carer Payment rates increased by more than $20 a fortnight for singles and $30 a fortnight for couples. They will receive a similar increase again in September. Payments are regularly increased to help shield people from the rising cost of living.

This assistance builds on the hip pocket relief the Government provides through halving the excise rate, tax cuts, child care assistance and reduced electricity prices.

Taking the pressure off Australians with cost of living support is part of the Government's plan for a stronger future.

Kath and Marilyn are a retired couple who live together and are both Age Pension recipients. Kath and Marilyn will each receive a one‑off cost of living payment of $250, so their household will receive $500 in April 2022. Their combined pension will also be more than $390 higher over the next six months, before it is increased again.

Temporary fuel excise relief

Cost of living relief at the petrol pump

The Russian invasion of Ukraine has seen fuel prices increase, adding to cost of living pressures faced by families and the cost of doing business for small businesses.

The Government is taking decisive, responsible and temporary action to cut fuel excise and reduce the pressure of high fuel prices on household budgets.

As part of Australia’s plan for a stronger future, the Government will reduce fuel excise by 50 per cent for 6 months. This will see excise on petrol and diesel cut from 44.2 cents per litre to 22.1 cents per litre.

Fuel subject to a lower excise rate is expected to flow through to the majority of service stations and Australian consumers within a few weeks as stations replenish their stocks.

Viv is a teacher and commutes to the classroom with her small petrol hatchback. On average she needs to fill her tank of 40 litres once every week. Under the changes, Viv would be expected to save up to $10 in excise and GST per tank of fuel or up to $250 over the 6 month period.

 

Morgan owns a small electrical business that employs 10 people. They each drive utes with 80L fuel tanks. Under the changes, Morgan’s business would save a combined total of up to $215 in excise and GST expenses at the bowser when filling up all 11 vehicles. If this business filled all 11 cars on a fortnightly basis, the business would save up to $2,780 in excise and GST expenses over the 6 month period.

More affordable child care

Ensuring access to child care for all families by reducing out-of-pocket expenses

The Government's support for child care is easing cost‑of‑living pressures for families and supporting choices for working parents.

The Government has invested $62 billion since 2013, with a record $10.3 billion forecast to be spent in 2021‑22. This investment is in addition to the $1.7 billion provided in last year’s Budget to make child care more affordable for families through the removal of the annual cap on the Child Care Subsidy and increased subsidies for second and subsequent children. This is improving cost of living pressures for around 250,000 families, saving them on average, around $2,260 per year, depending on their household income and the number of children in child care.

The Government continues to support child care services facing challenging circumstances, including COVID-19 and recent floods. This includes $279 million in COVID‑19 support, $6.9 million in business continuity payments and support for services through Special Circumstances grants in the Community Child Care Fund.

Georgia and Ed have two children under four and earn a combined annual income of $180,000. Their children both attend centre-based day care four days a week, at an average hourly rate of $10.80. Under changes to the Child Care Subsidy that started in March, Georgia and Ed will receive an increased subsidy of 80 per cent for their second child compared to 50 per cent under previous settings. These changes will save their family around $130 in out-of-pocket costs for child care per week or around $6,500 per year.

Putting home ownership in reach for more Australians

The Government is backing aspiring homeowners to achieve their dreams sooner

Home ownership is vital to the social and economic wellbeing of Australians. The Government is supporting more Australians into the housing market.

More help to achieve home ownership sooner

Under the Home Guarantee Scheme, part of an eligible home buyer's home loan will be guaranteed, enabling Australians to enter the property market sooner with a smaller deposit.

Building on its success to date, the Government is expanding the Home Guarantee Scheme to make available 50,000 places per year, more than double the current number of places available. A new Regional Home Guarantee will be established while the number of places under the Family Home Guarantee supporting single parents will double.

This will enable more Australians to achieve their aspirations of home ownership.

Savings fast track for first home buyers

The First Home Super Saver Scheme (FHSSS) helps Australians boost their savings for a first home by allowing them to build a deposit inside superannuation, giving them a tax cut. For most people, the FHSSS can boost the savings they can put towards a deposit by at least 30 per cent compared with saving through a standard deposit account.

From 1 July 2022, the maximum amount of voluntary contributions that can be released under the FHSSS will be increased from $30,000 to $50,000 enabling first home owners to achieve their dreams of home ownership sooner.

Home Guarantee Scheme

almost 60,000 Australians supported

First Home Super Saver Scheme

around 27,600 Australians have benefitted

Affordable and reliable energy

Driving down household and business power bills

The Government is making energy supply more secure, affordable and reliable for households and businesses as record levels of renewables are added to the grid.

The Government's actions in getting energy consumers a fair price on their power through its Default Market Offer price cap and 'big stick legislation' is achieving real results. Household electricity costs have fallen by 8 per cent and small business costs by 10 per cent over the past two financial years.

The Government is investing in clean and reliable generation to keep the lights on as more renewables connect to our grid. Through our historic expansion of the iconic Snowy Mountain Hydroelectric scheme, we are delivering 2000MW of renewable energy and pumped hydro storage through Snowy 2.0.

The Government is committed to delivering the Marinus Link undersea interconnector to connect Tasmania's Battery of the Nation project to the mainland. We are also investing in 660MW of flexible gas with the Hunter Power Project to provide reliable electricity when we need it most. These investments are a key part of our commitment to keep wholesale electricity prices below $70/MWh.

In this Budget, the Government will support communities to lower their bills and keep their lights on by providing $84 million to deploy microgrids. This builds on the $170 million of Commonwealth funding provided since 2019 that is expected to support more than 60 projects in regional communities. We will also look to secure our future gas supply by supporting key projects identified in the National Gas Infrastructure Plan. Increasing supply of affordable gas will help alleviate cost of living pressures for households and businesses and protect Australia from potential energy shortages.

The Government continues to invest in energy technologies that create new jobs and economic opportunities while driving down our emissions. Australia’s emissions are now 20 per cent below 2005 levels and we are on track to achieve up to a 35 per cent reduction by 2030, on our way to net zero emissions by 2050. This decade, the Government will invest more than $22 billion in low emissions technologies, driving over $84 billion of total investment to reduce emissions while growing the economy across Australia.

Lower taxes for hard-working Australians

The Government has delivered permanent tax relief

Permanent tax cuts of up to $2,565 for individuals in 2022‑23.

The Personal Income Tax Plan

The Government is delivering tax relief to help Australians with rising cost of living pressures.

Through the legislated Personal Income Tax Plan, an estimated $40 billion in tax relief has flowed to households since the start of the pandemic.

The new cost of living offset, together with the low and middle income tax offset (LMITO) for 2021‑22, will provide around $12 billion in support when taxpayers lodge their tax returns from 1 July 2022.

This is on top of around $16 billion in permanent tax relief that will flow to households in 2022-23.

In 2022-23, more than 12 million taxpayers are expected to benefit from lower taxes under the plan, worth up to $2,565 for individuals or $5,130 for dual income couples.

As a result of the Personal Income Tax Plan, an individual earning $90,000 each year, around the average full-time income, will benefit by a total reduction in tax of $8,655 from 2018‑19 to 2022‑23. By putting more money in their pockets, families will keep more of what they earn, allowing them to spend more on what they need.

Cumulative tax relief and tax paid for a single individual over five years from 2018‑19 to 2022‑23
Annual taxable income Cumulative tax liability based on 2017‑18 settings ($) Cumulative tax liability after PIT Plan measures ($) Change in cumulative tax ($)
40,000 24,735 20,655 -4,080
60,000 60,735 52,755 -7,980
80,000 95,735 87,755 -7,980
90,000 113,660 105,005 -8,655
100,000 133,160 124,355 -8,805
120,000 172,160 163,055 -9,105
140,000 211,160 203,195 -7,965
160,000 250,160 242,195 -7,965
180,000 289,160 281,195 -7,965
200,000 336,160 328,195 -7,965

A simpler tax system that rewards workers

The Government has provided around $40 billion in tax relief since the start of the pandemic

The Government is committed to keeping taxes low so that hard-working Australians keep more of what they earn. The Government’s legislated plan has already permanently lowered taxes for millions of taxpayers. When Stage 3 of the plan delivers further tax cuts in 2024‑25, around 95 per cent of taxpayers will face a marginal tax rate of 30 per cent or less. This will simplify the tax system, improve incentives for working Australians and increase reward for effort.

From 2018‑29
Lower taxes delivered through LMITO for low and middle income earners first
From 2020‑21
Permanent tax cuts to reward effort and aspiration, and temporary tax relief for COVID-19
From 2024‑25
Simpler system over the medium term

Sangeetha works as a web programmer, and her husband Mitchell works as a city planner for the local council. Sangeetha and Mitchell earn $86,000 and $92,000 respectively. In 2022‑23, Sangeetha and Mitchell together will pay $2,385 less than they would have paid without the Government’s Personal Income Tax Plan. In 2024-25, with Stage 3 of the plan, if they earn the same income, Sangeetha and Mitchell will see a further $2,200 reduction in their tax bill, leaving them $4,585 better off.