The 2022-23 Federal Budget is focused on continued recovery and rebuilding as the Australian economy recovers from the drastic impact of COVID-19. There is now however a strong focus on addressing the cost of living pressures currently impacting Australia, due to external factors like the war in Ukraine on fuel prices and overall inflationary pressures.
With this in mind the Government has put together a budget that intends to target individuals to assist with these costs of living pressures.
From a business perspective, apart from incentive to undertake additional expenditure on staff training and digitisation investment, there is surprisingly very few major changes announced for business this year.
1. Personal tax Rates Unchanged for 2022-2023
The Government did not announce any personal tax rates changes
The 2022–2023 tax rates and income thresholds for residents are unchanged from 2021–2022:
• taxable income up to $18,200 – nil;
• taxable income of $18,201 to $45,000 – 19% of excess over $18,200;
• taxable income of $45,001 to $120,000 – $5,092 plus 32.5% of excess over $45,000
• taxable income of $120,001 to $180,000 – $29,467 plus 37% of excess over $120,000; and
• taxable income of more than $180,001 – $51,667 plus 45% of excess over $180,000.
2. A longer "Lamington"
The Low and Middle Income Tax Offset (LMITO), affectionately referred to as the lamington will be extended for additional 12 months and increased by $420 for 2021-2022, such that an eligible individual will receive a maximum $1,500. The maximum tax offset will continue to apply to individual tax payers with annual incomes of less than $90,000. The offset will phase out for individuals with taxable incomes between $90,000 and $126,000.
3. Covid Tests Tax Deductible
Costs of taking COVID-19 tests – including polymerase chain reaction (PCR) tests and rapid antigen tests (RATs) – to attend a place of work are tax deductible for individuals from 1 July 2021.
4. Paid Parental Leave Scheme Enhancements
The Paid Parental Leave scheme will be overhauled by combining the current Parental Leave Payment (18 weeks paid leave for the primary carer) and the Dad and Partners leave payments (2 weeks paid leave) into a single combined Paid Parental Leave pay scheme of up to 20 weeks.
Cost of Living Measures
1. One-off $250 cost of living payment
The Government will make a $250 one-off cost of living payment in April 2022 to six million eligible pensioners, welfare recipients, veterans and eligible 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 two or more of the eligible categories
The payment will only be available to Australian residents who are eligible recipients of the following payments.
• Age Pension;
• Disability Support Pension;
• Parenting Payment;
• Carer Payment;
• Carer Allowance (if not receiving 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; and
• eligible Veterans’ Affairs payment recipients and Veteran Gold card holders.
2. Temporary reduction in fuel excise
This is a welcome change we could all use. The Government will reduce the excise and excise-equivalent customs duty rate that applies to petrol and diesel by 50% for six months. The Treasurer said this measure will see excise on petrol and diesel cut from 44.2 cents per litre to 22.1 cents. Mr Frydenberg said a family with two cars who fill up once a week could save around $30 a week, or around $700 over the next six months.
1. Additional Deductions for Training and Digital Technology
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.
2. Digital Adaption
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.
3. PAYG Instalments changes to Companies
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).
The commencement date is “subject to advice from software providers about their capacity to deliver”. It is anticipated that systems will be in place by 31 December 2023
4. More Covid-19 business grants will be tax exempt
Payments from additional state and territory COVID-19 business support grant programs will be made tax exempt until 30 June 2022 to support businesses affected by the state and territory lockdowns during the pandemic.
The eligible programs include:
• 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
• Queensland 2021 COVID-19 Business Support Grant
• South Australia COVID-19 Tourism and Hospitality Support Grant
• South Australia COVID-19 Business Hardship Grant
5. Other Key measures
• Digitalising trust income reporting on the tax return
• Option to lodge Taxable Payments reports quarterly via accounting software
• Boosting Apprenticeship Commencement wage subsidy extension to support apprenticeship and training schemes
• Fees associated with Australia’s business registers will be streamlined over 3 years from 2023-24. This will include the remove of late fees for annual company reviews and a number of fees currently paid for ad hoc lodgments.
There was very little movement in this year’s budget in the superannuation space this year which is a welcome relief for self-funded retirees.
1. Super guarantee: rate unchanged
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 2022–2023 (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.
It is worth noting that legalisation has recently passed to remove the $450 monthly minimum income threshold with effect from 1 July 2022. As such, the superannuation guarantee will be payable from the first $1 of income paid to employees from this date.
2. Superannuation pension drawdowns
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.
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