The Federal Budget 2022-23: Key highlights including a summary of changes to personal and business tax

The Federal Budget included a number of tax cuts and incentives in response to the challenging economic conditions. A number of the announcements are being actioned immediately, for example, the temporary reduction in the fuel excise. Other measures are plans for the future, including the plan to continue improving the digitisation of the tax system, with the proposed commencement of the digitalising of trust income reporting and processing set to start from 1 July 2024.

Key takeaways

1. Temporary reduction in fuel excise (cheaper fuel for six months)

You’ve probably already noticed this one if you drive. Fuel excise and excise-equivalent duties have been halved in an effort to reduce fuel prices. This welcome temporary relief has been available since 30 March 2022 and will be in place for six months.

2. Extension of the reduction in minimum drawdowns

This measure may interest those of you who are required to drawdown on your account-based pensions (ABP's) & similar products based on the required rate for your age bracket. 

3. Cost of living payment 

A one-off $250 cost of living payment will be made in April 2022 for eligible recipients of the Age Pension, Disability Support Pension and Commonwealth Seniors Health Card holders. A full list of eligible recipients can be found here. These payments are tax-exempt and don't count as income support.

4. Expanding access to employee share schemes 

With expanded access and reduction of red tape, employees at all levels are able to directly share in the business growth they’ve helped to create.

The previous cap on share issues of $5,000 for individual employees each year has been removed. Now the value of shares workers can buy from their employers is $30,000 per participant per year. If the sale or listing of the company were imminent, workers would be permitted to purchase more shares.

There is also a removal of regulatory requirements for offers to independent contractors where they don’t have to pay for their interests. 

5. Digitalising trust income reporting and processing

It’s proposed that from 1 July 2024 trust and beneficiary income reporting and processing will be digitised with the option to lodge electronically with increased pre-fill information and more automated ATO assurance.     

6. A temporarily reduced GDP uplift factor for PAYG & GST

For instalments that fall in the 2023 financial year (and that fall due after the legislation received Royal Assent), there is a short-term fix for businesses that are suffering from cash flow difficulties and expect to potentially recover soon. The “uplift factor” will be 2%, instead of 10%. This means you can essentially defer this payable until a later date.

What is an uplift factor? Basically, it’s an adjustment (increase) applied by the Government to instalments using a formula known as the gross domestic product (GDP) adjustment. This is based on data published by the Australian Bureau of Statistics. 

This applies to small to medium enterprises using the relevant instalment methods - up to $10 million aggregated turnover for GST instalments and $50 million annual aggregated turnover for PAYG instalments.  

Keep in mind that for some businesses that have recovered, capping the increase at 2 per cent for instalment payments may only defer higher costs until the final payment at the end of the year.

The key takeaways for individuals

1. Tax deductibility of COVID-19 text expenses

The costs of taking a COVID-19 test to attend a place of work are tax-deductible for individuals from 1 July 2021.  

2. $420 increase to the Low and Middle Income Tax Offset (LMITO) - 'cost of living tax offset' 

LMITO was introduced by the Government in the 2018 budget as a temporary measure to help low- and middle-income earners reduce the amount of tax they pay. Because it's a tax offset, it can only be used to lower your tax bill and can't be used to generate a tax refund or pay your Medicare levy. This latest cost of living tax offset is a once-off $420 increase to the existing LMITO. 

This may benefit those who earn a taxable income of below $126,000. The maximum benefit available for 2022 financial year tax returns will be $1500 for individuals and $3000 for couples. 

3. Increased Medicare levy low-income thresholds

For seniors and pensioners, families and singles from July 2021 the following increases will apply:

• Singles $23,226 to 23,365

• Families $39,167 to $39,402

• Single seniors and pensioners $36,705 to $36,925

• Family seniors and pensioners $51,094 to $51,401

• Each dependent child or student $3,597 to $3,619.

The key takeaways for businesses

Small and medium businesses (with aggregated annual turnover under $50 million) can take advantage of the 20% deductibility boosts being offered for costs associated with staff training and digital adoptions (see points 1 & 2 below).  Please feel free to contact us for assistance with applying these boosts. The overarching theme of the business measures focused on improving and embracing technology - for smarter data and better reporting.

1. Skills and training boost

This aims to support small and medium businesses to train and upskill their employees. From 7:30pm (AEDT) on 29 March 2022 until 30 June 2024, an additional 20% of business expenditure incurred on external training courses provided to employees will be deductible. These can be online or held in Australia and must be delivered by entities registered in Australia. 

For expenditure incurred between 1 July 2022 and 30 June 2024, the boost will be claimed in the income year the expense is incurred.

2. Technology investment boost

This aims to support small and medium businesses to train and upskill their employees. From 7:30pm (AEDT) on 29 March 2022 until 30 June 2023, an additional 20% of business expenditure incurred on business expenses and depreciating assets that support digital adoption (e.g. portable payment devices, cyber security systems or subscriptions to cloud-based services) will be deductible. There is an annual cap of $100,000 eligible expenditure for each qualifying income year, i.e. a max of $20,000 per eligible year. 

For expenditure incurred between 1 July 2022 and 30 June 2023, the boost will be claimed in the income year the expense is incurred.

Please note that for both of these boosts, eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year. 

3. Modernising the PAYG instalment system 

Companies will be able to choose to have PAYG instalments calculated based on current financial performance as per their accounting software with tax adjustments. This would mean the instalments payable would likely be more in line with current cash flow. This measure is set to be available from 1 January 2024.

4. Reporting of Taxable Payments Reporting Systems data (TPAR)

From 1 January 2024 (this date is yet to be confirmed), there will be the option to report this data monthly or quarterly in line with the lodgment cycle of activity statements. 

Please note that not all of the measures included in this blog have received royal assent. The list above is not an extensive list of proposals. You can find a link to the full paper here. If you would like to know how any of these measures might affect you or your business, please reach out to the Advali team at info@advali.com.au.