The Australian Government has released the 2022 Budget which you can find here:
https://budget.gov.au/2022-23/content/documents.htm
Below is a summary of some main key points from the 2022/2023 Budget. To stay up to date with changes as they happen during the financial year and some of the budget announcements become law make sure you subscribe to our mailing list.
Personal Taxation
Low Income Offset – LMITO increased by $420
The low and middle income tax offset (LMITO) will be increased by $420 for the 2021-22 income year so that eligible individuals will receive a maximum LMITO benefit up to $1,500 for 2021-22 (up from the current maximum of $1,080).
This one-off $420 cost of living tax offset will only apply to the 2021-22 income year. Importantly, the Government did not announce an extension of the LMITO to 2022-23. So it remains legislated to only apply until the end of the 2021-22 income year (albeit up to $1,500 instead of $1,080).
Low and middle income tax offset for 2021-22 (only)
| Taxable income (TI) | 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%) |
| $126,001 + | Nil | Nil |
Low income tax offset (unchanged – not to be confused with LMITO)
The low income tax offset (LITO) will also continue to apply for the 2021-22 and 2022-23 income years. The LITO was intended to replace the former low income and low and middle income tax offsets from 2022-23, but the new LITO was brought forward in the 2020 Budget to apply from the 2020-21 income year.
Low income tax offset for 2021-22 and 2022-23 (unchanged)
| Taxable income (TI) | Amount of offset |
| $0 – $37,500 | $700 |
| $37,501 – $45,000 | $700 – ([TI – $37,500] x 5%) |
| $45,001 – $66,667 | $325 – ([TI – $45,000] x 1.5%) |
| $66,668 + | Nil |
The maximum amount of the LITO is $700. The LITO will be withdrawn at a
rate of 5 cents per dollar between taxable incomes of $37,500 and
$45,000 and then at a rate of 1.5 cents per dollar between taxable
incomes of $45,000 and $66,667.
Source: Budget Paper No 2 [p 16]; Treasurer’s media release, 29 March 2022
Personal tax rates unchanged for 2022-23; Stage 3 start from 2024-25 unchanged
Resident rates and thresholds for 2022-23
The 2022-23 tax rates and income thresholds for residents (unchanged from 2021-22) are:
| Taxable income ($) | Tax payable ($) |
| 0 – 18,200 | Nil |
| 18,201 – 45,000 | Nil + 19% of excess over 18,200 |
| 45,001 – 120,000 | 5,092 + 32.5% of excess over 45,000 |
| 120,001 – 180,000 | 29,467 + 37% of excess over 120,000 |
| 180,001+ | 51,667 + 45% of excess over 180,000 |
Stage 3: rates and thresholds from 2024-25 onwards
The Stage 3 tax changes commence from 1 July 2024, as previously legislated. From 1 July 2024, the 32.5% marginal tax rate will be cut to 30% for one big tax bracket between $45,000 and $200,000. This will more closely align the middle tax bracket of the personal income tax system with corporate tax rates. 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%. From 1 July 2024, taxpayers earning between $45,000 and $200,000 will face a marginal tax rate of 30%. With these changes, around 94% of Australian taxpayers are projected to face a marginal tax rate of 30% or less.
Resident rates and thresholds – from 2024-25 onwards
The tax rates and income thresholds from the 2024-25 for residents (as already legislated) are:
| Taxable income ($) | Tax payable ($) |
| 0 – 18,200 | Nil |
| 18,201 – 45,000 | Nil + 19% of excess over 18,200 |
| 45,001 – 200,000 | 5,092 + 30% of excess over 45,000 |
| 200,001+ | 51,592 + 45% of excess over 200,000 |
Source: Budget Paper No 2 [p 24-25]
COVID-19 test expenses to be deductible
The Budget papers confirm that the costs of taking a COVID-19 test to attend a place of work are tax deductible for individuals from 1 July 2021. In making these costs tax deductible, the Government will also ensure FBT will not be incurred by businesses where COVID-19 tests are provided to employees for this purpose.
Source: Budget Paper No 2 [p 18]
Business Taxation
Deduction boosts for small business: skills and training and digital adoption
The Government announced two support measures for small businesses (aggregated annual turnover less than $50 million) in the form of a 20% uplift of the amount deductible for expenditure incurred on external training courses and digital technology.
External training courses
An eligible business will be able to deduct an additional 20% of expenditure incurred on external training courses provided to its employees. The training course must 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.
The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 until 30 June 2024.
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.
Digital adoption
An eligible business will be able to deduct an additional 20% of the cost incurred on business expenses and depreciating assets 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 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.
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 2023 will be included in the income year in which the expenditure is incurred.
Source: Budget Paper No 2 [p 26-27]
PAYG instalments: option to base on financial performance
The Budget papers confirm the Treasurer’s earlier announcement that 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).
Date of effect
The commencement date is “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. There are no details as to what tax adjustments will be required (although presumably this will involve a reverse, modified form of tax effect accounting).
The cost to revenue is “unquantifiable”.
Source: Budget Paper No 2 [p 21]
Tax Compliance and Integrity
Digitalising trust income reporting
The Budget confirms the Government’s intention to digitalise trust and beneficiary income reporting and processing (ie this was subject to an earlier announcement).
It will allow all trust tax return filers the option to lodge income tax returns electronically, increasing pre-filling and automating ATO assurance processes. However, there are no other additional details in the Budget papers than in the earlier announcement.
Date of effect
The measure will commence from 1 July 2024 – “subject to advice from software providers about their capacity to deliver”.
The Government also advises that it will consult with affected stakeholders, tax practitioners and digital service providers to finalise the policy scope, design and specifications.
The cost to revenue is “unquantifiable”.
Source: Budget Paper No 2 [p 18]
Taxable payments data reporting: option to link to BAS cycle
The Budget confirms the Treasurer’s earlier announcement that 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. The rules for the taxable payments reporting system are contained in Subdiv 396-B of Sch 1 to the TAA 1953.
The Government will consult with affected stakeholders, tax practitioners and digital service providers to finalise the policy scope, design and specifications of the measure.
Date of effect
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.
Source: Budget Paper No 2 [p 27]
STP data to be shared with States and Territories
The Budget papers confirm the Government’s intention to develop the IT infrastructure required to allow the ATO to share single touch payroll (STP) data with State and Territory Revenue Offices on an ongoing basis.
Funding for this measure has already been provided for by the Government. The funding will be deployed following further consideration of which States and Territories are able and willing to make investments in their own systems and administrative processes to pre-fill payroll tax returns with STP data.
Source: Budget Paper No 2 [p 172]
Superannuation
Super Guarantee no change to legislated rate rise to 10.5% for 2022-23
The Budget did not announce any change to the timing of the next Super Guarantee (SG) rate increase. The SG rate is currently legislated to increase from 10% to 10.5% from 1 July 2022, and by 0.5% per year from 1 July 2023 until it reaches 12% from 1 July 2025.
With the SG rate set to increase to 10.5% for 2022-23 (up from 10%), employers need to be mindful that they cannot use an employee’s salary sacrificed contributions to reduce the employer’s extra 0.5% of super guarantee. The ordinary time earnings (OTE) base for super guarantee purposes now specifically includes any sacrificed OTE amounts. This means that contributions made on behalf of an employee under a salary sacrifice arrangement (defined in s 15A of the Superannuation Guarantee (Administration) Act 1992 (SGAA)) are not treated as employer contributions which reduce an employer’s charge percentage.
Other Measures
Temporary reduction in fuel excise
The Government will reduce the excise and excise-equivalent customs duty rate that applies to petrol and diesel for 6 months by 50%. 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% for 6 months.
The Treasurer said this measure will see excise on petrol and diesel cut from 44.2 cents per litre to 22.1 cents. Mr Frydenberg said a family with 2 cars who fill up once a week could save around $30 a week or around $700 over the next 6 months. The Treasurer made a point of emphasising that the ACCC will monitor the price behaviour of retailers to ensure that the lower excise rate is fully passed on.
Date of effect
The measure will commence from 12.01am on 30 March 2022 and will remain in place for 6 months, ending at 11.59pm on 28 September 2022.
The measure is estimated to decrease receipts by $5.6bn, and decrease payments by $2.7bn over the forward estimates.
Source: Budget Paper No 2 [p 15]
Summary provided by IPA Group.