The Federal Treasurer, Mr. Josh Frydenberg, handed down the 2022/23 Federal Budget at 7:30 pm (AEST) on 29 March 2022.
The economy has continued to recover well and proving resilient to the impacts of COVID-19 along with unexpected events such as recent flooding in Australian and the situation in Ukraine. This has resulted in a healthier bottom line with the underlying cash deficit forecasted to be $79.8 billion in 2021-22, $19.4 billion better than the forecast in the December 2021 Mid-Year Economic and Fiscal Outlook (MYEFO). The Government is taking the opportunity to use this budget to boost the domestic economy, announcing various measures to support businesses and individuals with easing cost of living pressures, incentives and tax relief.
Existing tax reliefs has not been extended including the low and middle income tax offset, the temporary company loss carry back rules and the full expensing of depreciating assets. Instead, the government has opted for one-off payments via a $420 increase in the LIMITO and $250 cost of living payment to eligible recipients. These will grab the headlines but there are several other important measures including tax incentives for investment in training and technology, tax concessions for medical and biotechnology innovations and improved ATO reporting.
The full Budget papers are available at www.budget.gov.au and the Treasury ministers’ media releases are available at ministers.treasury.gov.au.
The key highlights are set out below:
INDIVIDUALS
ASF TAKEAWAYS: Individuals earning under $126,000 and welfare recipients/concessional card holders will receive one-off cost of living payments combined with fuel excise duty relief to deal with higher cost of living pressures. COVID-19 tests acquired for work purposes will now be tax deductible.
The low and middle income tax offset will be increased (one-off) by $420 for individuals earning up to $120,000.
CPI indexed Medicare levy low-income threshold amounts for singles, families, and seniors and pensioners for the 2021–22 year announced. Going forward, families earning less than $39,402 will be exempt from Medicare Levy (other thresholds apply for individuals, seniors and pensioners).
One-off tax-exempt payment of $250 to welfare recipient and concessional card holders in April 2022. This payment will be made to recipients of Age/Disability Support Pension and Parenting Payment amongst others.
Reduction in fuel excise duty by 50% for six months. The rate of excise and duty currently applying to petrol and diesel will fall from 44.2 to 22.1 cents per litre, and should put downward pressure at the fuel pumps.
New Paid Parental Leave scheme will combine Dad and Partner Pays into a single Parental Leave pay scheme of up to 20 weeks, which is fully flexible and able to be shared between eligible working parents as they see fit.
From 1 July 2021, costs in acquiring COVID-19 tests to attend a place of work are tax deductible.
COMPANIES AND BUSINESSES
ASF TAKEAWAYS: Overall, the budget allows SME businesses and business owners to utilise incentives to reinvest into their business through upskilling their workforce or digitising their business. Digitisation means more pre-filling, data-matching and data-sharing which can reduce compliance costs but makes data access easier for the ATO. In combination with the additional funding for the ATO Tax Avoidance Taskforce, it is now more important than ever to be cognisant of your tax risks and exposures.
Small businesses with an aggregated annual turnover of less than $50 million will be able to deduct an additional 20% of expenditure incurred on external training courses provided to their employees. There is no cap, but the course needs to be delivered by an Australian provider. This measure is set to commence on 29 March 2022 up till 30 June 2024, with the first boost claim to be made in the 2023 income tax return.
The same businesses will be able to deduct an additional 20% of expenditure incurred to support digital adoption, including purchase of assets (needs to be installed and ready to use by 30 June 2023). Examples include portable payment devices, cyber security systems and subscriptions to cloud-based services. An annual cap of $100,000 applies for each qualifying income year. This measure is set to commence on 29 March 2022 up till 30 June 2023, with the boost claims to be made in the 2023 income tax return.
The Government will provide over $650 million to the ATO across the next two years to extend the Tax Avoidance Taskforce to 30 June 2025 to target multinationals, large corporates, private groups and high wealth individuals.
Access to employee share schemes for unlisted companies has been expanded and regulatory requirements removed to reduce red tape and enable employees at all levels to directly share in business growth that they help generate.
SUPERANNUATION
ASF TAKEAWAYS: The government has abided to their promise to limit further changes to an ever-evolving superannuation system, to which we can all breathe a sigh of relief. The only measure announced was the extension of the minimum pension drawdown reduction.
The temporary 50% reduction in the minimum pension drawdown rates has been extended for another year to 30 June 2023.
OTHER CHANGES
ASF TAKEAWAYS: The concessional treatment for patents has expanded and should see more companies register patents in Australia rather than overseas. Existing COVID-19 support measures has not been extended notably the loss carry back tax offset and temporary full expensing.
Income tax derived from patents will be taxed at a concessional rate of 17% from 1 July 2022 has been extended from to include the agricultural sector, and low emissions technology innovations. This will apply on top of any R&D tax credits.
Both the existing loss carry back tax offset and temporary full expensing measures has not been extended and are due to end after 30 June 2023. This is a disappointing outcome as it is clear businesses are still recovering from the long term impact caused by COVID-19 and additional extension of the temporary full expensing measure was warranted.
Overall, the Government has delivered a solid budget, with emphasis on job creation, infrastructure spending and economic changes. However some of the key cost-of-living measures are only a temporary fix and may be viewed more as an Election Budget to shore up more votes from taxpayers. The Government will need to seriously consider the existing debt accumulated in order to return the Budget to better overall health.
If you want more details on any particular measure, and how it will impact your business or you personally, please reach out to the ASF team.