2022/2023 Federal Budget
1. Personal income tax changes
a) Increase to low and middle income tax offset (‘LMITO’)
The Government has announced a once-off $420 ‘cost of living tax offset’ for the 2022 income year, which will be provided in the form of an increase to the existing LMITO. This will increase the maximum LMITO benefit to $1,500 for individuals and $3,000 for couples, and will be paid from 1 July 2022 when Australians submit their tax returns for the 2022 income year. Other than those who do not require the full offset to reduce their tax liability to zero, all LMITO recipients will benefit from the full $420 increase. All other features of the LMITO remain unchanged. To the extent an individual is entitled to an amount of LMITO for the 2022 income year under the current law, their entitlement is proposed to be increased by $420, as follows:
| 2022 LMITO (current) | Plus Cost of Living tax offset |
$0 – $37,000 | $255 | $420 |
$37,001 – $48,000 | $255 + 7.5% of excess over $37,000 | $420 |
$48,001 – $90,000 | $1,080 | $420 |
$90,001 – $125,999 | $1,080 – 3% of excess over $90,000 | $420 |
$126,000+ | | Nil |
b) Increasing the Medicare levy low-income thresholds
The Government will increase the Medicare levy low-income thresholds for seniors and pensioners, families and singles from 1 July 2021 as follows: • The threshold for singles will be increased from $23,226 to $23,365. • The family threshold will be increased from $39,167 to $39,402. • For single seniors and pensioners, the threshold will be increased from $36,705 to $36,925. • The family threshold for seniors and pensioners will be increased from $51,094 to $51,401. For each dependent child or student, the family income thresholds will increase by a further $3,619 instead of the previous amount of $3,597.
c) Tax deductibility of COVID-19 test expenses
• The Government has announced that individuals will be able to deduct the costs of taking a COVID-19 test to attend a place of work; and • FBT will not be incurred by businesses where COVID-19 tests are provided to employees for this purpose. Proposed to commence from 1 July 2021
2. Changes affecting business taxpayers
a) Modernising the PAYG instalment system
The Government will enable companies to choose to have their PAYG instalments calculated based on current financial performance, extracted from business accounting software, with some tax adjustments. This will support business cash flow by ensuring instalments reflect current performance. Subject to advice from software providers about their capacity to deliver, it is anticipated that systems will be in place by 31 December 2023, with the measure to commence on 1 January 2024, for application to periods starting on or after that date.
b) Skills and training boost
The Government will introduce a skills and training boost to support small and medium-sized businesses to train and upskill their employees. The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 (i.e., Budget night) until 30 June 2024. Small and medium-sized businesses (with aggregated annual turnover of less than $50 million) will be able to deduct an additional 20% of expenditure incurred on external training courses provided to their employees. The external training courses will need to be provided to employees in Australia or online and delivered by entities registered in Australia. Some exclusions will apply, such as for in-house or on-the-job training and expenditure on external training courses for persons other than employees.
For eligible expenditure incurred by 30 June 2022, the boost will be claimed in tax returns for the following income year. For eligible expenditure incurred between 1 July 2022 and 30 June 2024, the boost will be claimed in the income year in which the expenditure is incurred
c) Technology investment boost
The Government will introduce a technology investment boost to support digital adoption by small and medium-sized businesses. The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 (i.e., Budget night) until 30 June 2023. Small and medium-sized businesses (with aggregated annual turnover of less than $50 million) will be able to deduct an additional 20% of expenditure incurred on business expenses and depreciating assets that support their digital adoption (such as portable payment devices, cyber security systems or subscriptions to cloud-based services).
An annual cap will apply in each qualifying income year so that expenditure up to $100,000 will be eligible for the boost. This equates to a maximum additional deduction of $20,000 per eligible year. For eligible expenditure incurred by 30 June 2022, the boost will be claimed in tax returns for the following income year. For eligible expenditure incurred between 1 July 2022 and 30 June 2023, the boost will be claimed in the income year in which the expenditure is incurred
d) Making COVID-19 business grants non-assessable non-exempt
The Government has extended the measures that enable payments from certain state and territory COVID-19 business support programs to be made non-assessable non-exempt income (‘NANE’) for income tax purposes until 30 June 2022. This measure was originally announced on 13 September 2020.
The Government has made the following state and territory grant programs eligible for this treatment since the 2021-22 Mid-Year Economic and Fiscal Outlook: Queensland 2021 COVID-19 Business Support Grant. e) Apprentice wage subsidy support extension
The Budget confirms the Government's earlier announcement to extend the Boosting Apprenticeship Commencement (BAC) and Completing Apprenticeship Commencements (CAC) wage subsidies by 3 months to 30 June 2022. The Budget also includes funding over 5 years to introduce a new Australian Apprenticeships Incentive System from 1 July 2022 as further support to employers and apprentices in "priority occupations". 3. Other budget announcements
a) Extending the reduction in minimum drawdowns
The Government will extend the 50% reduction of superannuation minimum drawdown requirements for account-based pensions (‘ABPs’) and similar products for a further year to 30 June 2023 (i.e., for the 2023 income year). Based on this change, the (effective) reduced minimum percentage factors for ABPs (including TRISs), which are used to calculate the minimum annual pension amount under Schedule 7 to the SIS Regulations, are set out in the following table for the 2023 income year. Note that, for ABPs and TRISs that commence or cease part-way through the 2023 income year, a pro-rated minimum pension payment applies (unless the pension commenced on or after 1 June 2023, in which case, no minimum pension payment is required).
Recipient’s Age | Minimum Percentage Factor | Reduce minimum Percentage Factor |
Under 65 | 4% | 2% |
65 to 74 | 5% | 2.5% |
75 to 79 | 6% | 3% |
80 to 84 | 7% | 3.5% |
85 to 89 | 9% | 4.5% |
90 to 94 | 11% | 5.5% |
95 and above | 14% | 7% |
b) Cost of living payment
The Government will provide a one-off $250 cost of living payment to help eligible recipients with higher cost of living pressures. The payment will be made in April 2022 to eligible recipients of the following payments and to concession cardholders: • Age Pension. • Disability Support Pension. • Parenting Payment. • Carer Payment. • Carer Allowance (if not in receipt of a primary income support payment). • Jobseeker Payment. • Youth Allowance. • Austudy and Abstudy Living Allowance. • Double Orphan Pension. • Special Benefit. • Farm Household Allowance. • Pensioner Concession Card holders. • Commonwealth Seniors Health Card holders. • Eligible Veterans’ Affairs payment recipients and Veteran Gold cardholders. The payments are exempt from tax and will not count as income support for the purposes of any income support payment. A person can only receive one economic support payment, even if they are eligible under two or more categories outlined above. The payment will only be available to Australian residents.
c) Temporary reduction in fuel excise
The Government will help reduce the burden of higher fuel prices by halving the excise and excise-equivalent customs duty rate that applies to petrol and diesel, and all other fuel and petroleum-based products except aviation fuels, for six months. This measure will commence from 12.01am on 30 March 2022 and will remain in place for six months.
For any further questions or information please contact Summit Business Accounting - 07 5443 6468
Comments