Insights – The Federal Budget 2022-2023
The 2022- 2023 Federal Budget was announced last night with a focus on cost living measures and cutting red tape. There was also some incentives in relation to employing and training as well as a push to digitization.
Our summary of the key measures are:
Cost of Living:
Cost of Living Tax Offset and bonus payments
The budget did not bring any additional tax cuts this year but rather introduced a Cost of Living Tax Offset.
For 2022 year tax payers earning less than $126,000 will receive an additional tax offset of $420. When added to the Low & Middle Income tax offset which will be extended, this will mean a total offset of $1,500 per person.
The offset forms part of the tax return so you will need to lodge your return to access and we need to remember that not all taxpayers will physically receive this amount in their bank account, rather it may reduce the amount of tax that they need to pay.
For eligible pensions and welfare recipients they will receive a one off payment in April 2022 for $250 and this will be automatically paid ie there is no need to apply.
These payments will be tax exempt and do not count as income for purposes of calculating support payments.
Temporary Fuel Excise Relief
Fuel excise will be temporarily reduced by 50% for 6 months, falling form 44.2c per litre to 22.1 cents per litre.
The cost of fuel should drop in the next couple of weeks as fuel stations replenish their stocks and will be a welcome cost saving for most Australians.
The ACCC will also monitor the price behaviour for retailers to ensure that the reduction is passed onto consumers.
Medicare Levy low Income threshold increased
The increase in the threshold means that taxpayers earning less than $23,365 and a family less than $39,402 will not pay Medicare levy when they lodge their returns.
Home guarantee scheme expanded
The scheme which allows the government to guarantee part of an eligible buyers home loan, ensures that Australians can buy a home sooner with a smaller deposit and without needed to pay lenders mortgage insurance. The expanded scheme will focus on first home buyers, regional buyers and single parents.
The 50% reduction to the minimum superannuation drawdown requirements has been extended for 2023 year.
Those aged 65-74 will now only need to draw 2.5%, rather than 5% from their fund as a pension, with the % increasing in line with age up to 7% for those aged 95 (as opposed to 14%)
This means that where retirees don’t need to draw down they can leave more in superannuation in a lower tax environment and reduce the need to cash in on investment assets.
Technology Investment Boost
Businesses with turnover less than $50 million will receive a bonus 20% deduction for business expenses that support digital uptake (up to $100,000 of expenditure per year). This will include things such as cloud computing and accounting software, portable payment devices, cyber security, or web page design.
This will be claimed in the tax returns in the 2023 tax return and means that for an expense of $100 they can claim $120.
Businesses with turnover less than $50million will also be able to receive a 120% deduction for providing external training to employees in Australia courses and online by Australian registered entities. This will be for expenditure from 1 July 2022 and 30 June 2024 and will be claimed in the following year tax return.
Quarterly PAYG tax instalment amounts uplift factor reduced
Quarterly PAYG instalments normally increase each year by 10%. This year the increase has been reduced to 2%. You should not that his wont actually mean you are paying less tax overall, but it may mean you keep your cash in the pocket longer with the payments to be lower than expected during the 2023 financial year.
Extension of Boosting Apprenticeship Commencement Wage Subsidy
Enrolments for businesses to sign up for trainees and apprentices has be extended until 30 June 2022 (50% of wages up to $7,000 per quarter) and any businesses that are registered by the end of the year will be eligible for a reduced wage subsidy for a second (10% of eligible wages up to $1,500 per quarter) and third year (5% of wages up to $750 per quarter).
Expanding access to Employee Share schemes
Changes to ESS rules to enable access for employees at all levels and remove restrictions for offers to independent contractors.
Patent Box tax regime
The Patent box regime (announced in last years budget but not yet legislated) allows a concessional tax rate of 17% on income derived from patents where the taxpayer undertakes R & D on that patent in Australia. This budget announced that the scheme will be extended to innovations to reduce emissions and those in agricultural sector.
Red tape reduction and more prefilling/ data sharing
Proposed new IT system to allow more prefilling of data, automation of online reporting and allow businesses that pay excise to do so less frequently.
This included getting rid of separate TPAR reporting as the information will be collected through the Activity Statements and sharing of data with payroll tax agencies to reduce need for separate lodgement of payroll tax returns.
Companies will be able to chose to have their PAYG instalments calculated from the financial performance by linking directly to accounting software. While this would allow instalments to be liked to current performance, it may be a concern for some tax payers providing that level of access to data.
How Can Alto Help?
If you are unsure of how the budget measures may apply to you, please reach out to discuss in more detail with one of the Alto team.
Author: Donna Bruce