The Federal Treasurer, Mr Josh Frydenberg, handed down the 2022–23 Federal Budget 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 the 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, with expanded “patent box” tax concessions proposed, 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.
The full Budget papers are available at www.budget.gov.au and the Treasury ministers’ media releases are available at ministers.treasury.gov.au.
We summarise below the key tax, superannuation and social security measures. These are proposals and will be subject to receiving Royal Assent.
Individuals
1. The low and middle-income tax offset (LMITO) will be increased by $420, up to a maximum of $1,500, in the 2021–22 income year to ease the current cost of living pressures. Eligible taxpayers will receive it upon lodgement of the 2021-2022 income tax return.
2. A one-off payment of $250 will be made to individuals who are currently in receipt of Australian government social security payments, including pensions, to ease the cost of living pressures.
3. Additional funding will be provided over 5 years to support older Australians in the aged care sector with managing the impacts of the COVID-19 pandemic.
4. 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.
5. A single Paid Parental Leave scheme of up to 20 weeks of paid leave will replace the existing system of 2 separate payments. Parents will be able to share the 20 weeks between them.
6. CPI indexed Medicare levy low-income threshold amounts for singles, families, and seniors and pensioners for the 2021–22 year announced.
7. The number of guarantees under the Home Guarantee Scheme will be increased to 50,000 per year to assist eligible homebuyers who have a lower deposit.
Business
1. Additional state and territory COVID-19 business support grant programs will be eligible for tax treatment as non-assessable non-exempt income until 30 June 2022. This includes (but is not limited to) :
a. NSW Commercial Landlord Hardship grant
b. NSW 2022 Small Business Support program
c. NSW Performing Arts Relaunch and Festival Relaunch programs
2. Small and medium businesses will be able to deduct an additional 20% of the expenditure incurred on external training courses provided to their employees.
a. Eligible businesses need to have aggregated turnover of less than $50 million.
b. Courses must be delivered by an Australian entity and provided to employees in Australia in person or online.
c. Applies to expenditure from 7:30 pm 29 March 2022 to 30 June 2024.
d. The increased deduction for expenditure incurred up to 30 June 2022 will be claimed in the 2022-2023 income tax return.
e. Expenditure incurred between 1 July 2022 to 30 June 2024 will be claimed in the income year that the expenditure is incurred.
3. Small and medium businesses will be able to deduct an additional 20% of eligible expenditure supporting digital adoption.
a. Eligible businesses need to have aggregated turnover of less than $50 million.
b. Eligible expenditure includes portable payment devices, cyber security systems and subscriptions to cloud-based services.
c. Applies to expenditure from 7:30 pm 29 March 2022 to 30 June 2024.
d. The increased deduction for expenditure incurred up to 30 June 2022 will be claimed in the 2022-2023 income tax return.
e. Expenditure incurred between 1 July 2022 to 30 June 2024 will be claimed in the income year that the expenditure is incurred.
4. The Boosting Apprenticeship Commencements wage subsidy will be extended by 3 months to 30 June 2022. Eligible businesses will be reimbursed up to 50% of the wages for an apprentice/trainee of up to $7,000 per quarter for 12 months.
5. Concessional tax treatment will apply from 1 July 2022 for primary producers selling Australian Carbon Credit Units and biodiversity certificates.
6. Access to employee share schemes in unlisted companies will be expanded.
7. The PAYG instalment system is set for a structural overhaul with a set GDP uplift of 2% to apply for the 2022–23 income year. PAYG and GST instalments will rise by a 2% GDP uplift.
8. Additional funding will be provided to further reform insolvency arrangements, including the insolvent trading “safe harbour”.
9. Business registry fees will be streamlined over 3 years from 2023–24. Company registration and management will move to a modernised platform in September 2023.
10. Wholly owned Australian incorporated subsidiaries of the Future Fund Board of Guardians will be exempt from corporate income tax.
Excise and customs duty
1. Excise and excise-equivalent customs duty on petrol and diesel will be reduced by 50% from 30 March 2022 for 6 months. The excise will reduce from 44.2 cents per litre to 22.1 cents per litre.
2. The temporary tariff concession for COVID-19 related medical and hygiene products will be made permanent.
3. Administration of fuel and alcohol excise, and excise-equivalent customs duty will be streamlined.
Superannuation
1. The 50% reduction of the superannuation minimum drawdown requirements for account-based pensions will be extended for an additional year.
Innovation
1. Corporate income from the commercialisation of patents, issued from 29 March 2022, with respect to agricultural and veterinary (agvet) chemical products will be taxed at an effective rate of 17% for income years starting from 1 July 2023.
2. The effective tax rate of 17% for the “patent box” regime will also be expanded to include patents that have the potential to lower emissions.
3. Following on from the 2021 Federal Budget announcement of the “patent box” regime for medical and biotechnology innovations, the concessional tax treatment will be expanded to include certain overseas jurisdictions with equivalent patent regimes.
Tax administration
1. 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. This option is proposed to commence on 1 January 2024.
2. Businesses will be allowed the option to lodge taxable payments reporting system data (via accounting software) on the same lodgement cycle as their activity statements. This is proposed to commence on 1 January 2024.
3. Trust and beneficiary income reporting and processing will be digitalised. Trustees will have the option to lodge tax returns electronically from 1 July 2024.
4. IT infrastructure will be developed to allow the ATO to share single touch payroll data with state and territory revenue offices.
5. The ATO will be given funding to extend the operation of the Tax Avoidance Taskforce by 2 years to 30 June 2025. The focus of the task force has been on multinationals, large public and private groups, trusts and high wealth individuals.
6. The start date of the 2019–20 Budget measure for holders of Australian Business Numbers will be deferred by a further 12 months.
Not-for-profits
1. Additional organisations have been approved as specifically listed deductible gift recipients effective from 1 July 2022 – Melbourne Business School Ltd, Advance Global Australians Ltd, Leaders Institute South Australia Inc, St Patrick’s Cathedral Melbourne Restoration Fund, and various entities related to Community Foundations Australia. The entities have end dates for their DGR status.
Indirect tax
1. The Indirect Tax Concession Scheme (ITCS) has been granted or extended to various diplomatic and consular representations.
Please contact us to find out more about how the Federal Budget will impact you or your business.
The team at EMspire Advisory are experienced Chartered Accountants, bookkeepers and tax agents in Sydney. We work closely with our clients to achieve the best possible outcomes. So to find out more and if you can benefit from these tax measures, please contact us.
Please note that this information is not specific and is general in nature and cannot be relied on as advice. Please contact us for advice specific to you and your circumstances.