This evening, the Federal Government has handed down its 2022-23 budget in an election year which sees the Government provide spending measures for lower and middle income earners, pensioners and welfare recipients, and a reduction of the fuel excise by 50% commencing on budget night which will continue for a period of 6 months.
Please find our Budget Report below that is inclusive of detailed summaries on measures to be introduced for personal and business taxation and superannuation.
Federal Budget 2022-2023
Tax Summary and Highlights
In brief, the 2022-23 budget is inclusive of the following measures:
- The low and middle income tax offset will be increased by an amount of $420 for individuals with earnings up to $126,000 per annum, and payable in respect of the 2021-22 income year. The Government has not announced an extension of the low and middle income offset beyond the 2021-22 income year. The maximum offset payable to an individual is $1,500 where their earnings are between $48,001 and $90,000 which then phases out up to an amount of $126,000.
- The low income tax offset remains unchanged and will continue to apply for the 2021-22 and 2022-23 income years. The maximum amount of the low income tax offset is $700 on an income of $37,500. The offset is phased out for individuals who earn greater than $66,667.
- Individuals offered an employee share scheme may invest up to $30,000 in unlisted companies per year (accruable for unexercised options for up to 5 years) plus 70% of dividends and cash bonuses. Participants will also be able to invest any amount if it would allow them to immediately take advantage of a planned sale or listing of the company.
- Costs incurred by individuals for undertaking Covid 19 tests to attend a place of work will be deductible from 1 July 2021. As such, no fringe benefits tax should be incurred by employers for providing the benefit of the test to employees.
- For small businesses (up to $50 million turnover), there is a proposed uplift of 20% on the expenditure incurred on external training courses. Further, the same uplift will be an allowable deduction for the cost incurred on business expenses and depreciating assets that support digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud-based services. The deduction is allowable for expenditure incurred from 7.30 29 March 2022 to 30 June 2023. An annual cap will apply in each qualifying income year so that expenditure up to $100,000 will be eligible for the boost.
- In the 2021-22 Budget, the Government announced the introduction of concessional tax treatment for eligible corporate income associated with new patents in the medical and biotechnology sectors (referred to “patent box” income). The legislation for this is now before parliament. For the 2022-23 budget the regime is proposed to extend to certain agricultural and veterinary chemical products as listed and companies that commercialise their patented technologies which have the potential to lower emissions. In both cases the income will be taxed at 17% in relation to rights and patents granted or issued after 29 March 2022 and for income years starting on or after 1 July 2023.
- PAYG/GST Instalments. The budget confirms that for small and medium business the GDP uplift factors will be limited to 2% in respect of instalments that relate to the 2022-23 income year. The measure applies to those businesses with up to $10 million annual aggregated turnover for GST instalments and $50 million annual aggregated turnover for PAYG instalments;
- The Budget confirms the Government’s intention to digitalise trust and beneficiary income reporting and processing (i.e. this was subject to an earlier announcement). It will allow all trust tax return filers the option to lodge income tax returns electronically, increasing pre-filling and automating ATO assurance processes. However, there are no other additional details in the Budget papers than in the earlier announcement. If enacted this measure will apply from 1 July 2024.
- The 50% reduction of the minimum superannuation pension drawdown requirements will be extended for the 2022-23 income year. Given the ongoing volatility in financial markets, this measure will allow retirees to avoid selling assets in order to satisfy the minimum drawdown requirements.
- Super Guarantee rate will continue to rise to 10.5% for 2022-23. Note that the Budget did not contain any change to the legislated Super Guarantee rate rise from 10% to 10.5% for 2022-23.