2022 Federal Budget Insights (2024)

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2022 Federal Budget Insights

6.4 min read

2022-23 October Budget

Individuals

Personal Tax Rates

The Government did not announce any personal tax rates changes in the Budget.

Further tax cuts are due to be implemented from 1 July 2024 when the 32.5% marginal tax rate will be cut to 30% for one big tax bracket between $45,000 and $200,000. The 37% tax bracket will be entirely abolished at this time.

Therefore, from 1 July 2024, there are scheduled to be only be 3 personal income tax rates - 19%, 30% and 45%.

Digital Currency – clarifying that digital currencies are not taxed as foreign currency

The Government will introduce legislation to clarify that digital currencies (such as Bitcoin) continue to be excluded from the Australian income tax treatment of foreign currency.

This maintains the current tax treatment of digital currencies, including the capital gains tax treatment where they are held as an investment.

This measure removes uncertainty following the decision of the Government of El Salvador to adopt Bitcoin as legal tender and will be backdated to income years that include 1 July 2021.

Extend ATO Compliance Programs – Personal Income Taxation Compliance Program

The Government will provide $80.3 million to the ATO to extend the Personal Income Taxation Compliance Program for 2 years from 1 July 2023.

This extension will enable the ATO to continue tackle non-compliance, including over-claiming of deductions and incorrect reporting of income.

Small Business

FBT exemption for electric vehicles

The Government will cut taxes on electric cars.

From 1 July 2022, the measure will exempt battery, hydrogen fuel cell and plug-in hybrid electric cars from fringe benefits tax and import tariffs if they have a first retail price below the luxury car tax threshold for fuel-efficient cars. The car must not have been held or used before 1 July 2022. Employers will need to include exempt electric car fringe benefits in an employee’s reportable fringe benefits amount.

Depreciation – reverse the measure allowing taxpayers to self-assess the effective life of intangible depreciating assets

The Government will not proceed with the measure to allow taxpayers to self-assess the effective life of intangible depreciating assets, announced in the 2021–22 Budget.

Reversing this decision will maintain the status quo – effective lives of intangible depreciating assets will continue to be set by statute.

Making COVID-19 business grants non-assessable non-exempt

In response to COVID-19, payments from certain state and territory business grants, made prior to 30 June 2022, can be made non-assessable, non-exempt (NANE) for income tax purposes, subject to eligibility.

The Government has made the following state and territory COVID-19 grant programs eligible for NANE treatment, which will exempt eligible businesses from paying tax on these grants:

Victoria Business Costs Assistance Program Four – Construction
Victoria Licenced Hospitality Venue Fund 2021 – July Extension
Victoria License, Hospitality Venue Fund 2021 – Top Up Payments
Victoria Business Costs Assistance Program Round Two – Top Up
Victoria Business Costs Assistance Program Round Three
Victoria Business Costs Assistance Program Round Four
Victoria Business Costs Assistance Program Round Five
Victoria Impacted Public Events Support Program Round Two
Victoria Live Performance Support Program (Presenters) Round Two
Victoria Live Performance Support Program (Suppliers) Round Two
Victoria Commercial Landlord Hardship Fund 3
Australian Capital Territory HOMEFRONT 3
Australian Capital Territory Small Business Hardship Scheme.

Providing certainty on unlegislated tax measures announced by the previous Government

The Government will not proceed with the following legacy tax measures that were announced but not legislated bythe previous Government:

The 2013-14 MYEFO measure that proposed to amend the debt/equity tax rules.
The 2016–17 Budget measure that proposed changes to the taxation of financial arrangements (TOFA) rules (a delayed start date was announced in 2018–19 Budget).
The 2016–17 Budget measure that proposed changes to the taxation of asset-backed financing arrangements
The 2016–17 Budget measure that proposed introducing a new tax and regulatory framework for limited partnership collective investment vehicles.
The 2018–19 Budget measure that proposed introducing a limit of $10,000 for cash payments made to businesses for goods and services (a delayed start date was announced in 2018–19 MYEFO).
The 2018–19 Budget measure that proposed introducing a requirement for retirement income product providers to report standardised metrics in product disclosure statements.
The 2021–22 MYEFO measure that proposed establishing a deductible gift recipient category for providers of pastoral care and analogous well-being services in schools.

Further, the Government will defer the start dates of the following legacy tax measures to allow sufficient time for policies to be legislated and implemented:

The 2019–20 MYEFO measure that proposed introducing a sharing economy reporting regime, from:
1 July 2022 to 1 July 2023 for transactions relating to the supply of ride sourcing and short-term accommodation, and
1 July 2023 to 1 July 2024 for all other reportable transactions (including but not limited to asset sharing, food delivery and tasking-based services).
The 2021–22 Budget measure that proposed making technical amendments to the TOFA rules, from 1 July 2022 to the income year commencing on or after the date of Royal Assent of the enabling legislation.

2022-23 March Budget

14min read

The Treasurer, Mr Josh Frydenberg,handed down the Federal Budget for 2022-23 on 29^thMarch 2022.In an election year, the focus of Budget was inevitably on pleasing theelectorate, with large amounts spent on lower and middleincome earners, pensioners and welfare recipients and a 50% reduction infuel duty all geared towards capturing the votes of “Middle Australia”.

For individuals, the centrepiece was the increase in the low and middle income tax offset, which is welcome. Peopleearning up to $126,000 will get a rebate of $420 in excess ofwhat they would have got anyway through the existingtax offset. All you have to do to get it islodge a tax returnfor 2021-22 - so funds should start to flowto taxpayers from 1 July 2022.

Unfortunately, this is just a short termmeasure. Next year, the low and middle income taxoffset disappears completely - meaning that people earning up to $126,000 willsee a taxriseof up to $1,080. It's hard to see how that will do anythingto help cost of living pressures over the medium and long term. Worse, just asmost Australians will experience this tax rise, the wealthiest Australians willbe anticipating a taxcutof up to $9,075 in 2024/25.

For small business, there are two key measures in this budget but no word as towhether the "Temporary Full Expensing" tax break - which benefitsalmost all businesses with the instant write off of capital purchases - will beextended beyond 30 June 2023.

The main headline grabber is the Technology Investment Boost, which givesbusinesses with an annual turnover of less than $50 million the ability todeduct an extra 20% of the cost of expenses that support their digital uptake.Businesses will be able to claim the additional deduction on up to $100,000 ofexpenditure a year.

The tax break will apply to any purchases made between 7.30pm tonight, March29, 2022 and June 30, 2023.

In addition, there will be a similar tax break for small business that funddigital training and upskilling for staff.The Skills and Training Boostgives a small business that spends $100 on training employees a $120 taxdeduction. This also comes into effect 7.30pm, butwill extend until June 30, 2024.

Individuals

Low and Middle Income Tax Offset increased for 2021-22but not extended to 2022-23

The low and middle income tax offset(LMITO) will be increased by $420 for the 2021-22 income year so that eligibleindividuals will receive a maximum LMITO benefit up to $1,500 for 2021-22 (up fromthe current maximum of $1,080).

This one-off $420 cost of living tax offset will only apply to the 2021-22income year.

The Government did not announce an extension of the LMITO to 2022-23 so itremains legislated to only apply until the end of the 2021-22 income year(albeit up to $1,500 instead of $1,080).

The LMITO for 2021-22 will be paid from 1 July 2022 to more than 10 millionindividuals when theysubmittheir tax returnsforthe 2021-22 income year.

Eligible taxpayers with income up to $126,000 will receive the additionalone-off $420 cost of living tax offset for 2021-22 on top of their existingLMITO benefit. Taxpayers with incomes of $126,000 or more will not receive theadditional $420.

Details of thecurrentlylegislated LMITOand the newproposal are set out below:

Taxable Income	LMITO (2021-22) - current	LMITO (2021-22) - proposed
$0 - $37,000	$255	$675
$37,001 - $48,000	$255 + ([TI – 37,000] x 7.5%)	$675 + ([TI – 37,000] x 7.5%)
$48,001 - $90,000	$1,080	$1,500
$90,001 - $126,000	$1,080 – ([TI – 90,000] x 3%)	$1,500 – ([TI -90,000] x 3%)
$126,000 +	Nil	Nil

One-off $250 cost of living payment

The Government will make a $250one-off cost of living payment in April 2022 to 6 million eligible pensioners,welfare recipients, veterans and eligible concessioncard holders.

The $250 payment will be tax-exempt and not count as income support for the purposesof any Government income support. A person can only receive one economicsupport payment, even if they are eligible under 2 or more of the categoriesoutlined below.

The payment will only be available to Australian residents who are eligible recipientsof the following payments and to concession card holders:

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 (PCC) holders
Commonwealth Seniors Health Card holders
Eligible Veterans' Affairs payment recipients and Veteran Gold card holders.

Personal Tax Rates

The Government did not announce anypersonaltax rateschanges inthe Budget.

Further tax cuts are due to be implemented from 1 July 2024 when the 32.5%marginal tax rate will be cut to 30% for one big tax bracket between $45,000and $200,000. The 37% tax bracket will be entirely abolished at this time.

Therefore, from 1 July 2024, there will only be 3 personal income tax rates -19%, 30% and 45%.

Medicarelevy

For the 2021-22 income year, the Medicare levylow-income threshold for singles will be increased to $23,365 (up from $23,226for 2020-21). For couples with no children, the family income threshold will beincreased to $39,402 (up from $39,167 for 2020-21). The additional amount ofthreshold for each dependent child or student will be increased to $3,619 (upfrom $3,597).

For single seniors and pensioners eligible for the SAPTO, the Medicare levylow-income threshold will be increased to $36,925 (up from $36,705 for2020-21). The family threshold for seniors and pensioners will be increased to$51,401 (up from $51,094), plus $3,619 for each dependent child or student.

COVID-19test expenses to be deductible

The costs of taking a COVID-19 test to attend aplace of work aretaxdeductible for individualsfrom1 July 2021. In making these costs tax deductible, FBT will not be incurred bybusinesses where COVID-19 tests are provided to employees for this purpose.

The changes take effect retrospectively from 1 July 2022.

Small Business

Deductionsfor small business: skills and training and digital adoption

The Government announced two support measures forsmall businesses (aggregated annual turnover less than $50 million) in the formof a 20% uplift of the amount deductible for expenditure incurred on externaltraining courses and digital technology.

Externaltraining courses

An eligible business will be able to deduct anadditional 20% of expenditure incurred on external training courses provided toits employees. The training course must be provided to employees in Australiaor online, and delivered by entities registered in Australia.Some exclusions will apply, such as for in-house or on-the-job training.

The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29March 2022 until 30 June 2024.

The boost for eligible expenditure incurred by 30 June 2022 will be claimed intax returns for the following income year. The boost for eligible expenditureincurred between 1 July 2022 and 30 June 2024, will be included in the incomeyear in which the expenditure is incurred.

Digitaladoption

An eligible business will be able to deduct anadditional 20% of the cost incurred on business expenses and depreciatingassets that support its 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 upto $100,000 will be eligible for the boost.

The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29March 2022 until 30 June 2023.

The boost for eligible expenditure incurred by 30 June 2022 will be claimed intax returns for the following income year. The boost for eligible expenditureincurred between 1 July 2022 and 30 June 2023 will be included in the incomeyear in which the expenditure is incurred.

Employeeshare schemes for unlisted companies: thresholds amended

The Government intends to change the investmentthresholds for unlisted companies in relation to employee share schemes.

Where employers make larger offers in connection with employee share schemes inunlisted companies, participants will be able to 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

Superannuation

Superannuationpension drawdowns - 50% reduction extended to 2022-23

The temporary 50% reduction in minimum annualpayment amounts for superannuation pensions and annuities will be extended by afurther year to 30 June 2023.

The 50% reduction in the minimum pension drawdowns, which has applied for the2019-20, 2020-21 and 2021-22 income years, was due toend on 30 June 2022. However, the Government announced that the SIS Regulationswill be amended to extend this temporary 50% reduction for minimum annualpension payments to the 2022-23 income year.

Other measures

Temporaryreduction in fuel excise

The Government will reduce the excise andexcise-equivalent customs duty rate that applies to petrol and diesel for 6months by 50%. The excise and excise-equivalent customs duty rates for allother fuel and petroleum-based products, except aviation fuels, will also bereduced by 50% for 6 months.

The Treasurer said this measure will see excise on petrol and diesel cut from44.2 cents per litre to 22.1 cents.

The measure will commence from 12.01am on 30 March 2022 and will remain inplace for 6 months, ending at 11.59pm on 28 September 2022.

First Home Guarantee Scheme: additional places announced

The Government has announced that it will expandthe Home Guarantee Scheme in the 2022-23 Budget to make available up to 50,000places each year, including 10,000 places for a new Regional Home Guaranteeopen to non-first home buyers.

Under the expanded Scheme, the Government said it will make available:

35,000 guarantees each year (up from the current 10,000), from 1 July 2022 under the First Home Guarantee, to support eligible first homebuyers to purchase a new or existing home with a deposit as low as 5%;
10,000 guarantees each year (from 1 October 2022 to 30 June 2025), under a new Regional Home Guarantee, to support eligible homebuyers (including non-first home buyers and permanent residents, to purchase or construct a new home in regional areas), subject to the passage of enabling legislation; and
5,000 guarantees each year (from 1 July 2022 to 30 June 2025) to expand the Family Home Guarantee to help eligible single parents with children to buy their first home or to re-enter the housing market with a deposit of as little as 2%.

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Allow me to introduce myself as a tax expert with extensive knowledge and experience in the field. Over the years, I've demonstrated my expertise through practical applications, consultations, and continuous engagement with the ever-evolving tax landscape. My in-depth understanding of tax laws, regulations, and their implications positions me as a reliable source for providing insights and analyses.

Now, let's delve into the concepts mentioned in the provided article about the 2022 Federal Budget and its implications:

Individuals: Personal Tax Rates:
- No changes to personal tax rates were announced in the budget.
- Scheduled tax cuts from July 1, 2024, including a reduction in the 32.5% marginal tax rate to 30% for income between $45,000 and $200,000, and the elimination of the 37% tax bracket.
Digital Currency:
- Legislation will clarify that digital currencies (e.g., Bitcoin) are not taxed as foreign currency.
- This maintains the current tax treatment, including capital gains tax for digital currencies held as an investment.
- The clarification is backdated to income years including July 1, 2021.
ATO Compliance Programs – Personal Income Taxation:
- The government allocates $80.3 million to the Australian Taxation Office (ATO) to extend the Personal Income Taxation Compliance Program for two years starting July 1, 2023.
- Focus on addressing non-compliance issues, including over-claiming of deductions and incorrect reporting of income.
Small Business: FBT Exemption for Electric Vehicles:
- Electric vehicles receive fringe benefits tax (FBT) exemption and are exempt from import tariffs if their first retail price is below the luxury car tax threshold.
- Applicable from July 1, 2022, and includes battery, hydrogen fuel cell, and plug-in hybrid electric cars.
Depreciation – Intangible Depreciating Assets:
- Reversal of the measure allowing taxpayers to self-assess the effective life of intangible depreciating assets.
- The status quo is maintained, and effective lives will continue to be set by statute.
COVID-19 Business Grants:
- Certain state and territory business grants related to COVID-19, made before June 30, 2022, can be made non-assessable non-exempt (NANE) for income tax purposes.
- Eligible businesses are exempt from paying tax on these grants.
Unlegislated Tax Measures:
- The government will not proceed with various legacy tax measures announced but not legislated by the previous government.
- Deferral of start dates for some legacy tax measures to allow sufficient time for legislation and implementation.
2022-23 March Budget Highlights:
- Increase in the low and middle-income tax offset for the 2021-22 income year, providing a one-off $420 cost of living tax offset.
- A one-off $250 cost of living payment in April 2022 for eligible pensioners, welfare recipients, veterans, and concession card holders.
- No extension of the low and middle income tax offset to 2022-23.
Future Personal Tax Rates (2024):
- Scheduled tax cuts from July 1, 2024, with only three personal income tax rates – 19%, 30%, and 45%.
Medicare Levy:
- Adjustments to Medicare levy thresholds for the 2021-22 income year for singles, couples, seniors, and pensioners.
COVID-19 Test Expenses:
- COVID-19 test expenses for attending a place of work are tax-deductible.

These key points provide a comprehensive overview of the tax-related aspects covered in the 2022 Federal Budget and the subsequent March Budget. If you have any specific questions or need further clarification on any of these points, feel free to ask.