SPECIAL ISSUE – 2022 FEDERAL BUDGET REPORT

Summary from the Budget related to Small Businesses

Personal Taxation

Low income offset – LMITO increased by $420 for 2021-22 (but not extended to 2022-23)

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).

The Government said the LMITO for 2021-22 will be paid from 1 July 2022 to more than 10 million individuals when they submit their tax returns for the 2021-22 income year. Other than those that do not require the full offset to reduce their tax liability to zero, all LMITO recipients will benefit from the full $420 increase. That is, the proposed one-off $420 cost of living tax offset will increase the maximum LMITO benefit in 2021-22 to $1,500 for individuals earning between $48,001 and $90,000 (but phasing out up to $126,000). Those earning up to $48,000 will also receive the $420 one-off tax offset on top of their existing $255 LMITO benefit (phasing up for incomes between $37,001 and $48,000)

All other features of the current LMITO remain unchanged (including that it will only apply until the end of the 2021-22 income year). Consistent with the current LMITO, taxpayers with incomes of $126,000 or more will not receive the additional $420.

The measure is estimated to cost the Budget $4.1bn.

 

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.

 

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.

 

Superannuation

The superannuation measures include:

▪ Super pension drawdowns – 50% reduction extended to 2022-23 – the temporary 50% reduction in minimum annual payment amounts for superannuation pensions and annuities will be extended by a further year to the 2022-23 income year.

▪ Super Guarantee rate – the Budget did not contain any change to the legislated Super Guarantee rate rise from 10% to 10.5% for 2022-23.

Other measures

▪ Fuel excise temporary reduction – the fuel excise will be reduced by 50% for 6 months, starting from midnight on Budget night.

▪ $250 cost of living payment – the Government will make a $250 one-off cost of living payment in April 2022 to eligible pensioners, welfare recipients, veterans and concession card holders.

▪ Apprentice wage subsidy extension – the Budget confirmed the extension of the Boosting Apprenticeship Commencement (BAC) and Completing Apprenticeship Commencements (CAC) wage subsidies by 3 months to 30 June 2022.

 

Family

▪ Paid Parental Leave scheme integrating existing schemes to give eligible families access to up to 20 weeks leave to use in ways that suit their specific circumstances.

Disaster support

▪ Disaster relief for floods in New South Wales and Queensland expected to exceed A$6 billion.

Medicare levy low-income thresholds for 2021-22

For the 2021-22 income year, the Medicare levy low-income threshold for singles will be increased to $23,365 (up from $23,226 for 2020-21). For couples with no children, the family income threshold will be increased to $39,402 (up from $39,167 for 2020-21). The additional amount of threshold for each dependent child or student will be increased to $3,619 (up from $3,597).

For single seniors and pensioners eligible for the SAPTO, the Medicare levy low-income threshold will be increased to $36,925 (up from $36,705 for 2020-21). The family threshold for seniors and pensioners will be increased to $51,401 (up from $51,094), plus $3,619 for each dependent child or student.

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).

ATO’s Tax Avoidance Taskforce: extended operation, more funding

The Government will provide $325.0 million in 2023-24 and $327.6 million in 2024-25 to the ATO to extend the operation of the Tax Avoidance Taskforce by 2 years to 30 June 2025.

The Taskforce was established in 2016 to undertake compliance activities targeting multinationals, large public and private groups, trusts and high wealth individuals. It also scrutinises specialist tax advisors and intermediaries that promote tax avoidance schemes and strategies.

This measure is estimated to increase receipts by $2.1 billion, and increase payments by $652.6 million over the forward estimates period.

 

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.