On Tuesday, 29 March 2022, Treasurer Josh Frydenberg handed down the 2022-23 Federal Budget.
In an election Budget, the Treasurer announced a range of cost of living measures, including a one-off $420 cost of living tax offset for low and middle income earners, and a $250 payment for pensioners and welfare recipients. The fuel excise will also be reduced by 50% for 6 months, starting from midnight on 29 March.
For small businesses, a Skills and Training Boost will provide a new 20% bonus deduction for eligible external training courses for upskilling employees from Budget night. In addition, businesses will receive a similar 20% bonus deduction for expenditure on digital technologies (eg cloud computing, eInvoicing, cyber security and web design) for investments of up to $100,000 per year.
The Treasurer said a strong economic recovery is well underway, notwithstanding the COVID-19 pandemic and recent events including floods and the Russian invasion of Ukraine. Economic growth forecasts have been revised upwards, driven by stronger-than-expected momentum in the labour market and consumer spending. The unemployment rate has also fallen to 4%, and is expected to reach 3.75% in the September 2022 quarter.
The major tax-related measures announced in the Budget included:
The superannuation measures include:
The low and middle income tax offset (LMITO) will be increased by $420 for the 2021-22 income year so that eligible individuals who earn up to $125,000 will receive a maximum LMITO benefit up to $1,500 for 2021-22 (up from the current maximum of $1,080).
This one-off $420 cost of living tax offset will only apply to the 2021-22 income year.
The LMITO for 2021-22 will be paid from 1 July 2022 to more than 10 million individuals when they submit their tax returns for the 2021-22 income year.
|Taxable income (TI) $||LMITO 2021-22 (current) $||LMITO 2021-22 (proposed) $|
|0 – 37,000||255||675|
|37,001 – 48,000||255 + ([TI – 37,000] x 7.5%)||675 + ([TI – 37,000] x 7.5%)|
|48,001 – 90,000||1,080||1,500|
|90,001 – 126,000||1,080 – ([TI – 90,000] x 3%)||1,500 – ([TI – 90,000] x 3%)|
The low income tax offset (LITO) will also continue to apply for the 2021-22 and 2022-23 income years. The LITO was intended to replace the former low income and low and middle income tax offsets from 2022-23, but the new LITO was brought forward in the 2020 Budget to apply from the 2020-21 income year.
|Taxable income (TI) $||Amount of offset $|
|0 – 37,500||700|
|37,501 – 45,000||700 – ([TI – $37,500] x 5%)|
|45,001 – 66,667||325 – ([TI – $45,000] x 1.5%)|
|90,001 – 126,000||1,080 – ([TI – 90,000] x 3%)|
In the Budget, the Government did not announce any personal tax rates changes. The Stage 3 tax changes commence from 1 July 2024, as previously legislated.
The Budget papers confirm that the costs of taking a COVID-19 test to attend a place of work are tax deductible for individuals from 1 July 2021. In making these costs tax deductible, the Government will also ensure FBT will not be incurred by businesses where COVID-19 tests are provided to employees for this purpose.
The Government announced two support measures for small businesses (aggregated annual turnover less than $50 million) in the form of a 20% uplift of the amount deductible for expenditure incurred on external training courses and digital technology.
An eligible business will be able to deduct an additional 20% of expenditure incurred on external training courses provided to its employees. The training course must be provided to employees in Australia or online, and delivered by entities registered in Australia.
Some exclusions will apply, such as for in-house or on-the-job training.
The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 until 30 June 2024.
The boost for eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year. The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2024, will be included in the income year in which the expenditure is incurred.
An eligible business will be able to deduct an additional 20% of the cost incurred on business expenses and depreciating assets that support its 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 expenditure up to $100,000 will be eligible for the boost.
The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 until 30 June 2023.
The boost for eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year. The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2023 will be included in the income year in which the expenditure is incurred.
In the 2021-22 Budget, the Government announced the introduction of concessional tax treatment for eligible corporate income associated with new patents in the medical and biotechnology sectors (referred to “patent box” income).
Under legislation currently before Parliament (Treasury Laws Amendment (Tax Concession for Australian Medical Innovations) Bill 2022), such income will be taxed at a concessional rate of 17%, with effect for income years starting on or after 1 July 2022. Eligible income will be taxed at the concessional tax rate to the extent that the R&D of the innovation took place in Australia.
The Government will now extend the patent box income measures to provide concessional tax treatment for corporate taxpayers who:
In both cases, patent box income will be taxed at an effective income tax rate of 17% in relation to rights and patents granted or issued after 29 March 2022 and for income years starting on or after 1 July 2023.
The Government will consult with industry before settling the detailed design of the patent box extension.
Companies will be allowed to choose to have their PAYG instalments calculated based on current financial performance, extracted from business accounting software (with some tax adjustments).
Date of effect – The commencement date will be subject to advice from software providers on 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.
The Budget papers confirm the Treasurer’s earlier announcement that the GDP uplift factor for PAYG and GST instalments will be set at 2% for the 2022-23 income year. The papers state that this uplift factor is lower than the 10% that would have applied under the statutory formula.
Date of effect – The 2% GDP uplift rate will apply to instalments that relate to the 2022-23 income year and fall due after the enabling legislation receives assent.
The Budget confirms the Government’s intention to change the investment thresholds for unlisted companies in relation to employee share schemes.
Where employers make larger offers in connection with employee share schemes in unlisted companies, participants can invest up to:
The Government will also remove regulatory requirements for offers to independent contractors, where they do not have to pay for interests.
Date of effect – not specified.
The Government will allow the proceeds from the sale of Australian Carbon Credit Units (ACCUs) and biodiversity certificates generated from on-farm activities to be treated as primary production income for the purposes of the Farm Management Deposits (FMD) scheme and the tax averaging provisions from 1 July 2022.
The Government will also change the taxing point of ACCUs for eligible primary producers to the year when they are sold, and extend similar treatment to biodiversity certificates issued under the Agriculture Biodiversity Stewardship Market scheme, from 1 July 2022.
Wholly owned Australian incorporated subsidiaries of the Future Fund Board of Guardians (ie 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.
Extending this exemption will remove the administrative burden associated with the payment of tax by the subsidiaries and subsequent claiming of a refund.
Date of effect – The measure will commence from the first income year after the amending legislation receives assent.
The Government will provide $325.0 million in 2023-24 and $327.6 million in 2024-25 to the ATO 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. It also scrutinises specialist tax advisors and intermediaries that promote tax avoidance schemes and strategies.
Businesses will be provided with the option to report Taxable Payments Reporting System data on the same lodgment cycle as their activity statements, via accounting software. The Government will consult with affected stakeholders, tax practitioners and digital service providers to finalise the policy scope, design and specifications of the measure.
Date of effect – 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.
The Budget papers confirm the Government’s intention to develop the IT infrastructure required to allow the ATO to share single touch payroll (STP) data with State and Territory Revenue Offices on an ongoing basis.
The temporary 50% reduction in minimum annual payment amounts for superannuation pensions and annuities will be extended by a further year to 30 June 2023.
The 50% reduction in the minimum pension drawdowns, which has applied for the 2019-20, 2020-21 and 2021-22 income years, was due to end on 30 June 2022. However, the Government announced that the SIS Regulations will be amended to extend this temporary 50% reduction for minimum annual pension payments to the 2022-23 income year. Given ongoing volatility, the Government said the extension of this measure to 2022-23 will allow retirees to avoid selling assets in order to satisfy the minimum drawdown requirements.
The Budget did not announce any change to the timing of the next Super Guarantee (SG) rate increase. The SG rate is currently legislated to increase from 10% to 10.5% from 1 July 2022, and by 0.5% per year from 1 July 2023 until it reaches 12% from 1 July 2025.
With the SG rate set to increase to 10.5% for 2022-23 (up from 10%), employers need to be mindful that they cannot use an employee’s salary sacrificed contributions to reduce the employer’s extra 0.5% of super guarantee. The ordinary time earnings (OTE) base for super guarantee purposes now specifically includes any sacrificed OTE amounts.
The increase in the SG rate to 10.5% from 1 July 2022 also means that the SG opt-out income threshold will decrease to $261,904 from 1 July 2022 (down from $275,000).
The Government will make a $250 one-off cost of living payment in April 2022. The payment will only be available to Australian residents who are eligible recipients of the following payments and to concession card holders:
The $250 payment will be tax-exempt and not count as income support for the purposes of any Government income support. A person can only receive one economic support payment, even if they are eligible under 2 or more of the categories outlined above.
The Government will reduce the excise and excise-equivalent customs duty rate that applies to petrol and diesel for 6 months by 50%. The excise and excise-equivalent customs duty rates for all other fuel and petroleum-based products, except aviation fuels, will also be reduced by 50% for 6 months.
The Treasurer said this measure will see excise on petrol and diesel cut from 44.2 cents per litre to 22.1 cents. The Treasurer made a point of emphasising that the ACCC will monitor the price behaviour of retailers to ensure that the lower excise rate is fully passed on.
Date of effect – The measure will commence from 12.01am on 30 March 2022 and will remain in place for 6 months, ending at 11.59pm on 28 September 2022.
The Government intends to streamline the administration of fuel and alcohol excise and excise-equivalent customs goods. From 1 July 2023, the changes will:
The Budget confirms the Government’s earlier announcement to extend the Boosting Apprenticeship Commencement (BAC) and Completing Apprenticeship Commencements (CAC) wage subsidies by 3 months to 30 June 2022.
The Government has announced that it will expand the Home Guarantee Scheme in the 2022-23 Budget to make available up to 50,000 places each year, including 10,000 places for a new Regional Home Guarantee open to non-first home buyers.
Under the expanded Scheme, the Government said it will make available:
Under the existing Scheme, eligible first home buyers can obtain a loan to build a new home or purchase a newly built home with a deposit of as little as 5%.
When Parliament resumed on 29 March, there were several Bills (tax, super and other measures – some more important than others) before both Houses. It is possible that some of these Bills will lapse when the Prime Minister calls a Federal election.
If you would like assistance understanding how announcements in this budget impact you please contact your AFS accountant or our office on 03 5443 0344.
The 2022-23 Budget Papers are available from the following website: