Federal Budget review 2022-23
Posted by Northadvisory on March 30, 2022
The Treasurer, Josh Frydenberg, delivered the Federal Budget on Tuesday 29 March 2022. We have outlined information that is relevant to you, your superannuation and business and employers.
Temporary reduction in fuel excise
As widely predicted, the Government will temporarily reduce the excise and excise-equivalent customs duty rate that applies to petrol and diesel by 50% for 6 months from Budget night.
That is, the current 44.2 cents per litre excise rate will reduce to 22.1 cents per litre from Budget night. However, the measure is subject to the passage of the enabling legislation so don’t expect to see a change right away.
The reduction extends to all other fuel and petroleum based products except aviation fuels. 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:
|$37,000 or less||$675|
|Between $37,001 and $48,000||$675 plus 7.5 cents for every dollar above $37,000, up to a maximum of $1,500|
|Between $48,001 and $90,000||$1,500|
|Between $90,001 and $126,000||$1,500 minus 3 cents for every dollar of the amount above $90,000|
$250 cost of living payment
A one-off $250 ‘cost of living payment’ will be provided to Australian resident recipients of the following payments and 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. 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.
|Single seniors and pensioners||$36,705||$36,925|
|Family threshold for seniors and pensioners||$51,094||$51,401|
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 Government has extended two existing guarantees and introduced a new regional scheme.
Just prior to the Budget, the Government announced:
- First Home Guarantee – from 1 July 2022, an increase from 10,000 to 35,000 guarantees to support eligible first homebuyers purchase a new or existing home.
- Single parent Family Home Guarantee – 5,000 guarantees each year from 1 July 2022 to 30 June 2025. The family home guarantee supports eligible single parents with children to buy their first home or to re-enter the housing market with a deposit of as little as 2%.
- Introduction of a Regional Home Guarantee. This guarantee will support eligible citizens and permanent residents who have not owed a home for 5 years (including non-first home buyers) to purchase or construct a new home in regional areas with a minimum 5% deposit areas (subject to the passage of enabling legislation).
Reduction in minimum superannuation drawdown rates extended again
The temporary 50% reduction in superannuation minimum drawdown requirements for account-based pensions and similar products has been extended to 30 June 2023.
Minimum superannuation drawdown rates 2019-2023
|Age||Default minimum drawdown rates (%)||Reduced rates by 50% for the 2019-20 to 2022-23 income years (%)|
|95 or more||14||7|
BUSINESS AND EMPLOYERS
$120 deduction for every $100 spent on technology
The Government intends to provide a 120% tax deduction for expenditure incurred by small businesses 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.
The technology boost will be available to small business with an aggregated annual turnover of less than $50 million.
An annual expenditure cap of $100,000 will apply to the boost.
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
Expanding access to employee share schemes
In broad terms, an Employee Share Scheme (ESS) is a scheme under which shares in a company, or rights to acquire shares in a company, are issued to an employee or their associate in respect of their employment.
At a commercial level, ESS arrangements are often used to better align the interests of employers and employees, as employees are provided with an opportunity to share in the profitability and growth of the business.
The arrangements can also be useful in situations where a business is in start-up mode and does not have significant cash flow or reserves to attract top quality employees with high salaries.
The Government has flagged changes to the ESS rules to expand access to schemes so that employees at all levels can directly share in the growth of the business.
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.
‘Patent Box’ tax regime extended to agriculture and emissions
The Patent Box tax regime was announced in the 2021-22 Budget for the medical and biotech industries and provides a concessional effective corporate tax rate of 17% on income derived from patents, to the extent that the taxpayer undertakes the R&D of that patent in Australia.
The Government has announced an extension of the regime to:
- Technology focused innovations to reduce emissions in line with the Government’s target to achieve net zero emissions by 2050, and
- Practical, technology focused innovations in the Australian agricultural sector.
Note that the legislation enabling the original 2021-22 Budget measure has not been enacted and is currently before Parliament – see Treasury Laws Amendment (Tax Concession for Australian Medical Innovations) Bill 2022.
Streamlining fuel and alcohol excise compliance
From 1 July 2023, fuel and alcohol businesses with an annual turnover of less than $50 million will be able to lodge and pay excise and excise equivalent customs duty on a quarterly basis, rather than weekly or monthly. These businesses will lodge returns and pay excise by the 28th day of the month after the end of each quarter.
In addition, businesses that import fuel and alcohol products for further manufacture or distribution, and want to defer payment of excise or excise-equivalent customs duty, will be able to transfer the fuel or alcohol straight into a warehouse administered by the ATO once the products have gone through Australian Border Force (ABF) customs clearance.
The ABF will still collect tax on direct imports.
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.
Tax deductibility of COVID-19 test expense
As previously announced, work‑related COVID‑19 test expenses incurred by individuals will be made tax deductible.
Changes will also be made to ensure that FBT will not be payable by employers if they provide fringe benefits relating to COVID‑19 testing to their employees for work‑related purposes.
The changes for deductions will be effective from 1 July 2021, with the FBT changes to apply from 1 April 2021.
At this stage it is not entirely clear whether the deduction rules will cover expenses incurred where the employee is able to work from home. 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.