We have pleasure in enclosing a summary of the tax, superannuation and social security highlights from the Federal Government’s 2022/23 Budget.
Addressing Cost of Living Pressures – temporary reduction in fuel excise
Global oil prices have risen significantly since the Russian invasion of Ukraine. The Government will help reduce the burden of higher fuel prices at home by halving the excise and excise-equivalent customs duty rate that applies to petrol and diesel for 6 months. The excise and excise-equivalent customs duty rates for all other fuel and petroleum-based products, except aviation fuels, will also be reduced by 50 per cent for 6 months. The Government is responding in a temporary, targeted and responsible way to reduce cost of living pressures experienced by Australian households and small businesses.
The measure will commence from 12.01am on 30 March 2022 and will remain in place for 6 months, ending at 11.59pm on 28 September 2022. Under the measure, existing policy settings for fuel excise and excise-equivalent customs duty, including indexation in August, will continue but on the basis of the halved rates. At the conclusion of the 6 month period the excise and excise-equivalent customs duty rates will then revert to previous rates, including indexation that would have occurred on those rates during the 6 month period.
The rate of excise and excise-equivalent customs duty currently applying to petrol and diesel is 44.2 cents per litre. This measure will halve the rate on petrol and diesel to 22.1 cents per litre from 30 March 2022, with the price faced by consumers expected to be reduced by a larger magnitude given GST will be levied on the lower excise rate.
The Australian Competition and Consumer Commission will monitor the price behaviour of retailers to ensure that the lower excise rate is fully passed on to Australians.
This targeted measure to provide temporary relief from fuel price pressures will be legislated to end on 28 September 2022.
This measure is estimated to decrease receipts by $5.6 billion, and decrease payments by $2.7 billion over the forward estimates period.
Source: Budget Paper No 2, p 15.
Cost of living tax offset
The Government will increase the low and middle income tax offset (LMITO) for the 2021-22 income year. LMITO is targeted at low- and middle-income earners that are most susceptible to cost of living pressures. The Government is responding in a temporary, targeted and responsible way to reduce cost of living pressures experienced by Australian households.
The LMITO for the 2021-22 income year will be paid from 1 July 2022 when Australians submit their tax returns for the 2021-22 income year. This proposal will increase the LMITO by $420 for the 2021-22 income year. This increases the maximum LMITO benefit in 2021-22 to $1,500 for individuals and $3,000 for couples.
Other than those that do not require the full offset to reduce their tax liability to zero, all LMITO recipients will benefit from the full $420 increase. All other features of the current LMITO remain unchanged. Consistent with the current LMITO, taxpayers with incomes of $126,000 or more will not receive the additional $420.
This measure is estimated to decrease receipts by $4.1 billion over the forward estimates period.
This measure builds on the 2021-22 Budget measure titled Retaining the low and middle income tax offset for the 2021-22 income year.
Source: Budget Paper No 2, p 16.
COVID-19 Response Package – making COVID-19 business grants non-assessable non-exempt
The Government has extended the measure which enables payments from certain state and territory COVID-19 business support programs to be made non-assessable non-exempt (NANE) for income tax purposes until 30 June 2022. This measure was originally announced on 13 September 2020.
In recognition that NANE tax treatment is only to be provided in exceptional circumstances, eligibility is limited to COVID-19 grant programs directed at supporting businesses that are the subject of a public health directive applying to a geographical area in which the businesses operate and whose operations have been significantly disrupted as a result of the public health directive. Consistent with this, the Government has made the following state and territory grant programs eligible for this treatment since the 2021-22 MYEFO:
• 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.
This measure is estimated to result in an unquantifiable decrease in receipts over the forward estimates period.
Source: Budget Paper No 2, p 17.
COVID-19 Response Package – tax deductibility of COVID-19 test expenses
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.
This measure is estimated to result in a significant but unquantifiable decrease in receipts over the forward estimates period.
Further information can be found in the media release of 8 February 2022 issued by the Minister for Housing and Assistant Treasurer.
Source: Budget Paper No 2, p 18.
Deferral of Shadow Economy – strengthening the Australian Business Number system measure
The Government will defer the start date of the Black Economy – strengthening the Australian Business Number (ABN) system measure, announced in the 2019-20 Budget, by 12 months to assist with integration into the Australian Business Registry Services (ABRS).
This measure is estimated to decrease receipts by $5.0 million over the forward estimates period.
Source: Budget Paper No 2, p 18.
Digitalising trust income reporting and processing
The Government will digitalise trust and beneficiary income reporting and processing, by allowing all trust tax return filers the option to lodge income tax returns electronically, increasing pre-filling and automating ATO assurance processes.
The measure will commence from 1 July 2024, subject to advice from software providers about their capacity to deliver.
Trust income reporting and assessment calculation processes have not been automated to the same extent as individual or company tax returns, resulting in longer processing times and limited pre-filling opportunities. This measure will reduce the compliance burdens on taxpayers, reduce processing times and enhance ATO processes.
The Government will consult with affected stakeholders, tax practitioners and digital service providers to finalise the policy scope, design and specifications.
This measure is estimated to result in an unquantifiable impact on receipts over the forward estimates period.
Source: Budget Paper No 2, p 18, 19.
Employee Share Schemes – expanding access and further reducing red tape
The Government will expand access to employee share schemes and further reduce red tape so that employees at all levels can directly share in the business growth they help to generate.
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.
This measure is estimated to result in an unquantifiable impact on receipts over the forward estimates period.
Source: Budget Paper No 2, p 19.
Modernisation of pay as you go (PAYG) instalment systems
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.
The Government will consult with affected stakeholders, tax practitioners and digital service providers to finalise the policy scope, design and specifications of this measure.
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 improve alignment between PAYG instalment liabilities and profitability, and support companies in managing cash flows.
This measure is estimated to result in an unquantifiable impact on receipts over the forward estimates period.
Source: Budget Paper No 2, p 21.
Personal Income Tax – increasing the Medicare levy low-income thresholds
The Government will increase the Medicare levy low-income thresholds for seniors and pensioners, families and singles from 1 July 2021. The increase in thresholds takes account of recent movements in the consumer price index so that low-income individuals continue to be exempt from paying the Medicare levy.
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.
This measure is estimated to decrease receipts by $90.0 million over the forward estimates period.
Source: Budget Paper No 2, p 24, 25.
Small Business – skills and training boost
The Government is introducing a skills and training boost to support small businesses to train and upskill their employees. The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 (Budget night) until 30 June 2024.
Small businesses (with aggregated annual turnover of less than $50 million) will be able to deduct an additional 20 per cent of expenditure incurred on external training courses provided to their employees. The external training courses will need to 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 and expenditure on external training courses for persons other than employees.
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.
This measure is estimated to decrease receipts by $550.0 million, and increase payments by $7.0 million over the forward estimates period.
Source: Budget Paper No 2, p 26, 27.
Small Business – technology investment boost
The Government is introducing a technology investment boost to support digital adoption by small businesses. The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 (Budget night) until 30 June 2023.
Small businesses (with aggregated annual turnover of less than $50 million) will be able to deduct an additional 20 per cent 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 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.
This measure is estimated to decrease receipts by $1.0 billion, and increase payments by $7.2 million over the forward estimates period.
Source: Budget Paper No 2, p 27.
Smarter reporting of Taxable Payments Reporting System data
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.
The Government will consult with affected stakeholders, tax practitioners and digital service providers to finalise the policy scope, design and specifications of the measure.
This measure is estimated to result in an unquantifiable impact on receipts over the forward estimates period.
Source: Budget Paper No 2, p 28.
Supporting Retirees – extension of the temporary reduction in superannuation minimum drawdown rates
The Government has extended the 50 per cent reduction of the superannuation minimum drawdown requirements for account-based pensions and similar products for a further year to 30 June 2023.
The minimum drawdown requirements determine the minimum amount of a pension that a retiree has to draw from their superannuation in order to qualify for tax concessions.
Given ongoing volatility, this change will allow retirees to avoid selling assets in order to satisfy the minimum drawdown requirements.
This measure is estimated to decrease receipts by $50.0 million and increase payments by $2.8 million over the forward estimates period.
Source: Budget Paper No 2, p 28.
Tax Integrity – extension of the Australian Taxation Office (ATO) Tax Avoidance Taskforce on multinationals, large corporates and high wealth individuals
The Government will provide $325.0 million in 2023-24 and $327.6 million in 2024-25 to the ATO to extend the operation of the Tax Avoidance Taskforce by 2 years to 30 June 2025.
The Taskforce was established in 2016 to undertake compliance activities targeting multinationals, large public and private groups, trusts and high wealth individuals. It also scrutinises specialist tax advisors and intermediaries that promote tax avoidance schemes and strategies.
The ATO’s total resourcing requirement, including for the delivery of the extension of the Tax Avoidance Taskforce, will be settled as part of the independent review of the ATO’s ongoing resourcing requirement announced as part of the 2021-22 MYEFO measure titled Australian Taxation Office – continuation of compliance programs and independent resourcing review.
This measure is estimated to increase receipts by $2.1 billion, and increase payments by $652.6 million over the forward estimates period.
Source: Budget Paper No 2, p 29.
Varying the GDP uplift factor for tax instalments
The Government has decided to set the GDP uplift factor for pay as you go (PAYG) and GST instalments at 2 per cent for the 2022-23 income year. This uplift factor is lower than the 10 per cent that would have applied under the statutory formula.
The lower uplift rate will provide cash flow support to small businesses, including sole traders, and other individuals with investment income, helping them to invest and grow. Around 2.3 million taxpayers are expected to benefit from this measure.
The 2 per cent GDP uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods (up to $10 million annual aggregated turnover for GST instalments and $50 million annual aggregated turnover for PAYG instalments) in respect of instalments that relate to the 2022-23 income year and fall due after the enabling legislation receives Royal Assent.
This measure is estimated to have no net impact on receipts, and no net impact on GST payments to the States and Territories over the forward estimates period.
Source: Budget Paper No 2, p 29, 30.
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.
Source: Budget Paper No 2, p 167.
Affordable Housing and Home Ownership
The Government will increase the number of guarantees under the Home Guarantee Scheme to 50,000 per year for 3 years from 2022-23 and then 35,000 a year ongoing to support homebuyers to purchase a home with a lower deposit. The guarantees will be allocated to provide:
• 35,000 guarantees per year ongoing for the First Home Guarantee (formerly the First Home Loan Deposit Scheme)
• 5,000 places per year to 30 June 2025 for the Family Home Guarantee
• 10,000 places per year to 30 June 2025 for a new Regional Home Guarantee that will support eligible citizens and permanent residents who have not owned a home for 5 years to purchase a new home in a regional location with a minimum 5 per cent deposit.
This will come at a cost of $8.6 million over 4 years from 2022-23 and $138.7 million over 7 years from 2026-27, with $20.5 million per year ongoing from 2033-34.
The Government will also increase the Government guaranteed liability cap of the National Housing and Finance Investment Corporation (NHFIC) by $2.0 billion to $5.5 billion to enable NHFIC to support increased loans through the Affordable Housing Aggregator, which increases support for affordable housing.
This measure builds on the 2021-22 MYEFO measure titled Supporting the Delivery of More Affordable Housing and the 2021-22 Budget measure titled Housing Package.
Source: Budget Paper No 2, p 170.
COVID-19 Economic Support
In addition to the $7.3 billion provided in MYEFO for COVID-19 Business Support Payments, the Government will provide a further $53.9 million in 2021-22 to extend COVID-19 Business Support Payments and access to the Pandemic Leave Disaster Payment. Further information on jointly-funded business support arrangements for all states and territories is provided in Budget Paper 3 – Federal Financial Relations.
This measure builds on the 2021-22 MYEFO measure titled COVID-19 Response Package – COVID-19 Business Support.
Source: Budget Paper No 2, p 171.
Reducing compliance costs for business through enhanced sharing of single touch payroll data
The Government will commit $6.6 million over the forward estimates period for 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 for by the Government.
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, to reduce compliance costs for businesses.
Source: Budget Paper No 2, p 172.
Small Business Support Package
The Government will provide $25.2 million over 3 years from 2021-22 to deliver initiatives to support small businesses. Funding includes:
• $10.4 million over 2 years from 2022-23 to enhance and redesign the Payment Times Reporting Portal and Register to improve efficiency and reporting
• $8.0 million in 2022-23 to the Australian Small Business and Family Enterprise Ombudsman to work with service providers to enhance small business financial capability
• $4.6 million over 2 years from 2021-22 to support 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
• $2.1 million over 2 years from 2021-22 to extend the Small Business Debt Helpline program operated by Financial Counselling Australia to continue to provide financial counselling to small businesses facing financial issues.
Further information can be found in the media release of 13 January 2022 issued by the Acting Minister for Employment, Workforce, Skills, Small and Family Business.
Source: Budget Paper No 2, p 172.