2022/23 Federal Budget Report

On 29 March 2022, the Federal Treasurer released the 2022/23 Federal Budget.  In a Federal Election year and with an element of ongoing uncertainty in the economy due to COVID, rising fuel prices and international conflict, the Federal Budget was high on targeted spending to promote growth and low on specific tax reform and cost saving measures.

While low on tax reform, some of the tax measures introduced include:

Personal measures

  • The Low and Middle Income Tax Offset (LMITO) has been increased for the current 2022 financial year from a maximum of $1,080 to a maximum of $1,500 representing an increased payment to those eligible of up to $420. All recipients of the LMITO will obtain the additional $420 amount.The revised LMITO for the 2022 financial year can be summarised below:
Taxable Income of taxpayer LMITO for 2022
(pre-Budget)
LMITO for 2022
(as revised)
$0 – $37,000 $255 $675
$37,001 – $48,000 Between $255 and $1,080 Between $675 and $1,500
$48,001 – $90,000 $1,080 $1,500
$90,001 – $126,000 Between $0 and $1,080 Between $420 and $1,500
$126,001 + $0 $0

The Government has now confirmed that the LMITO will not extend to the 2023 financial year.

The Government has not made any adjustments in the Federal Budget to the Low Income Tax Offset.

  • The Government has announced that it will make a $250 one-off payment to eligible pensioners, welfare recipients, veterans and eligible concession card holders.
  • The Government has sought to increase the places available under the Home Guarantee Scheme to enable more individuals to purchase homes with a deposit as low as 5%.

Business measures

  • Businesses with turnover of under $50M will be eligible to claim a tax deduction uplift of 20% (i.e. a 120% tax deduction) for expenditure items consisting of external training course expenses (including training delivered online) and digital adoption expenses.The 120% tax deduction for digital adoption has a $100,000 expenditure cap limit and will apply to expenses incurred by eligible businesses between 29 March 2022 and 30 June 2023.   The tax deduction uplift for external training course expenses will apply to expenses incurred between 29 March 2022 and 30 June 2024.

    The Federal Budget papers provide examples of digital adoption as including investment in portable payment devices, cyber security systems or subscriptions to cloud-based services.  However, at this stage, it is not exactly clear as to what the exact scope of the deduction will be.

  • The Government has announced that concessional tax rates will apply to corporate taxpayers that derive “patent box” income (i.e. income from the commercialisation of patents which were created in Australia). The rules will apply to medical, biotechnology, agricultural, veterinary products and businesses whose patents have the potential to lower emissions.  Under the concession, businesses will be taxed on “patent box” income at the rate of 17% rather than at the usual 25%/30% rate.
  • The tax measure announced in last year’s Federal Budget to remove the deferred taxing point on employee share scheme interests associated with cessation of employment has now been passed as legislation. In the Federal Budget, the Government has now announced changes to be made to the Corporations Law to enable companies to mor easily provide equity to their employees.

Fuel Excise

  • As expected, the Federal Government announced that the fuel excise will be reduced by 50% for a period of 6 months (starting immediately). The rate of excise will be reduced by 22.1 cents per litre.

Superannuation measures

  • The Government announced that the temporary reduction of 50% in the minimum annual pension payment retirees are required to draw will be expanded into the 30 June 2023 financial year. As a reminder, the minimum drawdowns are as follows:

Age

Standard drawdown percentage

Revised drawdown percentage

0 – 64

4

2

65 – 74

5

2.5

75 – 79

6

3

80 – 84

7

3.5

85 – 89

9

4.5

90 – 94

11

5.5

95 +

14

7

 

If you have any further questions relating to how the Federal Budget impacts you, please do not hesitate to contact your client service contact at Banks Group.

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