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Budget 2022 – Key Tax Changes

On Tuesday, 29 March 2022, Treasurer Josh Frydenberg handed down the 2022-23 Federal Budget, his 4th Budget.

In an election Budget, the Treasurer announced a range of spending measures, including a one-off $420 cost of living tax offset, and a $250 payment for welfare recipients. The fuel excise will also be reduced by 50% for 6 months, starting from midnight on Budget night.

1. Tax measures 

Increase in the LMITO 

The Government announced that it will provide a Cost of Living tax offset, by increasing the Low and Middle Income tax offset (LMITO) for the 2021–22 income year by $420.  This will increase the maximum amount of the LMITO from $1,080 to $1,500 (for individuals) and $3,000 (for couples). This is a temporary measure, and its end date is 30 June 2022.

Taxpayers won’t be able the LMITO until they lodge their 2022 tax return. 

Increasing the Medicare levy low-income thresholds

The Government will increase the Medicare levy low-income thresholds for singles, families, and seniors and pensioners from 1 July 2021.
The thresholds will be increased:
• for singles — from $23,226 to $23,365;
• for families — from $39,167 to $39,402;

Cost of living payments

The Government proposes to provide a $250 economic support payment to help  pensioners and welfare recipients with higher cost of living pressures.  The payment will be made in April 2022 to eligible recipients.

Superannuation Pensions – continued reduction in minimum pensions

The Government proposes to extend the temporary reduction in the minimum pension drawdown rates required for account-based pensions and annuities, allocated pensions and annuities and market-linked pensions and annuities by 50% for a further 12 months to 30 June 2023.

Small Business – New skills and training boost

The Government will introduce a new skills and training boost to support small businesses to train and upskill their employees.  Eligible small businesses will be able to claim an extra 20% (allowing them to claim 120%) of the expenditure incurred on external training courses provided to their employees.  The external training courses will need to be delivered in Australia by external entities registered in Australia.

Some training will be excluded, including inhouse or on-the-job training and expenditure on external training courses for persons other than employees.  The temporary increased deduction will be available to small businesses with an aggregated turnover of less than $50 million for eligible expenditure incurred between 29 March 2022 and 30 June 2024. 

NB  The increased deduction for eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year (that is, in the 2023 income tax return). 

New technology investment boost for small businesses

The Government will introduce a new technology investment boost to support small businesses to adopt digital technologies.  Eligible small businesses will be able to claim an extra 20% (allowing them to claim 120%) of the cost of the expenditure incurred on business expenses and depreciating assets that support the business’ digital adoption.

These include portable payment devices, cyber security systems or subscriptions to cloud based services.  

The temporary increased deduction will be available to small businesses with an aggregated turnover of less than $50 million for eligible expenditure incurred between 29 March 2022 and 30 June 2024. 

NB  The increased deduction for eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year (that is, in the 2023 income tax return). 

An annual cap of $100,000 will apply in each income year.

Employee share schemes (ESS) – expanded access for employees

The Government has announced it will expand access to ESS so more employees can partake in the growth of businesses.

The Government proposes to allow employers to make larger offers in connection with ESS in unlisted companies. Participants in the ESS will be able to invest up to:
• $30,000 per participant per year (with unexercised options being accruable for up to 5 years), plus 70% of dividends and cash bonuses; or
• any amount, if it would allow them to immediately take advantage of a planned sale or listing of the company to sell their purchased interests at a profit.
The Government also proposes to remove regulatory requirements for offers to independent contractors, where they do not have to pay for interests.

2. Spending measures

Temporary reduction in fuel excise

The Government proposes to halve the excise and excise-equivalent customs duty rate that
applies to petrol and diesel for six months.  As part of this measure, the Government also
proposes to halve excise and excise-equivalent customs duty rates for all other fuel and
petroleum-based products, except aviation fuels, for six months.

The rate of excise and excise-equivalent customs duty currently applying to petrol and
diesel is 44.2 cents per litre. This measure will halve the rate on petrol and diesel to 22.1 cents
per litre from 30 March 2022.

This measure will commence from 12:01am on 30 March 2022 and will remain in place for six
months, ending at 11:59pm on 28 September 2022.

SPENDING
– First home owners grant extended
– Education funding
– Cyber Security / Defence 9.9billion 

JobTrainer

The $1 billion JobTrainer Fund matches funding between the Commonwealth and state and territory governments. The fund will support up to 340,700 additional free or low-fee training places in areas of genuine need. Adding to the $2.8 billion Supporting Apprentices and Trainees Wage Subsidy, which supports existing apprentices and trainees through to 31 March 2021, the Government is adding a further $1.2 billion in a Boosting Apprenticeships Wage Subsidy, which will support up to 100,000 new apprentices and trainees by paying a 50% wage subsidy, up to a cap of $7,000 per quarter, for commencing apprentices and trainees at businesses of all sizes, in all industries. But it runs out 30 September 2021.

Digital and connectivity

An additional $4.5 billion investment in NBN Co will bring ultra-fast broadband to more homes, with extra funding of $29.2 million to also accelerate the rollout of the 5G network. Reforms will make permanent the measures enabling companies to hold virtual Annual General Meetings to engage with their shareholders and e-signatures.

First home buyers

An additional 10,000 first home buyers will be able to purchase a new home sooner under the extension to the First Home Loan Deposit Scheme. The additional 10,000 places will be provided in 2020-21. This will allow first home buyers to secure a loan to build a new home or purchase a newly built dwelling with a deposit of as little as 5%, with the Government guaranteeing up to 15% of a loan.

More funding to fight organised crime in the tax and super system

The Government will provide $15.1 million to the ATO to target serious and organised crime in the tax and superannuation systems. This extends the 2017- 18 Budget measure “Additional funding for addressing serious and organised crime in the tax system” by a further two years to 30 June 2023.

3. Our Economy

The Australian economy is headed for a deficit of $79.8 billion, which is forecast to be steady for 2023, and then reduce moderately.  This has been helped by significantly higher tax intake from commodity prices and exports. 

With a Federal election due to be called in the next few weeks, the Budget offers plenty of sweeteners for Individuals facing higher inflation and  cost of living pressures.  Wages have been forecast to rise above inflation

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