Last night the Federal Government handed down the Budget for 2022/23. With an election looming, the big spending budget is designed to alleviate increased cost of living pressures.
The budget contains a number personal and business tax-related measures that may apply to you.
Low-income offset and one-off payment
The low- and-middle-income tax offset (LMITO) that applies to taxpayers with income less than $126,000, is to be increased by $420 for 2021/22 income tax year. This increases the maximum LMITO benefit to $1,500 for individuals and $3,000 for dual income households. The LMITO is payable after lodgement of your 2021/22 personal income tax returns.
Individuals who are currently in receipt of an Australian government allowance or pension will also receive a one-off payment of $250 in April 2022 to ease the cost-of-living pressures. Certain concession card holders will also get the payment.
The cost-of-living payment will be exempt from tax and will not count towards an individual’s income for social security income test purposes.
The payment will cover individuals in receipt of the age pension, disability support pension, parenting payment, carer payment, carer allowance, JobSeeker payment, youth allowance, Austudy and Abstudy living allowance, double orphan pension, special benefit, farm household allowance and eligible Veterans’ Affairs payments. The payment will also go to individuals who hold a Pensioner Concession Card, a Commonwealth Seniors Health card, or a Veteran Gold card.
COVID-19 test expenses to be deductible
The costs of taking a COVID-19 test to attend a place of work will be treated as tax deductible for individuals from 1 July 2021. This will ensure fringe benefits tax (FBT) will not be incurred by businesses where COVID-19 tests are provided to employees for this purpose. This change will be in place permanently.
Increased deduction for small businesses – Staff training and digital adoption
Small and medium businesses will be able to deduct an additional 20% of expenditure incurred on external training courses provided to their employees and in respect of eligible expenditure supporting digital adoption.
The additional deduction will apply to businesses with an aggregated turnover of less than $50 million.
- The external training course must be delivered by an Australian entity and provided to employees in Australia or online. In-house or on-the-job training and expenditure for persons other than employees will be excluded.
- Eligible expenditure supporting digital adoption will include the cost of depreciating assets and business expenses supporting digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud-based services. An annual cap of $100,000 will apply to expenditure eligible for the additional deduction.
These measures will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 (Budget night) until 30 June 2023. Where eligible expenditure is incurred before 1 July 2022, the additional deduction will be claimed in the tax return for the following income year.
Temporary reduction in Fuel excise tax
The fuel excise tax will be temporarily reduced by 50 per cent for a period of six months, except for aviation fuels. The reduction will take effect from 12:01 am on 30 March 2022.
For businesses who usually claim fuel tax credits for heavy vehicles on public roads, this reduction in excise brings the full credit rate below the road user charge of 26.4 cents per litre. This will effectively reduce the fuel tax credits down to zero for 6 months.
Expansion of “Patent Box” tax concession
The “Patent Box” concession was announced in last year’s budget in relation to assessable income derived from exploiting a medical or biotechnology patent. Treasury Laws Amendment (Tax Concession for Australian Medical Innovations) Bill 2022 introducing new Division 357 into the ITAA 97 was introduced into Parliament on 10 February 2022.
The Government is proposing to extend the rules to include:
- the commercialisation of patents and eligible Plant Breeder’s Rights (PBRs), issued from 29 March 2022, in respect to agricultural and veterinary chemical products. Eligible patents are linked to agricultural and veterinary (agvet) chemical products listed on the Australian Pesticides and Veterinary Medicines Authority (APVMA), or PubCRIS (Public Chemicals Registration Information System) register.
- the commercialisation of patents issued from 29 March 2022, that have the potential to lower emissions. Eligible patents are linked to patented technology that is considered to reduce emissions in the 140 technology areas listed in the Government’s 2020 Technology and Investment Roadmap Discussion Paper or included as priority technologies in the Government’s 2021 and future annual Low Emissions Technology Statements are potentially eligible for the concession.
Under the proposed extension of the rules, income will be taxed at an effective rate of 17% to the extent that the R&D took place in Australia, for income years starting from 1 July 2023.
Finalisation of the detailed design of the “Patent Box” expansion will be subject to industry consultation.
Businesses will soon be able to choose to have their pay-as-you-go (PAYG) instalments calculated based on current financial year’s performance, extracted from business accounting software, with some tax adjustments. 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.
The lower uplift rate is aimed to provide cash flow support to small businesses including sole traders and other individuals with investment income.
COVID-19 business grants designated non-assessable non-exempt income
The measure that enables payments from certain state and territory COVID-19 business support programs to be made non-assessable non-exempt (NANE) for income tax purposes until 30 June 2022 has been extended. Eligibility is limited to COVID-19 grant programs directed at supporting businesses that are the subject of a public health directive applying to a geographical area in which the businesses operate and whose operations have been significantly disrupted because of the public health directive.
The Government has announced that it will expand access to the ESS to allow more employees to participate in the scheme.
The participants of ESS in unlisted companies will be allowed to invest up to:
- $30,000 per year, accruable for unexercised options for us to five years, please 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 interest at a profit
No effective date has been specified for this announcement.
Superannuation pension drawdowns
The 50 per cent reduction of the superannuation minimum drawdown requirements for account-based pensions and similar products for a future year has been extended to 30 June 2023. The 50 per cent reduction in the minimum pension drawdowns provides retirees with greater flexibility and certainty over their savings and super retirement funds.
Previously announced changes to superannuation
- Removal of the $450-a-month threshold before an employee’s salary or wages count towards the superannuation guarantee.
- Increasing the limit on the maximum amount of voluntary contributions under the First Home Super Saver Scheme from $30,000 to $50,000.
- Enabling individuals aged 60 and over to make downsizer contributions to their superannuation plan from the proceeds of selling their home, allowing up to $300,000 contribution by each spouse.
- Repealing the work test to individuals aged between 67 and 75 who claim a deduction for personal superannuation contributions and allow such individuals to make or receive non-concessional superannuation contributions under the bring forward rule.
- Enabling superannuation trustees to choose their preferred method of calculating exempt current pension income when they have member interests in both accumulation and retirement phases for part, but not all, of the income year.
If you have any questions or require assistance regarding the above, please do not hesitate to contact Calibre Business Advisory on (02) 9261 2177