In an economy emerging from the pandemic, the unemployment rate is currently at 4% and there is an expected budget deficit of $78 billion for 2022/23.
As international uncertainties add pressure on the cost of living, key measures of this year’s Budget are aimed to provide a relief from the cost of living.
- The low and middle income tax offset will be increased by $420 in the 2021–22 income year.
- A one-off payment of $250 will be made to individuals who are currently in receipt of Australian government social security payments, including pensions.
- Costs of taking a COVID-19 test to attend a place of work will be tax deductible for individuals and exempt from fringe benefits tax from 1 July 2021.
- A single Paid Parental Leave scheme of up to 20 weeks paid leave will replace the existing system of 2 separate payments.
- Small and medium businesses will be able to deduct an additional 20% of expenditure incurred on external training courses provided to their employees.
- Small and medium businesses will be able to deduct an additional 20% of eligible expenditure supporting digital adoption.
- Companies will be able to choose to have their PAYG instalments calculated based on current financial performance, extracted from business accounting software, with some tax adjustments.
- Access to employee share schemes in unlisted companies will be expanded.
Fuel excise and customs duty
Excise and excise-equivalent customs duty on petrol and diesel will be reduced by 50% from 30 March 2022 for 6 months.
The 50% reduction of the superannuation minimum drawdown requirements for account-based pensions will be extended for an additional year.
Below are some more details on these key features of the Budget. For full detail please follow this link Client Alert No. 92 – Full Detailed Federal Budget Summary 2022/23
The low and middle income tax offset (LMITO) will include a cost of living tax offset in the 2021–22 income year. The cost of living tax offset is a flat $420 to be applied to all recipients of LMITO when they lodge their tax return.
- The minimum LMITO for 2021–22 will be $675 for all individuals with a taxable income up to $37,000.
- Between taxable incomes of $37,000 and $48,000, the value is $675 plus 7.5% of the amount of the income that exceeds $37,000.
- Taxpayers with taxable incomes between $48,000 and $90,000 are eligible for the maximum offset of $1,080.
- For taxable incomes of $90,000 to $126,000 the offset phases out at a rate of Individuals 3 cents for every dollar.
Individuals who are currently in receipt of an Australian government allowance or pension will receive a one-off payment of $250 in April 2022 to ease the cost of living pressures.
Certain concession card holders will also get the payment e.g. Commonwealth Seniors Health Card.
Costs of taking a COVID-19 test to attend a place of work will be tax deductible for individuals and exempt from fringe benefits tax from 1 July 2021.
Employers will not incur fringe benefits tax if they provide COVID-19 testing to their employees for work-related purposes.
The Paid Parental Leave scheme will be overhauled by combining the current Parental Leave Payment (18 weeks paid leave for the primary carer) and the Dad and Partner leave payment (2 weeks paid leave) into a single combined Paid Parental Leave pay scheme of up to 20 weeks.
Leave will be fully flexible and both parents will be able to choose how they split the leave periods between themselves. Single parents will have access to the full 20 weeks.
The income test will also be broadened to have an additional household income eligibility test.
The threshold for singles has increased from $23,226 to $23,365.
The family threshold has increased from $39,167 to $39,402.
For single seniors and pensioners, the threshold has increased from $36,705 to $36,925.
The family threshold for seniors and pensioners has increased from $51,094 to $51,401.
For each dependent child or student, the family income thresholds increase to $3,619.
Payments from additional state and territory COVID-19 business support grant programs will be made non-assessable non-exempt income (NANE) for income tax purposes until 30 June 2022.
Small and medium businesses will be able to deduct an additional 20% of expenditure incurred on external training courses provided to their employees.
- Aggregated turnover of less than $50 million.
- External training course must be delivered by an Australian entity and provided to employees in Australia or online.
- In-house or on-the-job training and expenditure for persons other than employees will be excluded.
- Applies to eligible expenditure from 29 March 2022 (Budget night) until 30 June 2024.
- For expenditure incurred prior to 1 July 2022, the additional deduction is clamable in the 2022/23 tax year.
Concessional tax treatment will apply from 1 July 2022 for primary producers selling Australian Carbon Credit Units (ACCUs) and biodiversity certificates.
Proceeds from the sale of ACCUs and biodiversity certificates generated from on-farm activities will be treated as primary production income, providing access to existing income tax averaging arrangements and the Farm Management Deposits scheme.
For employers that make larger offers in connection with employee share schemes in unlisted companies, participants can invest up to:
- $30,000 per participant per year, accruable for unexercised options 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.
Varying the GDP uplift factor for PAYG and GST instalments
The gross domestic product (GDP) uplift rate that applies to pay-as-you-go (PAYG) instalments and GST instalments will be set at 2% for the 2022/23 income year.
This applies to small to medium enterprises which have aggregated turnover of up to:
- $10 million – for GST instalments; and
- $50 million – for PAYG instalments.
From 30 March 2022, the excise and excise-equivalent customs duty on petrol and diesel will be reduced by 50%. The reduction in fuel excise will be in place for 6 months.
- The 50% reduction lowers the excise from 44.2 cents per litre to 22.1 cents per litre (excludes aviation fuels)
- For businesses who claim fuel tax credits for heavy vehicles on public roads, this will effectively reduce the fuel tax credits down to zero.
The halving of the superannuation minimum drawdown requirements for account-based pensions and similar products will be extended for a further year to 30 June 2023.
Expansion of “Patent Box” Tax Concession
The “patent box” tax concession announced in the 2021 Federal Budget in relation to assessable income derived from exploiting a medical or biotechnology patent was introduced into Parliament on 10 February 2022.
The introduced Bill expanded the concession to include the following:
- AgricultureEligible patents are linked to agricultural and veterinary (agvet) chemical products listed on the Australian Pesticides and Veterinary Medicines Authority (APVMA) or PubCRIS (Public Chemicals Registration Information System) registers.
Corporate income from the commercialisation of patents and eligible Plant Breeder’s Rights (PBRs), issued from 29 March 2022, in respect to agricultural and veterinary chemical products will be taxed at an effective rate of 17% to the extent that the R&D took place in Australia, for income years starting from 1 July 2023.
- Low emissions innovationPatented technology that is considered to reduce emissions in the 140 technology areas listed in the Government’s 2020 Technology and Investment Roadmap Discussion Paper or included as priority technologies in the Government’s 2021 and future annual Low Emissions Technology Statements are potentially eligible for the concession.
- Medical and biotechnology innovationThe bill now includes eligible patents issued in the following overseas jurisdictions with equivalent patent regimes IP Australia, utility patents issued by the United States Patent and Trademark Office (USPTO) and European patents granted under the European Patent Convention (EPC).
The measure once enacted will apply in respect of income years starting on or after 1 July 2022 to income attributable to R&D conducted in Australia.
Companies will be able to choose to have their PAYG instalments calculated based on current financial performance, extracted from business accounting software, with some tax adjustments.
The government will consult with affected stakeholders, tax practitioners and digital service providers to finalise the policy scope, design and specifications of this measure.
It is anticipated that the measure will commence on 1 January 2024.
Businesses will be allowed the option to report taxable payments reporting system data (via accounting software) on the same lodgment cycle as their activity statements.
Consultation with affected stakeholders, tax practitioners and digital service providers will take place to finalise the policy scope, design and specifications of the measure.
It is anticipated that the measure will commence on 1 January 2024.
Trust and beneficiary income reporting and processing will be digitalised, by allowing all trust tax return filers the option to lodge income tax returns electronically, increasing pre-filling and automating ATO assurance processes.
The measure is proposed to commence from 1 July 2024.
The following organisations have been approved as specifically listed deductible gift recipients (DGRs):
- Melbourne Business School Ltd from 1 July 2022
- Advance Global Australians Ltd (subject to ACNC registration) from 1 July 2022 to 30 June 2027
- Leaders Institute South Australia Inc from 1 July 2022 to 30 June 2027
- St Patrick’s Cathedral Melbourne Restoration Fund from 1 July 2022 to 30 June 2027
- Numerous entities related to Community Foundations Australia from 1 July 2022 to 30 June 2027.