2022 - 2023 Federal Budget breakdown
2022–23 Federal Budget Highlights
The Federal Treasurer, Mr Josh Frydenberg, handed down the 2022–23 Federal Budget at 7:30pm (AEDT) on 29 March 2022.
In an economy emerging from the pandemic, the Treasurer has confirmed an unemployment rate of 4% and an expected budget deficit of $78 billion for 2022–23. As international uncertainties add pressure on the cost of living, key measures in the Budget provide cost of living relief in the form of an increased Low and Middle Income Tax Offset, a one off $250 payment for welfare recipients and pensioners and a 6-month fuel excise relief.
Other measures for business seek to promote innovation and provide tax incentives for small businesses to invest in the skills of their employees. A lower GDP uplift rate for PAYG and GST instalments has also been proposed to support the cash flows of small and medium businesses.
Temporary reduction in fuel excise
From 12:01 am on 30 March 2022, the excise and excise-equivalent customs duty on petrol and diesel will be reduced by 50%. The reduction in fuel excise will be in place for 6 months, ending at 11:59pm on 28 September 2022. This will reduce the excise from 44.2 cents per litre to 22.1 cents per litre, and applies to petrol, diesel and all other fuel and petroleum-based products except for aviation fuels.
For businesses who usually claim fuel tax credits for heavy vehicles on public roads, this reduction in excise brings the full credit rate below the road user charge of 26.4 cents per litre. This will effectively reduce the fuel tax credits down to zero for 6 months.
Individuals
Low and middle income tax offset to be increased by $420
The low and middle income tax offset (LMITO) will include a cost of living tax offset in the 2021–22 income year. The cost of living tax offset is a flat $420 to be applied to all recipients of LMITO when they lodge their tax return. The LMITO is a non-refundable tax offset.
The minimum LMITO for 2021–22 will be $675 for all individuals with a taxable income up to $37,000.
Individuals between $37,000 and $48,000 will receive $675 plus 7.5% of the amount of income that exceeds $37,000.
Individuals between $48,000 and $90,000 will receive the increased maximum of $1,500.
Individuals over $90,000 in taxable income will have the maximum amount reduced by 3 cents for every dollar above $90,000, tapering off to an offset of $420 at $126,000 taxable income.
One-off payment to ease cost of living pressures
Individuals who are currently in receipt of an Australian government allowance or pension will receive a one-off payment of $250 in April 2022 to ease the cost of living pressures. The cost of living payment will be exempt from tax and will not count towards an individual’s income for social security income test purposes.
The payment will cover individuals in receipt of the age pension, disability support pension, parenting payment, carer payment, carer allowance, JobSeeker payment, youth allowance, Austudy and Abstudy living allowance, double orphan pension, special benefit, farm household allowance and eligible Veterans’ Affairs payments. The payment will also go to individuals who hold a Pensioner concession card, a Commonwealth seniors health card or a Veteran Gold card.
Work-related COVID-19 tests tax deductible from 1 July 2021
Costs of taking a COVID-19 test to attend a place of work will be tax deductible for individuals and exempt from fringe benefits tax from 1 July 2021.
Legislation will be introduced to clarify that work-related COVID-19 test expenses incurred by individuals are tax deductible. Employers will not incur fringe benefits tax if they provide COVID-19 testing to their employees for work-related purposes. The amendments will take effect from the beginning of the 2021–22 tax year.
Superannuation Pension minimums
The 50% reduction of the superannuation minimum drawdown requirements for account-based pensions and similar products will be extended for a further year to 30 June 2023. The minimum drawdown requirements determine the minimum amount of a pension that a retiree must drawdown from their superannuation in order to qualify for tax concessions.
Paid Parental Leave scheme enhancements
The Paid Parental Leave scheme will be overhauled by combining the current Parental Leave Payment (18 weeks paid leave for the primary carer) and the Dad and Partner leave payment (2 weeks paid leave) into a single combined Paid Parental Leave pay scheme of up to 20 weeks.
Leave will be fully flexible and both parents will be able to choose how they split the leave periods between themselves. The Paid Parental Leave can be taken any time within 2 years of the birth or adoption of their child. The income test will also be broadened to have an additional household income eligibility test.
Medicare low-income thresholds for 2021–22
The CPI indexed Medicare levy low-income threshold amounts for singles, families, and seniors and pensioners for the 2021–22 year of income have been announced. With incomes at or below the new thresholds, no Medicare Levy is payable.
For singles, it is increasing to $23,365 and for Single Seniors & eligible Pensioners to $36,925. For families, it is increasing to $39,402 and $51,401 for Seniors and eligible Pensioner couples. The additional increment for dependent children/students is increasing also to $3,619.
Increased support for affordable housing and home ownership
The number of guarantees under the Home Guarantee Scheme will be increased to 50,000 per year for 3 years from 2022–23 and then 35,000 a year thereafter to support home buyers to purchase a home with a lower deposit.
The guarantees will be allocated to provide:
35,000 guarantees per year ongoing for the First Home Guarantee (formerly the First Home Loan Deposit Scheme)
5,000 places per year to 30 June 2025 for the Family Home Guarantee
10,000 places per year to 30 June 2025 for a new Regional Home Guarantee that will support eligible citizens and permanent residents who have not owned a home for 5 years to purchase a new home in a regional location with a minimum 5% deposit.
Business
More COVID-19 business grants will be tax exempt
Payments from additional state and territory COVID-19 business support grant programs will be made non-assessable non-exempt income (NANE) for income tax purposes until 30 June 2022. The NANE treatment is to support businesses affected by state or territory lockdowns during the pandemic.
Since the 2021–22 MYEFO, the following programs have been made eligible:
New South Wales 2022 Small Business Support Program
New South Wales Accommodation Support Grant
New South Wales Commercial Landlord Hardship Grant
New South Wales Performing Arts Relaunch Package
New South Wales Festival Relaunch Package
Queensland 2021 COVID-19 Business Support Grant
South Australia COVID-19 Tourism and Hospitality Support Grant
South Australia COVID-19 Business Hardship Grant.
Apprenticeship wage subsidy extended
The Boosting Apprenticeship Commencements wage subsidy will be extended to support businesses and Group Training Organisations that take on new apprentices and trainees. The subsidy will now be available to 30 June 2022. This measure will provide for an additional 35,000 apprentices and trainees. Eligible businesses will be reimbursed up to 50% of an apprentice or trainee’s wages of up to $7,000 per quarter for 12 months.
Increased deduction for small business external training expenditure
Small and medium businesses will be able to deduct an additional 20% of expenditure incurred on external training courses provided to their employees. The additional deduction will apply for businesses with aggregated turnover of less than $50 million. The external training course must be delivered by an Australian entity and provided to employees in Australia or online. In-house or on-the-job training and expenditure for persons other than employees will be excluded.
The measure will apply for eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 (Budget night) until 30 June 2024. Where eligible expenditure is incurred before 1 July 2022, the additional deduction will be claimed in the tax return for the following income year.
Increased deductions for digital adoption by small businesses
Small and medium businesses will be able to deduct an additional 20% of eligible expenditure supporting digital adoption. The additional deduction will apply for businesses with aggregated turnover of less than $50 million. Eligible expenditure will include the cost of depreciating assets and business expenses supporting digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud-based services. An annual cap of $100,000 will apply to expenditure eligible for the additional deduction.
The measure will apply for eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 (Budget night) until 30 June 2023. Where eligible expenditure is incurred before 1 July 2022, the additional deduction will be claimed in the tax return for the following income year.
PAYG income tax instalment system set for structural overhaul
The gross domestic product (GDP) uplift rate that applies to pay-as-you-go (PAYG) instalments and GST instalments will be set at 2% for the 2022–23 income year.
The GDP adjustment factor is usually calculated by using data from the Australian Bureau of Statistics and is based on GDP changes over the previous 2 calendar years. Using this statutory formula, it was expected that the GDP uplift for PAYG instalments would be much higher, causing potential cash flow issues for businesses. The 2% uplift rate will apply to instalments for the 2022–23 income year that fall due after amending legislation receives assent.
The current annual aggregated turnover thresholds for using the GST instalment method is $10 million and $50 million for PAYG instalments.
Concessional tax treatment for carbon abatement and biodiversity stewardship income
Concessional tax treatment will apply from 1 July 2022 for primary producers selling Australian Carbon Credit Units (ACCUs) and biodiversity certificates.
Proceeds from the sale of ACCUs and biodiversity certificates generated from on-farm activities will be treated as primary production income, providing access to existing income tax averaging arrangements and the Farm Management Deposits scheme. The taxing point of ACCUs for primary producers that are eligible for tax averaging or the Farm Management Deposits scheme will also be changed to the year in which they are sold. Similar treatment will be extended to biodiversity certificates issued under the Agriculture Biodiversity Stewardship Market scheme.
Currently, proceeds from selling ACCUs are treated as non-primary production income and ACCU holders are taxed based on annual changes in the value of their ACCUs. The measure will apply from 1 July 2022.
Expanded access to unlisted company employee share schemes
For employers that make larger offers in connection with employee share schemes in unlisted companies, participants can invest up to:
$30,000 per participant per year, accruable for unexercised options for up to 5 years, plus 70% of dividends and cash bonuses, or
any amount, if it would allow them to immediately take advantage of a planned sale or listing of the company to sell their purchased interests at a profit.
Regulatory requirements for offers to independent contractors will be removed, where they do not have to pay for interests.
Continued reforms to insolvency arrangements
Additional funding will be provided to further reform insolvency arrangements. This includes:
$22 million to implement reforms to unfair preference rules, including enhancing the Assetless Administration Fund, from 1 July 2023
$7 million to clarify the treatment of trusts with corporate trustees under Australia’s insolvency laws, and
$0.8 million in 2022–23 to implement the government’s response to the recommendations of the Review of the insolvent trading safe harbour, released in March 2022.
Business registry fees to be streamlined
Fees associated with Australia's business registers will be streamlined over 3 years from 2023–24.
Company registration and lifecycle management are scheduled to move to a modernised platform in September 2023. These reforms to Australia's business registers will:
remove the companies annual late review fee
reduce the number of fees paid for ad hoc lodgments under existing requirements
remove fees for searches conducted on the new platform, and
provide $300,000 to the Department of Treasury to redesign wholesale business register search services facilitated by third-party services.
The Digitisation of Tax Administration
PAYG instalment systems to be modernised and reporting of Taxable Payments via Activity Statements
Companies will be able to choose to have their PAYG instalments calculated based on current financial performance, extracted from business accounting software, with some tax adjustments.
Businesses will be allowed the option to report taxable payments reporting system data (via accounting software) on the same lodgment cycle as their activity statements.
The government will consult with affected stakeholders, tax practitioners and digital service providers to finalise the policy scope, design and specifications of these measures.
Subject to advice from software providers about their capacity to deliver, it is anticipated that systems will be in place by 31 December 2023, with the measures to commence on 1 January 2024, for application to periods starting on or after that date.
Digitalising trust and beneficiary income reporting and processing
Trust and beneficiary income reporting and processing will be digitalised, by allowing all trust tax return filers the option to lodge income tax returns electronically, increasing pre-filling and automating ATO assurance processes. The measure is proposed to commence from 1 July 2024, subject to advice from software providers about their capacity to deliver.
Enhanced sharing of STP data
IT infrastructure will be developed to allow the ATO to share single touch payroll (STP) data with state and territory revenue offices on an ongoing basis. The government will commit $6.6 million for this measure. Funding has already been provided for by the government. The funding will be deployed following further consideration of which states and territories are able and willing to invest in their own systems and administrative processes to pre-fill payroll tax returns with STP data, to reduce compliance costs for businesses.
ATO Tax Avoidance Taskforce to be extended
The ATO will be given funding to extend the operation of the Tax Avoidance Taskforce by 2 years to 30 June 2025. The taskforce was established in 2016 to undertake compliance activities targeting multinationals, large public and private groups, trusts and high wealth individuals. The taskforce also scrutinises specialist tax advisors and intermediaries that promote tax avoidance schemes and strategies.
The ATO’s total resourcing requirement, including for the delivery of the extension of the Tax Avoidance Taskforce, will be settled as part of the independent review of the ATO’s ongoing resourcing requirement announced as part of the 2021–22 MYEFO measure titled Australian Taxation Office – continuation of compliance programs and independent resourcing review.
Deferral of 2019 Budget measure on Australian Business Numbers
The start date of the 2019–20 Budget measure requiring holders of Australian Business Numbers (ABNs) with an income tax return obligation to lodge their income tax return and to confirm their ABN status annually, will be deferred by 12 months to assist with integration into the Australian Business Registry Services (ABRS).
As always with announced Federal Budget measures, most require supporting legislation which may prove tricky with the upcoming Federal Election. To discuss how these measures may affect you and your business, please contact your Accountant/Adviser at Luka Group on 02 6883 2200 today to discuss.