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Budget 2022-23 – The Government Splashes the Cash: How Will It Impact You?

On the back of another lockdown-disrupted year, and on the eve of an election, the government yesterday released the budget for FY 2022-23. There hasn’t been much room for business in the last few years due to COVID, but it looks like that is about to change as the government places business investment at the centre of its plans for economic recovery.

Two big announcements that will be relevant for most businesses are the Skills and Training Boost and the Technology Investment Boost. Both allow businesses to deduct an additional 20% of expenditure incurred on eligible training and digital technology, which is as broad as cloud computing and e-commerce. For example, this means an expense of $100 would lead to a deduction allowed of $120.

From an individual perspective, the Low & Middle Class Tax Offset has been increased to $1,500 and will apply to those earning under $126,000 at the time they lodge their 2022 tax return – an incentive to get the returns lodged early. There is no change to individual tax rates for FY2023 so inflation and cost of living pressure will continue to remain an issue for many in the short term. A six-month reduction of the Fuel Excise was announced which should help at the pump as well as a one-off $250 cost of living payment for pensioners, jobseekers and other concession cardholders.

Proposed changes to the employee shares scheme will be of interest to many in the tech sector, but yesterday’s announcement was a restatement of the intention to improve the red tape next financial year. It will seek to increase the limit of shares companies can provide to staff without disclosure obligations. This announcement does not however address the taxing point issue where shares can become taxable to employees before a liquidity event – we hope for further change in this area in the coming years.

We are pleased by the update to Parental Leave which will allow the government support payments to be split between eligible parents. This is not due to be introduced until 1 March 2023 though and we expect further information leading up to that date.

Out of the main announcements are two measures that the government will not be continuing after 30 June 2023. These are the loss carry back tax offset, where businesses could use current year losses to offset tax on profits from prior years from 2020-2022. The other is the full expensing of capital assets which will reduce back to limits that are due to be announced by the government of the day, prior to June 2023.

As always with budget announcements, we will wait and see how they are adapted from announcements into legislation through parliament. This is more relevant in the current year with the election expected next month and the opposition’s budget response to be announced this week.

We will continue to work with our clients to maximise opportunities presented by these announcements. If you have any questions about how you or your business may be impacted, please get in touch with the team to discuss further.

Summary of budget highlights

Businesses

Small Business — Skills and training boost —additional 20 per cent deduction

Small businesses will be able to deduct an additional 20 per cent of expenditure incurred on eligible external training courses provided to their employees.

Small Business — Technology investment boost

Small businesses will be able to deduct an additional 20 per cent of expenditure incurred on digital technologies like cloud computing, e-invoicing, cybersecurity and web design.

Export Market Development Grant

The Government will provide $267.1 million over 4 years from 2022-23 to modernise and improve Australia’s trade system and support Australian exporters. Funding includes $80.0 million to provide additional support for small and medium export businesses through the Export Market Development Grants program.

COVID-19 Response Package — making COVID-19 business grants non-assessable non-exempt (NANE) income

Grants payments from certain state and territory COVID-19 business support programs to be made non-assessable.


Companies

Employee Share Schemes — Expanding access and further reducing red tape

This announcement confirms the Government’s intention to expand access to participants of ESS in unlisted companies by allowing participants to invest up to:

  • $30,000 per participant per year, accruable for unexercised options for up to five years; or
  • any amount, if it would allow them to immediately take advantage of a planned sale or listing of the company.

without the unlisted company having to comply with the standard regulatory requirements

Patent Box regime — Update of policy specifications for Australian medical and biotechnology innovations

The Government has announced that it will expand the Patent Box regime previously announced in the 2021 Budget to:

  • update policy for Australian medical and biotechnology innovations to allow for patents granted or issued after 11 May 2021, and various patents issued by the US and Europe, to be eligible for the regime;
  • support practical, technology-focused innovations in the Australian agricultural sector;
  • support commercialised patented technologies which have the potential to lower emissions.

Patent Box regime — Expanded to the agricultural sector and low emissions technology

For the agricultural sector and low emissions technology innovations, eligible corporate income will be subject to an effective tax rate of 17 per cent in relation to rights and patents granted after 29 March 2022 and for income years starting on or after 1 July 2023

Tax deductibility of COVID-19 test expenses

FBT will not be incurred by businesses where COVID-19 tests are provided to employees for testing required to attend a place of work


Superannuation

Supporting Retirees — Extension of the temporary reduction in superannuation minimum drawdown rates

Proposed to extend the reduction to the minimum drawdown level for retirees in pension mode to the 2022–23 income year


Other taxes

Temporary reduction in fuel excise

The government announced a 50% reduction in the fuel excise for the period from 30 March 2022 until 28 September 2022


Individuals

Cost of living tax offset — LMITO increase

The Government has announced that it will increase the low and middle income tax offset (LMITO) for the 2021–22 income year by $420 to $1,500 for eligible taxpayers earning under $126,000.

$250 cost of living payment

Pensioners, carers, veterans, job seekers and other eligible concession cardholders, plus some self-funded retirees, will receive a one-off payment of $250 in April 2022

Parental leave

The Government has announced changes to enhance the Paid Parental Leave Scheme by rolling Dad and Partner Pay into a single Parental Leave pay scheme of up to 20 weeks, which is fully flexible and able to be shared between eligible working parents as they see fit.


Download the full Federal Budget 2022-23 here.

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