On Tuesday, 25 October, the Labor Government delivered the second Federal Budget for the year, following the May election and change in government. The main themes of this budget were stated to:
Only a small number of tax measures were delivered in this budget, mostly making good on the pre-election commitments to strengthen the laws targeted at multi-national corporations and strengthen tax integrity.
The budget now forecasts a cash deficit of $36.9 billion (1.5% of GDP) for 2022/23, and a redistribution of expenditure signals the new Government's change in focus.
Individuals
Businesses
Superannuation
Other measures
Electric car discount
The Government has announced that, from 1 July 2022, it will exempt battery, hydrogen fuel cell and plug-in hybrid electric cars from fringe benefits tax and import tariffs if they have a retail price below the luxury car tax threshold for fuel-efficient cars ($84,916 for 2022/23) and providing the car has not been held or used before 1 July 2022. Employers will still need to include these exempt benefits in an employee’s reportable fringe benefits amount.
Taxation of COVID grants
The following COVID related grants have been added to the list of grants eligible to be treated as non-assessable, non-exempt income (meaning business are not required to pay tax on them):
Thin capitalisation
The only announced significant rewrite of taxation legislation under this budget is to the thin capitalisation provisions. These rules essentially limit tax deductions in relation to debt for certain cross-border investments where certain limits are exceeded.
Under current legislation these limits are the greater of the amounts allowed under:
It is now being proposed to:
Digital currencies
The Government has confirmed its intention to introduce legislation to ensure digital currencies are not taxed under the rules for foreign currencies unless a digital currency is issued by or under the authority of a government agency.
Additional funding provided for ATO compliance activities
While the Government has continued with its pre-election promise to crack down on multi-national tax avoidance and tax compliance by providing significant additional funding to a number of ATO programs, many of these programs apply to small businesses.
Audit cycle
The Government has announced it will not be proceeding with the 2018-19 budget announcement to allow self-managed superannuation funds with a good compliance history to have a 3-year audit cycle. Instead, the requirement for annual audits will remain.
Downsizer contributions
The Government has confirmed it will reduce the minimum eligibility age to make a downsizer contribution from 60 to 55 years of age.
Under this concession, an individual can make a one-off post-tax contribution to their superannuation of $300,000 per person ($600,000 per couple) from the proceeds of selling their home (noting there are certain conditions that need to be met).
Residency rule changes
The previously announced self-managed super fund residency rule changes have been delayed from 1 July 2022 to a yet to be determined date, after the associated legislation received Royal Assent.
These measures are intended to extend the safe harbour for the central management and control test from a 2-year to a 5-year period and to remove the active member test from both self-managed superannuation funds and APRA funds.
Paid parental leave
The Government has announced it will expand the paid parental leave scheme from 1 July 2023 by making it more flexible. It will do this by making either parent able to claim the payment and both birth parents and non-birth parents eligible to receive the payment if they meet the criteria. Parents will also be able to claim weeks of the payment concurrently so they can take leave at the same time.
From 1 July 2024, the Government will start expanding the scheme by two additional weeks a year until it reaches a full 26 weeks from 1 July 2026.
Both parents will be able to share the leave entitlement, with a proportion maintained on a “use it or lose it” basis, to encourage and facilitate both parents to access the scheme and to share the caring responsibilities more equally. Sole parents will be able to access the full 26 weeks.
Child care subsidy
The Government has announced it will increase the child care subsidy rate from 85% to 90% for a family's first child in care and increase the rate for all families with less than $530,000 in household income.
The rate will lift from 85% to 90% for families earning with household earnings less than $80,000, and the subsidy rate will taper down one percentage point for each additional $5,000 in household income, until the $530,000 maximum limit is reached.
Families will continue to receive the existing higher subsidy rates for multiple children aged 5 or under in child care, with higher rates to cease 26 weeks after the older child’s last session of care, or when the child turns 6 years old.
Regional first home buyer scheme
The Government has announced it will establish a Regional First Home Buyers Scheme to support eligible citizens and permanent residents who have lived in a regional location for more than 12 months to purchase their first home in that location with a minimum 5% deposit. This will be limited to 10,000 places per year to 30 June 2026.
Penalty units
From 1 January, the Government will increase the Commonwealth penalty unit from $222 to $275.
For more information visit budget.gov.au. If you have specific questions about how this budget may impact you or your business, please speak with your local Boyce accountant.
Please note that the budget measures will only take effect once they become law.
