Australia’s Treasurer, Mr Josh Frydenberg handed down the 2022-23 Federal Budget on Tuesday, 29 March 2022.
The Treasurer said a strong economic recovery is well underway, notwithstanding the COVID-19 pandemic and new shocks, such as the recent floods and the Russian invasion of Ukraine. Mr Frydenberg said economic growth forecasts have been revised upwards, driven by stronger-than-expected momentum in the labour market and consumer spending. The unemployment rate has also fallen to 4%, and is expected to reach 3.75% in the September 2022 quarter.
Since the Mid-Year Economic and Fiscal Outlook (MYEFO) in December 2021, the underlying cash balance has improved by $103.6bn over the 5 years to 2025-26. Nevertheless, the Government is expected to record a deficit of $79.8bn for 2021-22 and $78.0bn for 2022-23 (down from $134.2bn in 2020-21). Net debt of $714.9bn for 2022-23 is forecast to rise to $864.7bn in 2025-26.
In an election Budget, the Treasurer announced a range of cost of living measures, including a one-off $420 cost of living tax offset for low and middle income earners, and a $250 payment for pensioners and welfare recipients. The fuel excise will also be reduced by 50% for 6 months, starting from midnight on Budget night.
For small businesses, a Skills and Training Boost will provide a new 20% bonus deduction for eligible external training courses for upskilling employees from Budget night. In addition, businesses will receive a similar 20% bonus deduction for expenditure on digital technologies (eg cloud computing, eInvoicing, cyber security and web design) for investments of up to $100,000 per year.
The full Budget papers are available at www.budget.gov.au
Key highlights from the 2022-23 Federal Budget
Temporary cost of living measures
- Excise and excise equivalent customs duty rate on petrol, diesel, and all other fuel and petroleum based products, except aviation fuels, will be reduced by 50% for 6 months.
- Increasing low and middle income tax offset by A$420 in 2021-22, taking maximum tax reduction to up to A$1,500 for more than 10 million eligible people.
- One-off payment of A$250 to 6 million eligible pensioners, welfare recipients, veterans and concession card holders.
- A$8.6 million to expand Home Guarantee Scheme to 50,000 places per year. Up to 35,000 places per year will be available for first home buyers.
- Family Home Guarantee will be increased to 5,000 places per year. and
- A new Regional Home Guarantee will offer up to 10,000 places per year.
- Small businesses (with aggregated annual turnover less than A$50 million) will be able to deduct a bonus 20% of the cost of business expenses and depreciating assets that support digital uptake, up to $100,000 of expenditure per year.
- Small businesses will also have access to a bonus 20% deduction for the cost of external training courses delivered to their employees.
- A$9.9 billion over 10 years to deliver a Resilience, Effects, Defence, Space, Intelligence, Cyber and Enablers (REDSPICE) package, which Government says will enhance the offensive and defensive cyber and intelligence capabilities of the Australian Signals Directorate (ASD).
- Additional $136.7 million in 2022-23 for Australian Border Force’s maritime surveillance and response capability.
- A$116.8 million to increase the Australian Criminal Intelligence Commission’s capacity to identify and disrupt serious criminal activity.
- A$547 million for targeted mental health and suicide prevention initiatives.
- A$331 million to promote the health of women and girls, including to support the National Women’s Health Strategy.
- A$28 million to commence work to establish Genomics Australia.
- 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.
- Additional A$17.9 billion committed to road, rail and community infrastructure projects.
- A$2.0 billion Regional Accelerator Program will diversify growing regional economies and create jobs in new and existing industries.
- A$$7.1 billion investment in infrastructure projects in four key regions seen as export frontiers, including in Darwin’s export capacity, water infrastructure and supply chain projects in north and central Queensland, and increasing low-emissions production in Western Australia’s Pilbara region.
- Disaster relief for floods in New South Wales and Queensland expected to exceed A$6 billion.
Revenue and expenditure
- Total 2022/23 revenues are estimated at A$547.6 billion, or 23.8% of GDP.
- Expenses are seen at $625.6 billion or 27.2% of GDP.
- Net debt is expected to rise to A$714.9 billion, or 31.1% of GDP, in 2022-23.
- Net debt is projected at A$864.7 billion, or 33.1% of GDP, in 2025-26.
- Gross debt is projected to rise to A$977 billion, or 42.5% of GDP, in 2022-23.
- Gross debt is projected at A$1.169 trillion, or 44.7% of GDP, in 2025-26.
- Budget forecasts assume prices of key exports drop from current high levels to levels more consistent with long-term fundamentals by the end of September.
- Budget papers show the iron ore price is assumed to decline from $134 to $55 per tonne free on board (FOB); metallurgical and thermal coal prices are assumed to decline from $512 to $130 per tonne FOB and $320 to $60 per tonne FOB, respectively.
- “If these high prices stay in place for the next six months as they are, that will be worth an additional A$30 billion to the budget bottom line,” Treasurer Josh Frydenberg has told reporters.
Tax-related measures announced
LMITO increased by $420 for 2021-22
- A one-off $420 cost of living tax offset for the 2021-22 income year will see the low and middle income tax offset (LMITO) increased up to a maximum of $1,500 for 2021-22 only (up from $1,080). Importantly, the Government did not announce an extension of the LMITO beyond 2021-22 when it is legislated to cease.
Personal tax rates
- No changes were made to the personal tax rates for 2022-23. The Stage 3 personal income tax cuts remain unchanged and will commence in 2024-25 as already legislated.
Small business 20% tax deduction boost
- Skills training 20% boosted deduction: businesses with turnover less than $50m will receive a 20% uplift on deductions for eligible expenditure on external training courses. The 20% boost will apply to eligible expenditure incurred from 7:30pm on 29 March 2022 until 30 June 2024.
- Digital adoption 20% boosted deduction: businesses with turnover less than $50m will receive a 20% uplift on deductions for eligible expenditure on digital technology. The 20% boost will apply to eligible expenditure incurred from from 7:30pm on 29 March 2022 until 30 June 2023.
Patent box income extended
- The concessional tax treatment for eligible corporate income associated with new patents in the medical and biotechnology sectors will be extended to corporate taxpayers who commercialise their:
- eligible patents linked to agricultural and veterinary chemical products; and
- patented technologies which have the potential to lower emissions.
Employee share schemes
- For company law purposes, the investment thresholds for unlisted companies will be changed so that ESS participants can invest up to $30,000 per participant per year (accruable for unexercised options for up to 5 years), plus 70% of dividends and cash bonuses. Participants will also be able to invest any amount if it would allow them to immediately take advantage of a planned sale or listing of the company.
Carbon credit and biodiversity certificate income
- The proceeds from the sale of Australian Carbon Credit Units (ACCUs) and biodiversity certificates generated from on-farm activities will be treated as primary production income for the purposes of the Farm Management Deposits (FMD) scheme and the tax averaging provisions from 1 July 2022.
Digitalising trust income
- All trust tax return filers will be given the option to lodge income tax returns electronically, increasing pre-filling and automating ATO assurance processes. The measure is proposed to apply from 1 July 2024 (subject to advice from software providers).
PAYG instalments option
- From 1 January 2024, 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).
Taxable payments data reporting
- From 1 January 2024, 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.
- Super pension drawdowns: 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.
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.