Tuesday night’s pre-election Federal Budget contained a variety of spending and support initiatives aimed at low and middle income earners, families and businesses. There were very few changes to superannuation, but a number of taxation and related measures.
Please note that these proposals are not yet legislated, and as always, the team at AGS Financial Group are well placed to advise you on your strategic options as these proposals progress.
Key elements of the budget include:
Extension of temporary reduction in superannuation minimum drawdown rates
The Government has announced a further extension of the temporary 50% reduction in the minimum drawdown rate for account-based pensions, to cover the upcoming 2022/23 financial year. This measure allows retirees to minimise their account drawdowns amid the financial market volatility associated with firstly the pandemic, but more recently the war in Ukraine.
|Age||Legislated Minimum||2019-20 to 2022-23
Income Years (Inclusive)
|95 or older||14%||7.0%|
Low and Middle Income Tax Offset
A one-off Cost of Living tax offset is proposed to be incorporated into the existing Low and Middle Income Tax Offset (LMITO) for the current 2021/22 financial year. This will effectively provide an extra $420 to taxpayers earning under $126,000.
Increasing the Medicare Levy low-income thresholds
The Government will increase the Medicare levy low-income thresholds for singles, families, and seniors and pensioners from the 2021-22 income year. The increase in thresholds takes account of recent movements in the consumer price index so that low-income individuals continue to be exempt from paying the Medicare levy.
|Old Threshold||New Threshold|
|Single Seniors & Pensioners||$36,705||$36,925|
|Family Seniors & Pensioners||$51,094||$51,401|
|Dependent Child or Student||+$3,597||+$3,619|
Temporary reduction in Fuel Excise
The excise and excise-equivalent customs duty rate that applies to petrol and diesel will be halved for 6 months to reduce the burden of higher fuel prices. At current excise rates this equates to 22.1c per litre. The excise and excise-equivalent customs duty rates for all other fuel and petroleum-based products, except aviation fuels, will also be reduced by 50 per cent for 6 months. Effective midnight of budget night.
Tax deductibility of COVID-19 test expenses
The government have confirmed their previous announcement that COVID-19 test expenses which have been incurred where it was a requirement to attend a workplace will be deductible to the individual. In addition to this, for Employer’s who provided testing to their employees, this will not be subject to Fringe Benefits tax.
Further funding: ATO tax avoidance taskforce
The ATO’s tax avoidance taskforce which was due to wrap up by 30 June 2023 has had its funding extended by a further 2 years. This indicates continued compliance approach by the ATO. The Taskforce is expected to continue a tax avoidance focus for Multinationals, Large Companies, and High Wealth individuals. This has also been the main driver in the ATO’s enhanced data matching technology to identify tax avoidance.
Social Security, Aged Care, Families and Housing Affordability
Expansion of Home Guarantee Scheme
The Home Guarantee Scheme is being expanded to help more first home buyers purchase their first home. In addition, a new Regional Home Guarantee Scheme for non-first home buyers is being introduced. Under the schemes, the government guarantees part of a home loan. This allows the purchase of a home with a smaller deposit without needing to pay Lender’s Mortgage Insurance.
- 35,000 guarantees each year (up from the current 10,000) from 1 July 2022 under the First Home Guarantee. This supports 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. This supports eligible homebuyers, including non-first home buyers and permanent residents, to purchase or construct a new home in regional areas.
- 5,000 guarantees each year from 1 July 2022 to 30 June 2025 to expand the Family Home Guarantee announced in last year’s Budget. This scheme assists eligible single parents with children to either buy their first home or re-enter the housing market with a deposit as little as 2%.
$250 Cost of Living Payment
The government will provide a once-off Cost-of-Living Payment of $250 in April 2022 to eligible pension and allowance recipients, and concession card holders.
Pharmaceutical benefits Scheme – Lowering the Safety net Threshold
In additional support to ease the cost of living pressures, from 1 July 2022, the PBS Safety Net thresholds will be reduced from $1,542.10 to $1,457.10 for general patients and from $326.40 to $244.80 for concessional patients.
Paid Parental Leave
- A further $346.1 million over 5 years to introduce an enhanced Paid Parental Leave scheme for eligible working families by integrating Dad and Partner Pay and Parental Leave Pay to provide eligible families access to up to 20 weeks leave to use in ways that suit their specific circumstances.
- Broadening the income test to include an additional household income threshold of $350,000 to further support workforce participation, particularly for women who are the primary earner.
- Eligible single parents will be able to access an additional 2 weeks of Paid Parental Leave and also benefit from the household income threshold test.
- Changes to the scheme also mean dads and partners will be able to access the Government’s scheme at the same time as any employer-funded leave, in the same way mothers currently can.
Women’s economic security and leadership – Facilitating job options
- $56.2 million to support more women into a greater array of occupations and jobs of the future, including $38.6 million over 4 years from 2022-23 to provide wrap-around support for women commencing in trade occupations on the Australian Apprenticeships Priority List.
- Building on the $147 million of investments to support gender equity in STEM, additional funding is being provided to encourage women to consider taking up careers in manufacturing and the technology workforce.
- Support is also being provided to further enable more women to develop entrepreneurial skills.
- $40.4 million to create pipelines for women to progress into board and leadership positions, including as sporting coaches and managers.
Small & Medium Business
Employee Share Schemes – Expanding access and reducing red tape
The government has announced that it will expand access to employee share schemes and further reduce red tape so that employees at all levels can directly share in the business growth they help to generate. Effective date not announced.
Small business – skills and training boost
Small businesses (with aggregated annual turnover of less than $50 million) will be able to deduct an additional 20 per cent 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.
The boost for eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year. The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2024, will be included in the income year in which the expenditure is incurred.
The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 until 30 June 2024.
Small business – technology investment boost
Small businesses (with aggregated annual turnover of less than $50 million) will be able to deduct an additional 20 per cent of the cost 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. The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 until 30 June 2023.
Modernisation of PAYG instalment systems
From 1 January 2024, companies will be able to choose to have their Pay As You Go (PAYG) instalments calculated based on current financial performance, extracted from business accounting software, with some tax adjustments. The aim is to support business cash flow by ensuring instalments reflect current performance.
Tax Concessions for commercialisation of certain new patents
In the 2021-22 Budget, the Government announced the introduction of concessional tax treatment (tax rate 17%) for eligible corporate income associated with new patents in the medical and biotechnology sectors (referred to “patent box” income). The Government will now extend the patent box income measures to provide concessional tax treatment for corporate taxpayers who:
- commercialise their eligible patents linked to agricultural and veterinary chemical products; or
- commercialise their patented technologies which have the potential to lower emissions.
The Government will consult with industry before settling the detailed design of the patent box extension.
Tax Planning Webinar
With 30 June fast approaching, now is the time to consider your tax planning opportunities, including those that may apply to you or your business thanks to the federal budget. Whether you’re an employee or a business owner, you’re invited to join us for our Tax Planning webinar, on Tuesday 26th April at 11am. Register here to attend live or receive the replay.
Contact us for Advice and Assistance
Naturally, as these measures become law, we are on hand to assist you with understanding and responding to the changes. As always, please contact us should you require any advice or assistance with your plans.
Published : 30 Mar 2022