Pre-Election Australian Federal Budget 2022-23
The Treasurer, Josh Frydenberg, has handed down Australia’s pre-election Federal Budget for 2022-23, his 4th Budget. The Budget pushes cash hand-outs into the wallets of Australians through temporary measures such as one-off payments and petrol excise cuts. With many measures tailing off in July-September 2022, it is clearly geared as an Election Budget, with the nation waiting for the Election date to be called. Here is our breakdown of the main measures announced last night:
The “headline” cash measures:
- One-off bonus cost of living tax offset – The Low and Middle Income Tax Offset (LMITO) has been in effect since the 2018/19 year and has offered up to $1,080 per year as an additional refund to those whose incomes fall under $126,000, with the full amount payable to those on incomes under $37,000. In last night’s Budget, an additional $420 has been added to the LMITO to bring it up to $1,500 for the 2022 tax year, claimable upon lodgement of your 2022 income tax return. However, the entire LMITO will be removed from the 2022/23 year onwards, so individuals will see a significant drop in their tax refunds next year.
- $250 Cost of living payment – A one-off, $250 payment will be made in April 2022 to eligible pensioners, welfare recipients, veterans and other concession card holders.
- Fuel excise temporary reduction – The fuel excise will be cut by 22c per litre for six months, from midnight on Budget night. It may take a few weeks before this filters through to the price at the petrol bowser.
Measures for business
- Increase to tax deduction for training – businesses with a turnover under $50 million will be able to claim a 120% tax deduction for eligible spending on training through external providers, for their employees. This extra tax deduction is valid from 7:30pm on 29 March 2022 until 30 June 2024.
- Increase to tax deduction for digital technology – businesses with a turnover under $50 million who spend on measures to support its digital adoption (including portable payment devices, cyber security systems or subscriptions to cloud-based services) will be able to claim a 120% deduction on those expenses. This measure is valid from 7:30pm on 29 March 2022 until 30 June 2023.
- PAYG Instalment option – this option, which will not apply until 1 January 2024, would allow companies to choose to have their PAYG Instalments calculated on their current financial performance, taken from their business accounting software. This measure will apply “subject to advice from software providers about their capacity to deliver” – which means it is not guaranteed to commence on the date above.
- Apprentice wage subsidy extension – the current Boosting Apprenticeship Commencement (BAC) and Completing Apprenticeship Commencement (CAC) wage subsidies will be extended by 3 months to 30 June 2022.
Measures for superannuation
- 50% pension reduction extended – the temporary 50% reduction in pension payments for superannuation pensions and annuities has once again been extended. Initially introduced as a result of market fluctuations during the COVID pandemic, the measure has been extended to 30 June 2023 due to ongoing market volatility, so pensioners do not have to sell down assets to meet their pension commitments.
- Super guarantee increases to 10.5% for 2022/23 – no change to this previously legislated super guarantee increase, so employers will need to increase their superannuation payments from 1 July 2022. It is important to note that salary sacrifice payments by employees do not count towards the super guarantee, so employers cannot count on salary sacrifice payments to make up the extra 0.5% super guarantee payments.
Measures for families/individuals
- COVID-19 RATs to be deductible – As previously announced, the cost of Rapid Antigen Tests which are required to be taken to attend a workplace are tax deductible from 1 July 2021. Of course, the cost of these tests needs to be verified by receipts, which means many tests purchased prior to the announcement on 8 February 2022 may not be eligible for this deduction claim if receipts were not kept.
- More places for First Home Guarantee Scheme – This scheme allows eligible first home buyers to get a loan to buy or build their first home with a deposit as low as 5%. The Government provides a guarantee for the difference between the deposit and 20% of the purchase price. The Budget increased the number of places for this scheme from 10,000 per year to 35,000 per year, from 1 July 2022.
Tax compliance measures
- More money for Tax Avoidance Taskforce – The Government is boosting the funding of the ATO’s Tax Avoidance Taskforce, to target multinationals, large public and private groups, trusts and high wealth individuals.
- Digital trust tax returns – the Government has flagged a potential, optional switch to digital tax returns for trusts from 1 July 2024, relying on pre-filled information and ATO assurance processes. No real detail has been provided on this measure and how it would operate.
- Single Touch Payroll data to go to States – The Government intends to allow the ATO to share Single Touch Payroll (STP) data with the States and Territories, to streamline payroll tax return preparation and lodgement for businesses.
We now wait for the Opposition’s Budget Reply Speech on Thursday night to see the Labor Party’s pitch to voters before the Federal Election is called.
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