Federal Budget review 2022-23

At the conclusion of the 6 months on 28 September 2022, the excise and excise-equivalent customs duty rates revert to previous rates including any indexation that would have applied during the 6 month period.

The Australian Competition and Consumer Commission (ACCC) will monitor the price behaviour of retailers to ensure that the lower excise rate is passed on to consumers.

The measure comes at a cost of $5.6bn.

Low and middle income cost of living tax offset increase

The low and middle income tax offset (LMITO) currently provides a reduction in tax of up to $1,080 for individuals with a taxable income of up to $126,000.

The tax offset is triggered when a taxpayer lodges their 2021-22 tax return.

For the 2021-22, the LMITO will be increased by $420 which means that the proposed new rates for individuals are as follows:

The payments are exempt from taxation and will not count as income support for the purposes of any income support payment. An individual can only receive one payment.

Medicare levy low-income threshold increased

The Medicare levy low income thresholds for seniors and pensioners, families and singles will increase from 1 July 2021.

For each dependent child or student, the family income thresholds increase by a further $3,619 instead of the previous amount of $3,597.

Home Guarantee Scheme extended

The Home Guarantee Scheme guarantees part of an eligible buyer’s home loan, enabling people to buy a home with a smaller deposit and without the need for lenders mortgage insurance.

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. That is, the additional deduction available under this measure is expected to be claimed in the 2023 tax return.

Lowering tax instalments for small business

Normally, GST and PAYG instalment amounts are adjusted using a GDP adjustment or uplift. For the 2022-23 income year, the Government is setting this uplift factor at 2% instead of the 10% that would have applied.

The 2% uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods for instalments for the 2022-23 income year and are due after the amending legislation comes into effect:

• Up to $10 million annual aggregated turnover for GST instalments and
• $50 million annual aggregated turnover for PAYG instalments

Where employers 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 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.

The Government will also remove regulatory requirements for offers to independent contractors, where they do not have to pay for interests.

While these changes might expand access to employee share schemes, it is important to consider the tax implications that can arise for employee when they receive shares or options at a discount to their market value. There are a number of different ways that employees can be taxed in this area and the treatment will often depend on how the ESS arrangement has been structured by the company.

Licensing requirements across the excise system will also be streamlined by:

• removing all renewal requirements for excise and excise equivalent customs goods licences; removing licence fees; enabling the ATO and ABF to issue entity level licences in addition to site level licences; and providing blanket permission to move goods between sites controlled by licensed businesses
• removing onshore producers of crude oil and condensate from the excise system until and unless they exceed the relevant production threshold to be liable for excise payments
• extending the time limit to apply for a refund of excise overpayments from 12 months to 4 years after payment, to align with refunds of customs duty
• creating a public register of excise and excise equivalent customs goods licences administered by the ATO.

And, the excise and excise-equivalent customs duty regime for fuel will be amended by:

• introducing a refund provision, similar to that in the excise law, for excise equivalent customs duty on petroleum based oils used in the further manufacture of petroleum lubricants, ending double taxation of these oils
• removing the requirement to pay and then claim Fuel Tax Credits in respect of excise or excise equivalent customs duty on fuels used in domestic commercial shipping (‘bunker fuels’), aligning their treatment with the duty-free treatment of bunker fuels for international voyages
• setting a single rate for businesses to calculate and claim Vapour Recovery Unit refunds.

The excise law will be amended to provide a targeted exemption from excise licensing requirements, up to a threshold of 10,000 litres per year, for licensed hospitality venues to fill beer from kegs into sealed, non-pressurised containers of no more than 2 litres capacity and not designed for medium to long term storage (‘growlers’).

Linking PAYG instalments to financial performance

As announced prior to the Budget, companies will be able to choose to have their pay as you go (PAYG) instalments calculated using current financial performance, extracted from business accounting software, with some tax adjustments.

The move is intended to ensure that instalment liabilities are aligned to the businesses cashflow. In addition, the digitisation of PAYG instalments will improve transparency and provide more accurate data on performance.

Digitising taxable payments reporting system

As announced prior to the Budget, businesses will be able to report Taxable Payments Reporting System data via their accounting software on the same lodgment cycle as their activity statements.

The measure is expected to reduce the costs of complying with the system and increase transparency.

Sharing of Single Touch Payroll data

As announced prior to the Budget, the Government will commit $6.6 million for the development of IT infrastructure that will enable the ATO to share Single Touch Payroll (STP) data with State and Territory Revenue Offices on an ongoing basis.

The funding will be deployed following further 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 in order to reduce compliance costs for businesses.

ABN integrity measure delayed

Back in the 2019-20 Budget, the Government announced that Australian Business Number (ABN) holders would be stripped of their ABNs if they failed to lodge their income tax return. In addition, ABN holders would be required to annually confirm the accuracy of their details on the Australian Business Register.

This measure has been deferred for 12 months, which means that the tax return lodgement obligation is due to commence from 1 July 2022 with the annual confirmation of ABN details to commence from 1 July 2023.

The initial media release indicates that the measure will cover situations where the individual has the option of working remotely, while the Budget only refers to costs of taking a COVID-19 test to attend a place of work but doesn’t specifically refer to employees who can work from home.

If you have any questions about how any of these announcements affect you, please contact our team today.