Federal Budget 2022 / 2023

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

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

For small businesses, a Skills and Training Boost will provide a new 20 per cent bonus deduction for eligible external training courses for upskilling employees from Budget night. In addition, businesses will receive a similar 20 per cent bonus deduction for expenditure on digital technologies (e.g., cloud computing, elnvoicing, cyber security and web design) for investments of up to $100,000 per year.

The Treasurer said a strong economic recovery is well underway, notwithstanding the COVID-19 pandemic and new shocks, such as the recent floods and the Russian invasion of Ukraine. Mr Frydenberg said economic growth forecasts have been revised upwards, driven by stronger-than expected momentum in the labour market and consumer spending. The unemployment rate has also fallen to 4 per cent and is expected to reach 3.75 per cent in the September 2022 quarter.

Since the Mid-Year Economic and Fiscal Outlook (MYEFO) in December 2021, the underlying cash balance has improved by $103.6 billion over the five years to 2025-26. Nevertheless, the Government is expected to record a deficit of $79.8 billion for 2021-22 and $78.0 billion for 2022-23 (down from $134.2 billion in 2020-21). Net debt of $714.9 billion for 2022-23 is forecast to rise to $864.7 billion in 2025-26.

Tax measures:

The major tax-related measures announced in the Budget included:

• Low- and middle-income tax offset (LMITO) increased by $420 for 2021-22 - a one-off $420 cost of living tax offset for the 2021-22 income year will see the low- and middle-income tax offset (LMITO) increased up to a maximum of $1,500 for 2021-22 only (up from $1,080). Importantly, the Government did not announce an extension of the LMITO beyond 2021-22 when it is legislated to cease.
• No changes to the personal tax rates for 2022-23 - the Stage 3 personal income tax cuts remain unchanged and will commence in 2024-25 as already legislated.
• Small business 20 per cent deduction boost for skills training and digital adoption businesses with turnover less than $50 million will receive a 20 per cent uplift on deductions for eligible expenditure on external training courses and digital technology. The 20 per cent boost will apply to eligible expenditure incurred from 7:30pm on 29 March 2022 until 30 June 2024 (for skills training) and 30 June 2023 (for digital adoption).
• Patent box income extended – the concessional tax treatment for eligible corporate income associated with new patents in the medical and biotechnology sectors will be extended to corporate taxpayers who commercialise their: (i) eligible patents linked to agricultural and veterinary chemical products; and (ii) patented technologies which have the potential to lower emissions.
• Employee share schemes (ESS) – for company law purposes, the investment thresholds for unlisted companies will be changed so that ESS participants can invest up to $30,000 per participant per year (accruable for unexercised options for up to five years), plus 70 per cent of Federal Budget 2022-23 dividends and cash bonuses. Participants will also be able to invest any amount if it would allow them to immediately take advantage of a planned sale or listing of the company.
• Carbon credit and biodiversity certificate income - the proceeds from the sale of Australia Carbon Credit Units (ACCUs) and biodiversity certificates generated from on-farm activities will be treated as primary production income for the purposes of the Farm Management Deposits (FMD) scheme and the tax averaging provisions from 1 July 2022.
• Digitalising trust income - all trust tax return filers will be given the option to lodge income tax returns electronically, increasing pre-filling and automating ATO assurance processes. The measure is proposed to apply from 1 July 2024 (subject to advice from software providers).
• PAYG instalments options - from 1 January 2024, companies will be allowed to choose to have their PAYG instalments calculated based on current financial performance, extracted from business accounting software (with some tax adjustments).
• Taxable payments data reporting option - from 1 January 2024, businesses will be provided with the option to report Taxable Payments Reporting System data on the same lodgment cycle as their activity statements, via accounting software.

Superannuation measures:

The superannuation measures include:

• Super pension drawdown 50 per cent reduction extended to 2022-23 - the temporary 50 per cent reduction in minimum annual payment amounts for superannuation pensions and annuities will be extended by a further year to the 2022-23 income year.
• Super Guarantee rate unchanged - the Budget did not contain any change to the legislated. 
• Super Guarantee rate rise from 10 per cent to 10.5 per cent for 2022-23.

Other measures:

• Fuel excise temporary reduction - the fuel excise will be reduced by 50 per cent for six months, starting from midnight on Budget night.
• $250 cost of living payment - the Government will make a $250 one-off cost of living payment in
• April 2022 to eligible pensioners, welfare recipients, veterans and concession card holders
• Apprentice wage subsidy extension - the Budget confirmed the extension of the Boosting
• Apprenticeship Commencement (BAC) and Completing Apprenticeship Commencements (CAC) wage subsidies by three months to 30 June 2022.

Article posted 19 May, 2022