Federal Budget 2022-23

The Federal Treasurer Josh Frydenberg delivered the Australian Budget 2022-23 on 29 March 2022. This budget aims to create jobs, develop infrastructure, guarantee services and provide confidence to Australian businesses.

We are delighted to bring highlights of the budget that will impact the business and individual taxpayers today.

Executive summary of the Federal Budget 2022-23

• Low- and middle-income Tax Offset will be increased by $420 in 2021-22, taking the maximum tax reduction to up to $1,500 for a single-income household or up to $3,000 for a dual-income household.
• Excise and Excise equivalent customs duty rate on petrol and diesel will be reduced by 50% for six months starting from 12:01 am on 30 March 2022.
• One-off payment of $250 to eligible pensioners, welfare recipients, veterans, and concession cardholders
• Home Guarantee Scheme to expand by $8.6 million to 50,000 places per year. Up to 35,000 places per year will be available for first home buyers; Family Home Guarantee will be increased to 5,000 places per year, and a new Regional Home Guarantee will offer up to 10,000 places per year.
• Small Businesses (with aggregated annual turnover of less than $50 million) will be able to deduct an additional 20 percent of the cost of business expenses and depreciating assets that support digital uptake, up to $100,000 of expenditure per year, and additional access to additional 20 percent deduction for the cost of external training courses delivered to their employees.
• Paid Parental Leave Scheme integrates existing schemes to give eligible families access to up to 20 weeks of leave to use in ways that suit their specific circumstances.

Personal Taxation

1. 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 returns. 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.

2. One-Off Payment to Ease Cost of Living Pressures

The Australian government is providing a $250 one-off tax-exempt payment to 6 million people to help Australians meet the cost-of-living pressures. It will be paid to eligible pensioners, welfare recipients, veterans, and concession cardholders.

3. Work-Related Covid-19 Tests Tax Deductible from 1 July 2021

From 1 July 2021 onwards, the 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. Work-related Covid 19 Test cost deduction amendments will take effect from 1 July 2021.

4. Medicare Low-Income Thresholds for 2021-22

The new thresholds for Medicare levy low-income threshold amount for singles, families, and seniors and pensioners for the 2021–22 year of income have been announced. The new thresholds are: –

5. Paid parental Leave Scheme Enhancement

Paid parental leave scheme in the budget combines two existing parental leave schemes into one. It merges two weeks of dad and partner pay with 18 weeks of parental leave pay (for the primary carer). Now, either parent can take the leave of up to 20 weeks in a bid to increase “choice and flexibility for families”

The Paid Parental Leave can be taken any time within 2 years of the birth or adoption of their child.

6. Increased Support for Affordable Housing and Home Ownership

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 Places each year under the First Home Guarantee to support eligible first home buyers to purchase a new or existing home with a deposit as low as five percent
• 5,000 places per year to 30 June 2025 for the Family Home Guarantee, Australia’s first-ever specifically targeted single-parent family housing scheme supports eligible single parents with children to buy their first home or to re-enter the housing market with a deposit of as little as two percent
• 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.

Business Taxation

1. Making COVID-19 Business Grants Non-Assessable Non-Exempt

The Government has extended the measures that enable payments from certain state and territory COVID-19 business support programs to be made non-assessable non-exempt income (‘NANE’) for income tax purposes until 30 June 2022. This measure was originally announced on 13 September 2020.

The Government has made the following state and territory grant programs eligible for this treatment since the 2021-22 Mid-Year Economic and Fiscal Outlook:

• New South Wales Accommodation and Support Grant.
• New South Wales Commercial Landlord Hardship Grant.
• New South Wales Performing Arts Relaunch Package.
• New South Wales Festival Relaunch Package.
• New South Wales 2022 Small Business Support Program.
• Queensland 2021 COVID-19 Business Support Grant.
• South Australia COVID-19 Tourism and Hospitality Support Grant.
• South Australia COVID-19 Business Hardship Grant.

2. 2. Skills and Training Boost

As per the Federal Budget, the Government will introduce a skills and training boost to support small and medium-sized businesses to train and upskill their employees. The boost will apply to eligible expenditure incurred from 7:30 pm (AEDT) on 29 March 2022 (i.e., Budget night) until 30 June 2024.

Small and medium-sized businesses (with an aggregated annual turnover of less than $50 million) will be able to deduct an additional 20% of expenses incurred on external training courses provided to their employees.

For eligible expenditure incurred by 30 June 2022, the additional deduction will be claimed in tax returns for the following income year. For eligible expenditure incurred between 1 July 2022 and 30 June 2024, the Additional deduction will be claimed in the income year in which the expenditure is incurred.

3. 3. Technology Investment Boost

As per the Federal Budget, The Government will introduce a technology investment boost to support digital adoption by small and medium-sized businesses. The boost will apply to eligible expenditures incurred from 7:30 pm (AEDT) on 29 March 2022 (i.e., Budget night) until 30 June 2023.

Small and medium-sized businesses (with an aggregated annual turnover of less than $50 million) will be able to deduct an additional 20% of the expenditure incurred on business expenses and depreciating assets that support their digital adoption (such as portable payment devices, cyber security systems or subscriptions to cloud-based services).

An annual cap will apply in each qualifying income year so that expenditures up to $100,000 will be eligible for the boost. This equates to a maximum additional deduction of $20,000 per eligible year.

For eligible expenditure incurred by 30 June 2022, the boost will be claimed in tax returns for the following income year. For eligible expenditure incurred between 1 July 2022 and 30 June 2023, the boost will be claimed in the income year in which the expenditure is incurred.

4. 4. Apprenticeship Wage Subsidy Extended

The Federal Government announced 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 now extended for 2021-2022. This measure will provide for an additional 35,000 apprentices and trainees to get a job. Employers are eligible for 50 percent of the wages for a new or recommencing apprentice or trainee, up to $7,000 per quarter for 12 months.

5. 5. Modernising the PAYG Instalment System

The Federal Government will enable companies to choose to have their PAYG instalments calculated based on current financial performance, extracted from business accounting software, with some tax adjustments. This will support business cash flow by ensuring instalments reflect current performance.

In 2022 23, the PAYG income tax and GST instalments will be increased by 2 percent, instead of 10 percent for the income year.

6. 6. Future Fund Subsidiaries to be Tax Exempt

Wholly Owned Australian incorporated subsidiaries of the future fund board of Guardians (i.e the future fund board”) will be exempt from corporate income tax. Currently, the future fund board is exempt from income taxes, but this exemption does not extend to its wholly-owned subsidiaries. As a result, these subsidiaries pay corporate income tax, which is subsequently refunded to the future fund board via Franking credits attached to the dividends paid to it by the subsidiaries.

Extending this exemption will remove the administrative burden associated with the payment of tax by the subsidiaries and subsequent claiming of a refund.

7. 7. Temporary Reduction in Fuel Excise

• Federal Government will reduce Fuel excise by 50 percent for 6 months from 12:01 am on 30 March 2022,
• The 50% reduction will reduce the excise from 44.2 cents per litre to 22.1 cents per litre
• 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

8. 8. Innovation Updates

The Government will expand access to the Patent Box regime, announced in the 2021-22 Budget and currently before Parliament, to corporate taxpayers who commercialise their eligible patents relating to:

• Agricultural and veterinary (agvet) chemical products listed on the Australian Pesticides and Veterinary Medicines Authority (APVMA), PubCRIS (Public Chemicals Registration Information System) register, or eligible Plant Breeder’s Rights (PBRs); and technologies that have the potential to lower emissions.
• Eligible income will be subject to an effective income tax rate of 17%, for patents granted after 29 March 2022 and for income years starting on or after 1 July 2023

Superannuation Measures

1. Extension of The Temporary Reduction in Superannuation Minimum Draw Down Rates

The Government has extended the 50 percent reduction of the superannuation minimum drawdown requirements for account-based pensions and other similar products up to 30 June 2023.

Minimum Superannuation Drawdown Rates 2019-2023

2. Digitalising Trust Income Reporting

The Government will digitalise trust and beneficiary income reporting and processing, 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 will commence from 1 July 2024, subject to advice from software providers about their capacity to deliver.

3. Employee Share Schemes – Expanding Access and Further Reducing Red Tape.

The Government will expand access to employee share schemes and further reduce red tape so that employees at all levels can directly share in the business growth they help to generate. Where employers 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 percent of dividends and cash bonuses received during the year; 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.

The Government will also remove regulatory requirements for offers to independent contractors, where they do not have to pay for interests.

4. Allowing Commutation of Certain Income Streams

As previously announced, the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations) will be amended to allow commutations to be made from certain non-commutable pensions to resolve excess transfer balance amounts.

Tax Administration Updates

1. Reporting of Taxable Payments

Businesses will be allowed the option to report taxable payments reporting system data (via accounting software) on the same lodgement cycle as their activity statements.

2. Sharing of Single Touch Payroll (‘STP’) data

The Government has committed to the development of IT infrastructure required to allow the ATO to share STP data with State and Territory Revenue Offices on an ongoing basis. Funding for this measure has already been provided and will be deployed following consideration of which States and Territories are able and willing, to make investments in their own systems and administrative processes to pre-fill payroll tax returns with STP data.

3. 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 task force scrutinises specialist tax advisors and intermediaries that promote tax avoidance schemes and strategies.

4. ABN Measures Deferred

The Budget papers confirm that the start date of the Black Economy – strengthening the Australian Business Number (ABN) system measure, announced in the 2019-20 Budget, by 12 months to assist with integration into the Australian Business Registry Services (ABRS).

Source: The Official ATO Budget 2022-2023 report and other verified sources.