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Federal Budget 2022/23

 

The new federal budget was released on 25 October 2022. Here are some highlights.

 

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 Individual tax rates

 

The Government did not announce any changes to personal tax rates.

 

The stage 3 tax cuts will still commence from 1 July 2024. According to the stage 3 tax rates, the 32.5% marginal tax rate will be reduced to 30% for one big tax bracket between $45,000 and $200,000. This will more closely align the middle tax bracket of the individual rates with corporate tax rates. The 37% tax bracket will be entirely abolished.

 

The Budget did not announce any extension of the low and middle income tax offset (LMITO). From 1 July 2022, the LMITO has ceased.

 

No changes were made to the low income tax offset (LITO) in the budget. The LITO will continue to apply for the financial year 2022/23 and beyond.

 

 

Fringe benefits exempt – electric cars

 

Battery, hydrogen fuel cell and plug-in hybrid electric cars are exempt from fringe benefits tax and 5% import tariffs if they have a first retail price below the luxury car tax threshold for fuel-efficient cars, currently $84,916. The car must not have been held or used before 1 July 2022. Employers will need to include the exempt electric car fringe benefits in the calculation of an employee’s reportable fringe benefits amount.

 

 

Tax policies from previous Government

 

The Government has announced it will not proceed with certain legacy tax measures from the previous Government including:

 

  • The Government will not change the annual audit requirement to a three-yearly requirement for SMSFs with a history of good record-keeping and compliance.

 

  • The Government will not introduce the $10,000 limit for cash payments made to business for goods and services.

 

  • The Government will not proceed with the measure to allow taxpayers to self-assess the effective life of intangible depreciating assets (such as patents, registered designs, copyrights and in-hours software), which was announced in the budget 2021/22.

 

 

Paid parental leave

 

The Government has announced it will make the paid parental leave available for either parent and both birth parents and non-birth parents are allowed to receive the payment if they meet the

eligibility criteria. The Government will start expanding the scheme until it reaches a full 26 weeks from 1 July 2026.

 

 

Digital Currency

 

The budget confirms that the Government will introduce legislation to clarify that digital currencies such as Bitcoin continue to be excluded from the Australian income tax treatment of foreign currency. This will maintain the current tax treatment of digital currencies, including the CGT treatment when they are held as investments.

 

 

Downsizer contributions

 

The Government will reduce the minimum eligibility age from 60 to 55 years of age for making downsizer contributions to their superannuation funds. The downsizer contribution allows eligible people to make a one-off post-tax contribution to their superannuation funds of up to $300,000 per person from the proceeds of selling their home. Both members of a couple can make contributions and the contributions do not count towards non-concessional contribution caps.

 

 

Energy efficiency grants for SMEs

 

The Government will provide grants to support small to medium enterprises to upgrade energy

efficient equipment. The grants will support studies, planning, equipment and facility upgrade projects that will improve energy efficiency, reduce emissions or improve the management of power demand.

 

 

COVID-19 business grants

 

The Government has made the following COVID-19 grant programs eligible for non-assessable non-exempt (NANE), which will exempt eligible businesses from paying tax on these grants.

 

  • Business Costs Assistance Program Four – Construction (Victoria)

  • Licenced Hospitality Venue Fund 2021 – July Extension (Victoria)

  • License, Hospitality Venue Fund 2021 – Top Up Payments (Victoria)

  • Business Costs Assistance Program Round Two – Top Up (Victoria)

  • Business Costs Assistance Program Round Three (Victoria)

  • Business Costs Assistance Program Round Four (Victoria)

  • Business Costs Assistance Program Round Five (Victoria)

  • Impacted Public Events Support Program Round Two (Victoria)

  • Live Performance Support Program (Presenters) Round Two (Victoria)

  • Live Performance Support Program (Suppliers) Round Two (Victoria)

  • Commercial Landlord Hardship Fund 3 (Victoria)

 

 

ATO compliance programs

 

  • The Government will provide funding to the ATO to extend its Personal Income Taxation

Compliance Program for two years from 1 July 2023. This will focus on the key areas of non-compliance, including overclaiming of deductions and incorrect reporting of income.

 

  • The Government will extend the existing ATO Shadow Economy Program for a further three years from 1 July 2023. This extension will enable the ATO to continue a strong and co-ordinated response to target shadow economy activity, protect revenue and level the playing field for those businesses that are complying with the laws.

 

  • The Government has boosted funding for the ATO Tax Avoidance Taskforce over four years from 1 July 2022. The extension of the Tax Avoidance Taskforce will support the ATO to pursue new priority areas of business tax risks, complementing the ongoing focus on multinational enterprises and large public and private businesses.

 

 

Increase in Commonwealth penalty unit

 

From 1 January 2023, the Government will increase the amount of the Commonwealth penalty unit from $222 to $275. Penalty units are referring to the amount payable for fines under Commonwealth laws, including tax offences. Total fines are calculated by multiplying the value of one penalty unit by the number of penalty units prescribed for the offence.

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Vincent Wan

CPA, Registered Tax Agent

Oct 2022

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