Key initiatives include:
- A 6 month, 50% reduction in fuel excise with effect from midnight Budget night
- A $420 cost of living tax offset for low and middle income earners from 1 July 2022
- A one-off $250 economic support payment to some social security payment recipients
But, it is also a Budget that drives digitisation. Not just to support innovation but to streamline compliance, create transparency and more
readily identify anomalies. Single touch payroll was the first step, the PAYG instalment system, trust compliance, and payments to
contractors are next.
For you & your family
Temporary reduction in fuel excise
From 12.01am 30 March 2022
As widely predicted, the Government will temporarily reduce the excise and excise-equivalent customs duty rate that applies to petrol and diesel by 50% for 6 months from Budget night. That is, the current 44.2 cents per litre excise rate will reduce to 22.1 cents per litre from Budget night. However, the measure is subject to the passage of the enabling legislation so don’t expect to see a change right away.
The reduction extends to all other fuel and petroleum based products except aviation fuels.
At the conclusion of the 6 months on 28 September 2022, the excise and excise-equivalent customs duty rates revert to previous rates including any indexation that would have applied during the 6 month period.
The Australian Competition and Consumer Commission (ACCC) will monitor the price behaviour of retailers to ensure that the lower excise rate is passed on to consumers.
The measure comes at a cost of $5.6bn.
Low and middle income cost of living tax offset increase
From 1 July 2021 to 30 June 2022
The low and middle income tax offset (LMITO) currently provides a reduction in tax of up to $1,080 for individuals with a taxable income of up to $126,000.
The tax offset is triggered when a taxpayer lodges their 2021-22 tax return.
For the 2021-22, the LMITO will be increased by $420 which means that the proposed new rates for individuals are as follows:
$250 cost of living payment
From April 2022
A one-off $250 ‘cost of living payment’ will be provided to Australian resident recipients of the following payments and 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.
The payments are exempt from taxation and will not count as income support for the purposes of any income support payment. An individual can only receive one payment.
Medicare levy low-income threshold increased
From 1 July 2021
The Medicare levy low income thresholds for seniors and pensioners, families and singles will increase from 1 July 2021.
For each dependent child or student, the family income thresholds increase by a further $3,619 instead of the previous amount of $3,597.
Home Guarantee Scheme extended
The Home Guarantee Scheme guarantees part of an eligible buyer’s home loan, enabling people to buy a home with a smaller deposit and without the need for lenders mortgage insurance. The Government has extended two existing guarantees and introduced a new regional scheme.
Just prior to the Budget, the Government announced:
- First Home Guarantee – from 1 July 2022, an increase from 10,000 to 35,000 guarantees to support eligible first homebuyers purchase a new or existing home.
- Single parent Family Home Guarantee - 5,000 guarantees each year from 1 July 2022 to 30 June 2025. The family home guarantee supports 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%.
Introduction of a Regional Home Guarantee. This guarantee will support eligible citizens and permanent residents who have not owed a home
for 5 years (including non-first home buyers) to purchase or construct a new home in regional areas with a minimum 5% deposit areas (subject
to the passage of enabling legislation).
Digitalising trust income reporting
From 1 July 2024
Trust and beneficiary income reporting and processing will be digitalised with all trusts being provided with the option of lodging income tax returns electronically.
While this measure will reduce compliance costs, it will also increase transparency and provide the ATO with a greater insight into where
anomalies are occurring.
Reduction in minimum superannuation drawdown rates extended again
The temporary 50% reduction in superannuation minimum drawdown requirements for account-based pensions and similar products has been extended to 30 June 2023.
Minimum superannuation drawdown rates 2019-2023
For business & employers
$120 deduction for every $100 spent on technology
From 7:30pm AEDT, 29 March 2022 until 30 June 2023
The Government intends to provide a 120% tax deduction for expenditure incurred by small businesses 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.
The technology boost will be available to small business with an aggregated annual turnover of less than $50 million.
An annual expenditure cap of $100,000 will apply to the boost.
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. That is, the additional deduction available under this measure is expected to be claimed in the 2023 tax return.
Lowering tax instalments for small business
From 2022-23 income year
Normally, GST and PAYG instalment amounts are adjusted using a GDP adjustment or uplift. For the 2022-23 income year, the Government is setting this uplift factor at 2% instead of the 10% that would have applied.
The 2% uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods for instalments for the 2022-23 income year and are due after the amending legislation comes into effect:
- Up to $10 million annual aggregated turnover for GST instalments and
- $50 million annual aggregated turnover for PAYG instalments
Expanding access to employee share schemes
In broad terms, an Employee Share Scheme (ESS) is a scheme under which shares in a company, or rights to acquire shares in a company, are issued to an employee or their associate in respect of their employment.
At a commercial level, ESS arrangements are often used to better align the interests of employers and employees, as employees are provided with an opportunity to share in the profitability and growth of the business. The arrangements can also be useful in situations where a business is in start-up mode and does not have significant cash flow or reserves to attract top quality employees with high salaries.
The Government has flagged changes to the ESS rules to expand access to schemes so that employees at all levels can directly share in the growth of the business.
Where employers make larger offers in connection with employee share schemes in unlisted companies, participants can invest up to:
- $30,000 per participant per year, accruable for unexercised options for up to 5 years, plus 70 per cent 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.
The Government will also remove regulatory requirements for offers to independent contractors, where they do not have to pay for interests.
While these changes might expand access to employee share schemes, it is important to consider the tax implications that can arise for employee when they receive shares or options at a discount to their market value. There are a number of different ways that employees can be taxed in this area and the treatment will often depend on how the ESS arrangement has been structured by the company.
Concessional tax treatment for carbon abatement and biodiversity stewardship
From 1 July 2022
The sale of Australian Carbon Credit Units (ACCUs) and biodiversity certificates generated from on-farm activities to be treated as primary production income for the purposes of the Farm Management Deposits (FMD) scheme and tax averaging from 1 July 2022.
In addition, the taxing point of ACCUs for eligible primary producers will change to the year when they are sold, and similar treatment will be extended to biodiversity certificates issued under the Agriculture Biodiversity Stewardship Market scheme, from 1 July 2022. Currently, ACCU holders are taxed based on changes in the value of their ACCUs each year, which can result in tax liabilities prior to sale. Eligible primary producers are those who are currently eligible for the FMD scheme and tax averaging.
Temporary tariff concession on COVID-19 products permanent
From 1 July 2022
The temporary tariff concession in place for certain medical and hygiene products to treat, diagnose or prevent the spread of COVID 19 will be made permanent and the range of products to which the concession applies expanded.
Linking PAYG instalments to financial performance
From 1 January 2024
As announced prior to the Budget, companies will be able to choose to have their pay as you go (PAYG) instalments calculated using current financial performance, extracted from business accounting software, with some tax adjustments.
The move is intended to ensure that instalment liabilities are aligned to the businesses cashflow. In addition, the digitisation of PAYG
instalments will improve transparency and provide more accurate data on performance.
Digitising taxable payments reporting system
From 1 January 2024
As announced prior to the Budget, businesses will be able to report Taxable Payments Reporting System data via their accounting software on the same lodgment cycle as their activity statements.
The measure is expected to reduce the costs of complying with the system and increase transparency.
Sharing of Single Touch Payroll data
As announced prior to the Budget, the Government will commit $6.6 million for the development of IT infrastructure that will enable the ATO to share Single Touch Payroll (STP) data with State and Territory Revenue Offices on an ongoing basis.
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 in order to reduce compliance costs for businesses.
ABN integrity measure delayed
From 1 July 2022
Back in the 2019-20 Budget, the Government announced that Australian Business Number (ABN) holders would be stripped of their ABNs if they failed to lodge their income tax return. In addition, ABN holders would be required to annually confirm the accuracy of their details on the Australian Business Register.
This measure has been deferred for 12 months, which means that the tax return lodgement obligation is due to commence from 1 July 2022 with the annual confirmation of ABN details to commence from 1 July 2023.
Tax status of COVID-19 grants
The measure that enables payments from certain state and territory COVID-19 business support programs to be treated as non-assessable non-exempt (NANE) income has already been extended until 30 June 2022.
The Government has announced that the following state and territory grant programs have been made eligible for this treatment since the 2021-22 MYEFO, although it is not clear whether the relevant legislative instruments have been issued as yet
- New South Wales Accommodation Support Grant
- New South Wales Commercial Landlord Hardship Grant
- New South Wales Performing Arts Relaunch Package
- New South Wales Festival Relaunch Package
- New South Wales 2022 Small Business Support Program
- Queensland 2021 COVID 19 Business Support Grant
- South Australia COVID 19 Tourism and Hospitality Support Grant
- South Australia COVID 19 Business Hardship Grant.
This builds on the list of existing grants paid by New South Wales and Victoria that can already qualify for NANE income treatment.
Tax deductibility of COVID-19 test expenses
From 1 July 2021
As previously announced, work‑related COVID‑19 test expenses incurred by individuals will be made tax deductible.
Changes will also be made to ensure that FBT will not be payable by employers if they provide fringe benefits relating to COVID‑19 testing to their employees for work‑related purposes.
The changes for deductions will be effective from 1 July 2021, with the FBT changes to apply from 1 April 2021.
At this stage it is not entirely clear whether the deduction rules will cover expenses incurred where the employee is able to work from home. The initial media release indicates that the measure will cover situations where the individual has the option of working remotely, while the Budget only refers to costs of taking a COVID-19 test to attend a place of work but doesn’t specifically refer to employees who can work from home.
Education, skills & training
$120 deduction for every $100 spent on skills and training
From 7:30pm AEDT, 29 March 2022 until 30 June 2024
The Government intends to provide a 120% tax deduction for expenditure incurred by small businesses on external training courses provided to employees. The deduction will be available to small business with an aggregated annual turnover of less than $50 million. 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.
We assume there will need to be a nexus between the employee’s employment and the training program undertaken for the boost, although we are waiting on further details of this initiative to be released.
The boost for eligible expenditure incurred by 30 June 2022 will be claimed in the tax return for the following income year (that is, the
2023 tax return). 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.
Apprentice wage subsidy support extended
Just prior to the Federal Budget, the Government announced the extension of the:
- Boosting Apprenticeship Commencements wage subsidy, and
- Completing Apprenticeship Commencement wage subsidy.
Any employer (or Group Training Organisation) who takes on an apprentice or trainee up until 30 June 2022 can gain access to:
- 50% of the eligible Australian Apprentice’s wages in the first year, capped at a maximum payment value of $7,000 per quarter per Australian Apprentice,
- 10% of the eligible Australian Apprentice’s wages in the second year, capped at a maximum payment value of $1,500 per quarter per Australian Apprentice, and
- 5% of the eligible Australian Apprentice’s wages in the third year, capped at a maximum payment value of $750 per quarter per Australian Apprentice.