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Federal Budget 2022/23

 

The new federal budget was released on 29 March 2022. Here are some highlights.

 

Changes affecting individual taxpayers:

 

Increasing the low and middle income tax offset

The Government has announced a one-off $420 ‘cost of living tax offset’ for the 2022 income year. This will be provided in the form of an increase to the low and middle income tax offset. The maximum offset benefit will increase to $1,500 for individuals and $3,000 for couples. The calculation will depend on the individual’s taxable income. Taxpayers with taxable incomes from $48,000 to $90,000 will be eligible to the maximum offset benefit. The taxpayers with taxable income over $126,000 will not be eligible to receive this offset benefit.  

 

Increasing the Medicare levy low-income thresholds

The Government will increase the Medicare levy low income thresholds as follows:

 

• The single threshold will be increased from $23,226 to $23,365.

• The family threshold will be increased from $39,167 to 39,402.

• The single threshold for seniors and pensioners 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 $3,597.

 

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 onwards. The fringe benefits tax will not be applicable to the Covid-19 test expenses as well.

 

 

Changes affecting businesses:

 

Skills and training boost

The Government will introduce a skills and training boost to support small and medium-sized businesses (with aggregated annual turnover of less than $50 million) to upskill their employees. An additional 20% of expenses incurred on external training courses provided to their employees will be deductible. The boost will be applicable to eligible expenses incurred from 29 March 2022 until 30 June 2024.

 

The external training courses will need to be provided to employees in Australia or online and delivered by entities registered in Australia.

 

For eligible training expenses incurred by 30 June 2022, the boost will be claimed in tax returns for the following income year. For eligible training expenses incurred between 1 July 2022 and 30 June 2024, the boost will be claimed in the income year in which the expenses are incurred.

 

Technology investment boost

The Government will introduce a technology investment boost to support digital adoption by small and medium-sized businesses (with aggregated annual turnover of less than $50 million). An additional 20% of expenses incurred on business outgoings and depreciating assets that support their digital adoption (such as portable payment devices, cyber security systems or subscriptions to cloud-based services) will be deductible. The boost will apply to eligible expenses incurred from 29 March 2022 until 30 June 2023.

 

An annual cap will apply in each qualifying income year so that a total of expenses up to $100,000 will be eligible for the boost. The maximum additional deduction will be $20,000 per eligible year.

 

For eligible expenses incurred by 30 June 2022, the boost will be claimed in tax returns for the following income year. For eligible expenses incurred between 1 July 2022 and 30 June 2023, the boost will be claimed in the income year in which the expenses are incurred.

 

Making COVID-19 business grants non-assessable non-exempt

The Government has extended the measures that allow payments of certain state and territory COVID-19 business support grants to become non-assessable non-exempt income for income tax until 30 June 2022. This measure was originally announced on 13 September 2020.

 

Modernising the PAYG instalment system

The Government will enable businesses to choose to have their PAYG instalments calculated based on current financial performance, extracted from the accounting software with some tax adjustments. This will support business cash flow by ensuring instalments reflect current performance.

 

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.

 

Streamlining the Taxable Payments Reporting system

The Government will provide businesses with the option to report Taxable Payments Reports 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.

 

 

Other changes:

 

Temporary reduction in fuel excise

The Government will reduce the burden of higher fuel prices by halving the excise and excise-equivalent customs duty rate that applies to petrol and diesel, and all other fuel and petroleum-based products except aviation fuels, for six months. This measure will commence from 30 March 2022 and will remain in place for six months.

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Extending the reduction in minimum drawdowns

The Government will extend the 50% reduction of superannuation minimum drawdown requirements for account-based pensions and similar products for a further year to 30 June 2023.

 

Accordingly, the standard minimum percentage factors for account-based pensions are to be reduced by 50%.

 

Cost of living payment ($250)

The Government will provide a one-off $250 cost of living payment to help eligible recipients. The payments will be made in April 2022 to the following payment recipients and concession cardholders:

 

• 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 holders.

• Commonwealth Seniors Health Card holders.

• Eligible Veterans’ Affairs payment recipients and Veteran Gold cardholders.

 

The payments are exempt from tax 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 two or more categories outlined above.

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Vincent Wan

CPA, Registered Tax Agent

Mar 2022