The Treasurer handed down the 2022-23 federal budget on Tuesday 29 March 2022.
In our view, the budget contained no major changes to the tax system. A significant portion of the budget content on the Federal Government Budget website is dedicated to recapping previous budget measures and funding announcements that have already been legislated.
Below is our summary of favourable tax measures and other key announcements included within the 2022-23 federal budget.
Tax Announcements for Individuals
Cost of Living Tax Offset
The Government will increase the low and middle income tax offset (LMITO) for the 2021-22 income year from $1,080 to $1,500 (an extra $420). LMITO is targeted at low- and middle-income earners that are most susceptible to cost of living pressures.
LMITO is still scheduled to finish 30 June 2022.
Low- and middle-income earners will receive the increased LMITO as follows:
Medicare Levy Threshold for Low-income Earners
The Government will increase the Medicare levy low-income thresholds for seniors and pensioners, families and singles from 1 July 2021 as follows:
- The threshold for singles will be increased from $23,226 to $23,365.
- The family threshold will be increased from $39,167 to $39,402.
- For single seniors and pensioners, the threshold will be increased from $36,705 to $36,925.
- The family threshold for seniors and pensioners will be increased from $51,094 to $51,401.
For each dependent child or student, the family income thresholds will increase by a further $3,619 instead of the previous amount of $3,597.
Note: All individual Australian resident taxpayers earning over these thresholds will generally need to pay the Medicare Levy of 2%. This is separate from the Medicare Levy Surcharge which impacts high-income earners and can only be avoided by having adequate private hospital cover.
The Government will introduce legislation to make work‑related COVID‑19 test expenses incurred by individuals tax deductible from 1 July 2021. This applies both when an individual is required to attend the workplace or has the option to work remotely.
Tax Announcements for Businesses
Skills and Training Boost
Small businesses (with aggregated annual turnover of less than $50 million) will have access to a new 20% bonus deduction for eligible external training courses for upskilling employees.
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 Skills and Training Boost will apply to expenditure incurred from Budget night 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.
Technology Investment Boost
Small businesses (with aggregated annual turnover of less than $50 million) will be able to deduct an additional 20% of the cost 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 expenditure up to $100,000 will be eligible for the boost.
The Technology Investment Boost will apply to expenditure incurred from Budget night 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.
COVID-19 Business Grants – Non-assessable
The Government has made amounts received under the following state and territory COVID-19 business support grant programs non-assessable non-exempt (NANE) for income tax purposes until 30 June 2022:
- Queensland 2021 COVID-19 Business Support Grant
- New South Wales Accommodation 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
- South Australia COVID-19 Tourism and Hospitality Support Grant
- South Australia COVID-19 Business Hardship Grant
The Government will ensure 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 fringe benefits tax (FBT) will not be incurred by businesses where COVID-19 tests are provided to employees for this purpose.
PAYG Instalment System
The Government will enable companies to choose to have their pay as you go (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.
Taxable Payments Reporting System
The Government will allow businesses the option to report Taxable Payments Reporting System data (via accounting software) on the same lodgment cycle as their activity statements.
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.
This measure will increase the accuracy and timeliness of reporting while lowering compliance costs for taxpayers.
Single Touch Payroll
The Government has committed to the development of IT infrastructure required to allow the ATO to share Single Touch Payroll (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.
Small Business Support Package
The Government will provide funding over three (3) years from 2021/22 to deliver initiatives to support small businesses, including additional funding for:
- the enhancement and redesign the Payment Times Reporting Portal and Register to improve efficiency and reporting;
- the Australian Small Business and Family Enterprise Ombudsman to work with service providers to enhance small business financial capability;
- 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
- the extension of the Small Business Debt Helpline program operated by Financial Counselling Australia to continue to provide financial counselling to small businesses facing financial issues
Measures to Reduce the Cost of Living
$250 Cost of Living Payment
The Government will provide $1.5 billion in 2021-22 to provide a $250 economic support payment to help eligible recipients with higher cost of living pressures. The payment will be made in April 2022 to eligible 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.
The payments are exempt from taxation and will not count as income support for the purposes of any income support payment. A person can only receive one economic support payment, even if they are eligible under 2 or more of the categories outlined above. The payment will only be available to Australian residents.
Halving the Fuel Excise
the Government will reduce fuel excise by 50% for 6 months until 28 September 2022. This will see excise on petrol and diesel cut from 44.2 cents per litre to 22.1 cents per litre.
Apprentices & Trainees
Boosting Apprenticeship Commencements
Extension of the Boosting Apprenticeship Commencements wage subsidy for new apprentices and trainees signed up by 30 June 2022 (previously 31 March 2022).
Any employer who takes on an apprentice or trainee up until 30 June 2022 can gain access to:
- 50% of the eligible Australian Apprentice’s wages in the first year, capped at a maximum payment value of $7,000 per quarter per Australian Apprentice,
- 10% of the eligible Australian Apprentice’s wages in the second year, capped at a maximum payment value of $1,500 per quarter per Australian Apprentice, and
- 5% of the eligible Australian Apprentice’s wages in the third year, capped at a maximum payment value of $750 per quarter per Australian Apprentice.
Australian Apprentices Incentives System
From 1 July 2022, the Australian Apprenticeships Incentive System (AAIS) will provide broad support to the economy through wage subsidies for employers in priority occupations and hiring incentives for employers in non-priority occupations.
Apprentices and trainees in priority occupations will also receive a generous direct payment of up to $5,000 over two years to assist with the cost of undertaking an apprenticeship.
The AAIS will shift to supporting occupations in demand or skills need, with a hiring incentive of up to $4,000 to be provided for employers in priority occupations, as well as a new Australian Apprentices Training Support Payment of up to $3,000 paid directly to apprentices in priority occupations.
It will be guided by a new Australian Apprenticeships Priority List, which sets out the occupations with an apprenticeship or traineeship pathway that have strong current and future demand. The list is based on the National Skills Commission analysis and will be updated every year.
Superannuation Minimum Pension Payments
The Government has extended the 50% reduction of the superannuation minimum drawdown requirements for account-based pensions and similar products for a further year to 30 June 2023.
The minimum drawdowns for the 2023 financial year, calculated based on a super fund member’s age and pension account balance as at 1 July 2022, will be as follows:
Paid Parental Leave Scheme
There will be changes to the Paid Parental Leave scheme by rolling Dad and Partner Pay into Parental Leave Pay to create a single scheme of up to 20 weeks, fully flexible and shareable for eligible working parents as they see fit.
The Paid Parental Leave can be taken any time within 2 years of the birth or adoption of their child. The income test will also be broadened to have an additional household income eligibility test.
This change also means that single parents will receive access to the full 20 weeks of paid parental leave (instead of just 18 weeks).
Feel free to contact our office for further details about any of the above 2022-23 budget announcements.
You can also visit the Federal Government Budget website for more information.