01 Jun 2022-23 Federal Budget Highlights
The Federal Treasurer, Mr Josh Frydenberg, handed down the 2022–23 Federal Budget at 7:30 pm (AEDT) on 29 March 2022.
In an economy emerging from the pandemic, the Treasurer has confirmed an unemployment rate of 4% and an expected budget deficit of $78 billion for 2022–23. It is very much an election budget with no contentious announcements and plenty of upside for voters.
As international uncertainties add pressure on the cost of living, key measures in the Budget provide cost of living relief in the form of an increased Low and Middle Income Tax Offset, a one off $250 payment for welfare recipients and pensioners, and a 6-month fuel excise relief.
Other measures for business seek to promote innovation with tax incentives for small business to invest in the skills of their employees and technology.
From a superannuation perspective there are no announced changes other than an extension of the reduced minimum pension drawdown rates.
The tax, superannuation and individual highlights are set out below.
If you have any questions about how the Budget may impact you, please ask your Client Manager at Otto & Partners.
Increased deduction for small business external training expenditure
Small and medium businesses will be able to deduct an additional 20% of expenditure incurred on external training courses provided to their employees.
The additional deduction will apply for businesses with aggregated turnover of less than $50 million. The external training course must be delivered by an Australian entity and provided to employees in Australia or online. In-house or on-the-job training and expenditure for persons other than employees will be excluded.
The measure will apply for eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 (Budget night) until 30 June 2024. Where eligible expenditure is incurred before 1 July 2022, the additional deduction will be claimed in the tax return for the following income year.
Increased deductions for digital adoption by small businesses
Small and medium businesses will be able to deduct an additional 20% of eligible expenditure supporting digital adoption.
The additional deduction will apply for businesses with aggregated turnover of less than $50 million. Eligible expenditure will include the cost of depreciating assets and business expenses supporting digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud-based services. An annual cap of $100,000 will apply to expenditure eligible for the additional deduction.
The measure will apply for eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 (Budget night) until 30 June 2023. Where eligible expenditure is incurred before 1 July 2022, the additional deduction will be claimed in the tax return for the following income year.
Apprenticeship wage subsidy extended
The Boosting Apprenticeship Commencements wage subsidy will be extended to support businesses and Group Training Organisations that take on new apprentices and trainees.
The subsidy will now be available to any employer who takes on an apprentice or trainee up until 30 June 2022. This measure will provide for an additional 35,000 apprentices and trainees.
Eligible businesses will be reimbursed up to 50% of an apprentice or trainee’s wages of up to $7,000 per quarter for 12 months, with 10% and 5% of eligible wages continuing to be reimbursed through the second and third year of the apprenticeship, respectively.
More COVID-19 business grants will be tax exempt
Payments from additional state and territory COVID-19 business support grant programs will be made non-assessable non-exempt income (NANE) for income tax purposes until 30 June 2022. The NANE treatment is to support businesses affected by state or territory lockdowns during the pandemic.
The Queensland 2021 COVID-19 Business Support Grant is now eligible.
Expanded access to unlisted company employee share schemes
For employers that make larger offers in connection with employee share schemes in unlisted companies, participants can invest up to:
- $30,000 per participant per year, accruable for unexercised options for up to 5 years, plus 70% 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.
Extension of the reduction in superannuation minimum drawdown rates
The halving 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 minimum drawdown requirements determine the minimum amount of a pension that a retiree must drawdown from their superannuation in order to qualify for tax concessions.
Repealing the work test for voluntary superannuation contributions
This was an announcement in last year’s budget but it didn’t become law until February 2022, so it is worth mentioning again. From 1 July 2022, individuals who are aged between 67 to 74 years old will be able to make or receive personal contributions and salary sacrificed contributions without meeting the work test, subject to the existing contribution caps. They will still be required to meet the work test to claim a deduction for personal contributions.
For individuals aged 67 to 74 who have a superannuation balance under the transfer balance cap (typically $1.6 to $1.7M) this may present an opportunity to boost your superannuation balance.
- The low and middle income tax offset will be increased by $420 in the 2021–22 income year to ease the current cost of living pressures.
- A one-off payment of $250 will be made to individuals who are currently in receipt of Australian government social security payments, including pensions, to ease cost of living pressures.
- Additional funding will be provided over 5 years to support older Australians in the aged care sector with managing the impacts of the COVID-19 pandemic.
- Costs of taking a COVID-19 test to attend a place of work will be tax deductible for individuals and exempt from fringe benefits tax from 1 July 2021.
- A single Paid Parental Leave scheme of up to 20 weeks paid leave will replace the existing system of 2 separate payments.
- CPI indexed Medicare levy low-income threshold amounts for singles, families, and seniors and pensioners for the 2021–22 year announced.
Low and middle income tax offset to be increased by $420
The low and middle income tax offset (LMITO) will include a cost of living tax offset in the 2021–22 income year. The cost of living tax offset is a flat $420 to be applied to all recipients of LMITO when they lodge their tax return.
The minimum LMITO for 2021–22 will be $675 for all individuals with a taxable income up to $37,000.
Individuals between $37,000 and $48,000 will receive $675 plus 7.5% of the amount of the income that exceeds $37,000.
Individuals between $48,000 and $90,000 will receive the increased maximum of $1,500.
Individuals over $90,000 in taxable income will have the maximum amount reduced by 3 cents for every dollar above $90,000, tapering off to an offset of $420 at $126,000 taxable income.
The LMITO is a non-refundable tax offset.
One-off payment to ease cost of living pressures
Individuals who are currently in receipt of an Australian government allowance or pension will receive a one-off payment of $250 in April 2022 to ease the cost of living pressures. Certain concession card holders will also get the payment.
The cost of living payment will be exempt from tax and will not count towards an individual’s income for social security income test purposes.
The payment will cover individuals in receipt of the age pension, disability support pension, parenting payment, carer payment, carer allowance, JobSeeker payment, youth allowance, Austudy and Abstudy living allowance, double orphan pension, special benefit, farm household allowance and eligible Veterans’ Affairs payments.
The payment will also go to individuals who hold a Pensioner concession card, a Commonwealth seniors health card or a Veteran Gold card.
However, if an individual receives multiple pensions or allowances, they will only receive the one-off payment once.
Work-related COVID-19 tests tax deductible from 1 July 2021
Costs of taking a COVID-19 test to attend a place of work will be tax deductible for individuals and exempt from fringe benefits tax from 1 July 2021.
Legislation will be introduced to clarify that work-related COVID-19 test expenses incurred by individuals are tax deductible. Employers will not incur fringe benefits tax if they provide COVID-19 testing to their employees for work-related purposes.
The amendments will take effect from the beginning of the 2021–22 tax year.
Excise and customs duty
Temporary reduction in fuel excise
From 12:01 am on 30 March 2022, the excise and excise-equivalent customs duty on petrol and diesel will be reduced by 50%. The reduction in fuel excise will be in place for 6 months, ending at 11:59pm on 28 September 2022.
The 50% reduction will reduce the excise from 44.2 cents per litre to 22.1 cents per litre, and applies to petrol, diesel and all other fuel and petroleum-based products except for aviation fuels.
For businesses who usually claim fuel tax credits for heavy vehicles on public roads, this reduction in excise brings the full credit rate below the road user charge of 26.4 cents per litre. This will effectively reduce the fuel tax credits down to zero for 6 months.