2022-23 Federal Budget Update

 

2022-23 Federal Budget Update

On March 29, 2022 the Morrison Government unveiled the 2022/23 Federal Budget announcing a number of changes for Australians. We’ve summarised the key points below:
 

For Individuals

 

Increasing the Medicare levy low-income thresholds

KEY POINTS

• Medicare levy low-income thresholds will be increased for singles, families, and seniors and pensioners from 1 July 2021.
• The effect of this change is to take account of recent CPI movements so that low-income taxpayers generally continue to be exempt from paying the Medicare levy.

Individuals and families will not have to pay the Medicare levy if their individual or family taxable income is below the low-income threshold.

The changes to the Medicare levy low-income thresholds are as follows:

 

 

 

 

 

Cost of living tax offset – low and middle income tax offset (LMITO) increase

KEY POINTS

• The low and middle income tax offset (LMITO)  will increase for the 2021–22 income year by $420 to $1,500.
• All LMITO recipients will benefit from the full $420 increase unless the full offset is required to reduce a taxpayer’s tax liability to zero.
• All other features of the LMITO remain unchanged, including the requirement that relevant income is below $126,000.

LMITO is targeted at low and middle-income earners that are most susceptible to cost of living pressures. The LMITO for the 2021-22 income year will be paid from 1 July 2022 when individual tax returns have been submitted for the 2021-22 income year.

 

$250 cost of living payment

KEY POINTS

• Eligible recipients will be provided with a tax-exempt support payment of $250 to assist with higher cost of living pressures.
• The payments will be made in April 2022 and will be targeted to Australian residents who are recipients of particular social security payments and concession card holders.

The payment will be made to eligible Australian resident recipients of the following payments and to concession card holders:

• Age Pension
• Disability Support Pension
• Parenting Payment
• Carer Payment
• Carer Allowance (if not in receipt of a primary income support payment)
• Jobseeker Payment
• Youth Allowance
• Austudy and Abstudy Living Allowance
• Double Orphan Pension
• Special Benefit
• Farm Household Allowance
• Pensioner Concession Card (PCC) holders
• Commonwealth Seniors Health Card holders
• eligible Veterans’ Affairs payment recipients and Veteran Gold card holders.

 

Paid parental leave

The Government is investing $346.1 million over five years from 2021-22 to introduce Enhanced Paid Parental Leave (PPL), which is fairer and provides full flexibility for eligible working families. These changes will provide increased choice for families to decide how best to manage work and care. Eligibility for the scheme is also being expanded.

 

Expansion to Home Guarantee Scheme

KEY POINTS

The Government has announced that it will expand the existing Home Guarantee Scheme to:

• increase the number of available guarantees from 10,000 to 35,000 each year to support eligible first homebuyers to purchase a new or existing home with a deposit as low as five per cent — from 1 July 2022;
• establish a new Regional Home Guarantee which will provide 10,000 guarantees each year to support eligible homebuyers to purchase or construct a new home in regional areas — from 1 October 2022 to 30 June 2025;
• expand the Family Home Guarantee — to provide 5,000 guarantees to support 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 per cent — from 1 July 2022 to 30 June 2025.

 

For Businesses

 

Small Business – Technology investment boost

KEY POINTS

The Government will introduce a technology investment boost to support digital adoption by small businesses. The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 (Budget night) until 30 June 2023.

• Small businesses with an aggregated annual turnover of less than $50 million will be able to deduct an additional 20 per cent of expenditure incurred on business expenses and depreciating assets that support their digital adoption up to an annual cap of $100,000 of expenditure.
• The 20 per cent boost will be claimable in respect of eligible expenditure incurred:
  • by 30 June 2022 the boost — in the tax return for the following income year;
  • between 1 July 2022 and 30 June 2023 — in the income year in which the expenditure is incurred.

 

Small Business – Skills and training boost

KEY POINTS

The Government will introduce a skills and training boost to support small businesses to train and upskill their employees. The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 (Budget night) until 30 June 2024.

• Small businesses with an aggregated annual turnover of less than $50 million will be able to deduct an additional 20 per cent of expenditure incurred on eligible external training courses provided to their employees.
• The 20 per cent boost will be claimable in respect of eligible expenditure:
  • incurred by 30 June 2022 —in the tax return for the following income year;
  • incurred between 1 July 2022 and 30 June 2024 — in the income year in which the expenditure is incurred.

Some exclusions will apply, such as for in-house or on-the-job training and expenditure on external training courses for persons other than employees. The external training courses will need to be provided to employees in Australia or online, and delivered by entities registered in Australia.

 

Modernising the PAYG instalment system

The 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.

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 measure to commence on 1 January 2024, for application to periods starting on or after that date.

 

Varying the Gross Domestic Product (GDP) uplift factor for PAYG and GST instalments

KEY POINTS

• The GDP uplift factor for pay as you go (PAYG) and GST instalments will be set at two per cent in respect of instalments that relate to the 2022–23 income year and fall due after the enabling legislation receives Royal Assent.
• The two per cent GDP uplift rate — rather than the statutory 10 per cent — will apply to small to medium enterprises which have aggregated turnover of up to:
  • $10 million — for GST instalments; and
  • $50 million — for PAYG instalments.

 

COVID-19 Response Package – Making COVID-19 business grants non-assessable non-exempt income

KEY POINTS

• The Government has announced that it will extend the measure which enables payments from certain state and territory COVID-19 business support programs to be made non-assessable non-exempt income for tax purposes until 30 June 2022.
• The extension from the original end date of 30 June 2021 has already been legislated.
• Eight further programs have been declared eligible for the concessional tax treatment since the 2021–22 mid-year economic and fiscal outlook (MYEFO).

 

Small Business Support Package

KEY POINTS

The Government will provide funding over three years from 2021/22 to deliver initiatives to support small businesses, including:

• $10.4 million over two years from 2022/23 to enhance and redesign the Payment Times Reporting Portal and Register to improve efficiency and reporting;
• $8.0 million in 2022/23 to the Australian Small Business and Family Enterprise Ombudsman to work with service providers to enhance small business financial capability;
• $4.6 million over two years from 2021/22 to support the New Access for Small Business Owners program delivered by Beyond Blue to continue to provide free, accessible, and tailored mental health support to small business owners; and
• $2.1 million over two years from 2021/22 to extend the Small Business Debt Helpline program operated by Financial Counselling Australia to continue to provide financial counselling to small businesses facing financial issues.

 

Employee Share Schemes – Expanding access and further reducing red tape

KEY POINTS

Expanded access to employee share schemes (ESS) will be provided as well as a further reduction to red tape so that employees at all levels can participate in the scheme.

• Participants of ESS in unlisted companies will be allowed to invest up to:
  • $30,000 per participant per year, accruable for unexercised options for up to five years, plus 70 per cent 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 relief from the Corporations Act 2001 also extended to offers to independent contractors, where they do not have to pay for the interests.
• No date of effect is specified in the Budget papers.

 

Superannuation

 

Supporting Retirees – Extension of the temporary reduction in superannuation minimum drawdown rates

KEY POINTS

• A temporary 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 effect of this proposed change is that default drawdown rates will be reduced by 50 per cent for another year if legislated.

The minimum drawdown requirements determine the minimum amount of a pension that a retiree has to draw from their superannuation in order to qualify for tax concessions. Given ongoing volatility, this change will allow retirees to avoid selling assets in order to satisfy the minimum drawdown requirements.

 

Other

 

Temporary reduction in fuel excise

The Government has announced that it will reduce by 50 per cent the excise and excise-equivalent customs duty rate that applies to:

• petrol and diesel (current rate 44.2 cents per litre);
• all other fuel and petroleum-based products, except aviation fuels, for six months from 12.01 am on 30 March 2022 until 11.59 pm on 28 September 2022.
  • The existing indexation arrangement in August will continue, but on the halved rates.
  • The reduction in price of fuels to consumers should be greater because GST is levied on the lower excise rate.

Implications for businesses

Eligible businesses receive fuel tax credits (FTC) for the excise that is included in the price of fuel. The rate of the FTC depends on the size of the vehicle and where it is used. Heavy vehicles travelling on public roads have their FTC reduced by the road user charge (RUC).

The Government is not changing the existing RUC arrangements for heavy vehicles travelling on public roads, but the temporary reduction in fuel excise will provide a net benefit for heavy vehicle operators of 4.3 cents per litre from 30 March 2022, compared to current settings.