After the October Budget non-event we were looking forward to a more pro-active and interesting May 2023 Federal Budget.
Just as is the case with many movie sequels, the May 2023 Budget was disappointing.
The Government obviously wanted to test reaction to various measures by leaking the measures in advance to gauge what the community reaction would be. Despite the Treasurer talking down the economy at every opportunity since taking the reins, the Budget should be in surplus this time next year. This should not come as a shock given that we essentially have full employment (i.e. the number of available jobs compared to the number of unemployed is now 1:1), commodity prices for the best part of the 2022 financial year were at record highs and the tax payable on these profits has now been paid.
In our Budget Summary over the past 20 odd years we have focused on the changes that will impact clients from a taxation perspective. This year is no different. However, our Budget Summary is brief because there was not a lot for small business or individuals in the Budget. The main points that we have taken from the Budget are as follows:
Superannuation Changes
1.1
A few years ago the “non-arms length” income and expense provisions (NALI and NALE) within the Income Tax Assessment Act were tightened and made more complicated. While the deferment of the application of these measures was welcomed the measures remain abstract and difficult for many to have a clear understanding of what is permissible and what is not permissible. In our view the recent amendments should simply be abolished and we go back to a system that was much simpler and easier for everyone to understand. As this will not happen the Budget provided the framework for further changes to the NALI/NALE provisions and these are:
Limiting income of SMSFs and Small APRA Funds that are taxable as NALI to twice the level of a general expense. Fund income taxable as NALI will exclude contributions.
Large APRA Funds (i.e. industry funds) will be exempt from the NALI provisions for both general and specific expenses of the Fund
Expenditure that occurred prior to the 2019 income year will be exempt
Not surprising, industry funds are now exempt from these provisions given that the superannuation policies of this Government appear to be dictated by industry funds.
1.2
Government is committed to introducing an additional 15% tax on notional/unrealised earnings on superannuation balances greater than $3.0m per person. The Budget stated that only 80,000 people would be affected by the change. However, the omitted to state that as the $3.0m threshold is not to be indexed that the number of people affected in the future will grow significantly.
1.3
From 1 July 2026 employers will be required to pay their employees’ Superannuation Guarantee entitlements to the employees’ nominated superannuation fund on the same day as the employer pays the employees’ salaries and wages. We think that this is actually a good measure as it should reduce the rate of delinquency of employees’ superannuation entitlements not being paid.
Personal Income Taxes
Again there was not a lot in the Budget in relation to personal income tax and using the tax system to provide some cost of living relief. In relation to personal income taxes we note the following from the Budget:
2.1
The current marginal tax rates will remain in place until 30 June 2024 and these are:
Threshold
Tax Rate
Tax Payable ($)
0 – 18,200
0%
$0
18,201 – 45,000
19%
$0 + 19% of every dollar over 18,200
45,001 – 120,000
32.5%
5,092 + 32.5% of every dollar over 45,000
120,001 – 180,000
37%
29,467 + 37% of every dollar over 120,000
180,001+
45%
51,667 + 45% of every dollar over 180,000
If the Government does not make any changes to the existing proposed marginal tax rates from 1 July 2024 then the applicable marginal tax rates effective from that date will be:
Threshold
Tax Rate
Tax Payable ($)
0 – 18,200
0%
$0
18,201 – 45,000
19%
$0 + 19% of every dollar over 18,200
45,001 – 200,000
30%
5,092 + 30% of every dollar over 45,000
200,001 & above
45%
51,592 + 45% of every dollar over 200,000
2.2
Increase in the Medicare Levy Low Income Thresholds
With effect from 1 July 2022 the Medicare Levy low income thresholds will be as follows:
Taxpayer Group Annual Savings
Old Threshold
New Threshold
Annual Savings
Single
$23,365
$24,276
$18.22
Family
$39,402
$40,939
$30.74
Single – Seniors/Pensioners
$36,925
$38,365
$28.80
Family – Seniors/Pensioners
$51,401
$53,406
$40.10
For each dependant child/student add
$3,619
$3,760
$2.82
As you can see from the table above the annual savings will not make any impact on the cost of living pressure of those who need it the most.
The Low and Middle Income Tax Offset was not extended and this will cause individuals to be worse off by up to $1,500 this year. Further, the Low Income Tax Offset was not adjusted and remains at a maximum of $700 for those on incomes below $37,500 or a lesser amount as the offset shades out between incomes of $37,501 and $45,000. The Government could have used the Low Income Tax Offset as a means of ensuring that those who most need the cost of living assistance actually received the assistance. Rather than introducing new schemes and further bureaucracy the Government could have simply increased the Low Income Tax Offset.
Small Business Support
The following Budget measures announced are supposed to assist small business:
3.1
Management of Tax Instalments and Improve Cash Flow
The Government has proposed to set the GDP Adjustment factor for PAYG Instalments and GST Instalments at 6% for the 2023/24 tax year and this is a reduction from the 12% that would have otherwise been applicable. While this sounds wonderful because they have halved the GDP Adjustment Factor all it does is alter the calculation of the increase in the quarterly instalments. Hence, as is the case with the Medicare Levy Low Income thresholds the actual dollar benefit for most small businesses will be insignificant. For example, if a small business had an annual tax bill of $100,000, the change in the GDP Adjustment Factor means that instead of paying PAYG Instalments of $28,000 (being $100,000 x 1.12 divided by 4), they will now pay instalments of $26,500 (being $100,000 x 1.06 dividend by 4).
How does this make a meaningful improvement to a small business’ cash flow?
Given the economic climate and the fact that business profits would decline over the next 12 months we would suggest that the best way from small businesses to manage their own cash flow will be to look to vary their quarterly PAYG instalments. That is, we need to be pro-active in this area to ensure that we preserve cash flow for the business. By reviewing the operating position of the company each quarter we can then calculate the quarterly PAYG instalment payable based on actual profit. This will be a much more effective tool in managing your business’ cash flow than accepting a PAYG Instalment issued by the ATO with a reduced GDP Adjustment Factor.
3.2
$20,000 Instant Asset Write Off
Businesses with an aggregated annual turnover of less than $10.0m will be able to immediately write off the full cost of eligible assets costing less than $20,000 that are first used or installed for use between 1 July 2023 and 30 June 2024.
3.3
Small Business Energy Incentive
Businesses with an aggregated annual turnover of less than $50m will be eligible to deduct an additional 20% of the cost of eligible depreciating assets that support electrification and more efficient use of energy. The maximum incentive is $20,000 and eligible assets will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024. Certain exclusions (such as electric cars) will apply.
3.4
Lodgement Amnesty Period – 1 June 2023 to 31 December 2023
A lodgement amnesty period will be provided for small businesses with an aggregated annual turnover of less than $10m to encourage them to bring their tax lodgements up to date. Under the amnesty the ATO will remit all Failure to Lodge penalties. The amnesty period will commence on 1 June 2023 and finish on the 31 December 2023.
Importantly, the Budget was silent on remission of General Interest Charges which indicates that general interest charges will be applied and collection enforced for any late payment of tax liabilities.
Travelling Overseas?
If you travel overseas from the 1 July 2024 the cost of your holiday will increase by $10 per person as the Government announced that the cost to depart Australia will increase from $60 per person to $70 per person.
Overall the Budget was a non-event as most measures were leaked or announced prior to the Budget being handed down.
If you would like to discuss how the 2022 – 2023 Federal Budget may impact you please contact our office.
With all the rhetoric from the current Government about easing the cost of living expenses during and after the last election and how they have to manage an out of control budget deficit and an irresponsible level of Government debt, the first Budget of Jim Chalmers was a non-event. We learn from the Budget that the Government debt will rise over the next four years, that the Budget deficit will fall and there is virtually no support to ease cost of living expenses unless you have a young family in need of child care or you spend a lot of money on pharmaceutical products.
We have been writing Budget summaries for well over 15 years and this will be the shortest summary we have ever prepared. The following is a summary of the main points from the Budget that we consider to be noteworthy:
Superannuation
Downsizer eligibility age will be reduced to the age of 55. This means that anyone who has owned their main residence for more than 10 years and who is 55 years or over will be able to make a contribution to their superannuation fund of $300,000. While mentioned in the Budget the legislation to put this change through was introduced into Parliament on the 3 August this year. While mentioned again in the Budget papers, it is not actually a Budget initiative. The effective date will be the first day of the quarter following the provisions being passed through Parliament and receiving Royal Assent.
The previous Coalition Government announced that they would replace the annual audit requirement with a requirement to have a Self-Managed Superannuation Fund audited every 3 years for Funds that had a good history of compliance and record keeping. Despite the fact that this would have been good for SMSFs in reducing costs the current ALP Government, in their infinite wisdom, has chosen to scrap this proposal.
Residency rules relating to SMSFs (and Small APRA Funds) which were to extend the central management and control test safe harbour rules from two to five years and also remove the active member test have been deferred. The new rules were to commence on 1 July 2022 but this has now been pushed out to a date when the relevant legislation receives Royal Assent.
The Government gave no indication on whether they would allow an amnesty period for pensioners to exit certain legacy pensions (such as market linked pensions, life-time expectancy pensions and life-time pensions). This was a proposal by the previous Government that would be extremely useful for a number of self-funded retirees. It is now a wait and see game as to whether the current Government will give this amnesty.
The current Superannuation Guarantee Charge (SGC) rate for 2022/23 tax year is 10.50%. The Government will not interfere with the planned increases from the current rate of 10.50% to 12.00% by 1 July 2025.
2022/23
10.50%
2023/24
11.00%
2024/25
11.50%
2025/26 & beyond
12.00%
Individuals
The Stage 3 tax cuts proposed by the previous Coalition Government will, at this stage, proceed as planned. This will mean that from 1 July 2024 the tax rates and tax brackets will be as follows:
$0 to $18,200
0%
$Nil
$18,201 to $45,000
19%
$Nil + 19%
$45,001 to $200,000
30%
$5,092 + 30%
$200,001 +
45%
$51,592 + 45%
A positive for seniors is that the eligibility income thresholds to receive a Commonwealth Seniors Health Card will increase. Again, this is not actually a Budget measure but was included in the Budget paper. The legislation for the change is currently before Parliament (introduced on the 27 July 2022) and the increases will take affect 7 days after the legislation receives Royal Assent. The new income thresholds will be:
Singles
$90,000
Up from $61,284
Couples living together
$144,000
Up from $98,054
Couples separated by illness
$180,000
Up from $122,568
Business
The previous Coalition Government had planned to allow taxpayers to self assess the effective life of intangible depreciating assets. The Budget included a statement that the ALP Government will not proceed with this measure which means that the relevant intangible assets may only be depreciated in accordance with the prescribed rates.
The Thin Capitalisation rules which place a restriction on the deductibility of foreign held debt will be amended. The current rules that are based on a balance sheet approach will now be based on earnings test. The deductibility of interest (i.e. debt related deductions) will be limited to 30% of profits using an EBITDA based measure of profit. EBITDA refers to “Earnings Before Interest, Tax, Depreciation and Allowances”. Any interest deduction denied as a result of applying these rules will be able to be carried forward to future years for up to 15 years. It is proposed that these changes will take affect from 1 July 2023.
No Fringe Benefits Tax on electric vehicles acquired after 1 July 2022 that have a value less than the luxury car tax threshold (currently $84,916 for fuel efficient cars) . Whilst not a Budget specific announcement, it was again referred to in the Budget.
Other
Another change that the Government is looking to introduce is to align the tax treatment of off-market share buy-backs undertaken by publicly listed companies with the tax treatment afforded to on-market share buy-backs. In the past the off-market share buy-backs have allowed listed companies to undertake capital management programmes that enable them to buy shares back at a discount to their market value (typically a 14% discount) and use the tax system (in particular, franking credits) to more than make up for the discount selling price. This has been a very good source of additional income for SMSFs and now looks like it will end.
All in all the Budget was extremely disappointing. As we wrote in our previous Budget Summary, there was a real opportunity to finally abolish Fringe Benefits Tax. It is a tax that generates only marginally more than 1% of Government revenue and the cost to business is enormous. With the hospitality and entertainment/leisure sector still recovering from two years of COVID there was a real opportunity to abolish FBT and encourage businesses to support these sectors and help them recover and generate more jobs (especially when they are now forecasting that unemployment rates will rise and the economy will slow down).
If you would like to discuss how the 2022 – 2023 Federal Budget may impact you please contact our office.
On Tuesday, 29 March 2022, Treasurer Josh Frydenberg handed down the 2022-23 Federal Budget.
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.
We have summarised the key points related to individuals, businesses, and superannuation below:
Individuals
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) – see table below.
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.
Low and middle income tax offset for 2021-22 (only)
Taxable income (TI)
LMITO 2021-22 (current)
LMITA 2021-22 (proposed)
$0 – $37,000
$255
$675
$37,001 – $48,000
$255 + ([TI – 37,000] x 7.5%)
$675 + ([TI – 37,000] x 7.5%)
$48,001 – $90,000
$1,080
$1,500
$90,001 – 126,000
$1,080 – ([TI – 90,000] x 3%)
$1,500 – ([TI – 90,000] x 3%)
$126,001 +
Nil
Nil
As noted above, the Government has proposed that eligible taxpayers with income up to $126,000 will receive the additional one-off $420 cost of living tax offset for 2021-22 on top of their existing LMITO benefit.
Currently, the amount of the LMITO for 2021-22 is $255 for taxpayers with a taxable income of $37,000 or less. Between $37,000 and $48,000, the value of LMITO increases at a rate of 7.5 cents per dollar to the maximum amount of $1,080. Taxpayers with taxable incomes from $48,000 to $90,000 are eligible for the maximum LMITO of $1,080. From $90,001 to $126,000, LMITO phases out at a rate of 3 cents per dollar.
Low income tax offset (unchanged)
The low income tax offset (LITO) will also continue to apply for the 2021-22 and 2022-23 income years. The LITO was intended to replace the former low income and low and middle income tax offsets from 2022-23, but the new LITO was brought forward in the 2020 Budget to apply from the 2020-21 income year.
Low income tax offset for 2021-22 and 2022-23 (unchanged)
Taxable income (TI)
Amount of offset
$0 – $37,500
$700
$37,501 – $45,000
$700 – ([TI – $37,500] x 5%)
$45,001 – $66,667
$325 – ([TI – $45,000] x 1.5%)
$66,668 +
Nil
The maximum amount of the LITO is $700. The LITO will be withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000 and then at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667
Personal tax rates unchanged for 2022-23; Stage 3 start from 2024-25 unchanged
The Low & Middle Income Tax Offset (LMITO) that was introduced for the 2020 tax year has been In the Budget, the Government did not announce any personal tax rates changes. The Stage 3 tax changes commence from 1 July 2024, as previously legislated.
Resident rates and thresholds for 2022-23
The 2022-23 tax rates and income thresholds for residents (unchanged from 2021-22) are:
Taxable income ($)
Tax Payable ($)
0 – 18,200
Nil
18,201 – 45,000
Nil + 19% of excess over 18,200
45,001 – 120,000
5,092 + 32.5% of excess over 45,000
120,001 – 180,000
29,467 + 37% of excess over 120,000
180,001+
51,667 + 45% of excess over 180,000
Stage 3: rates and thresholds from 2024-25 onwards
The Stage 3 tax changes commence from 1 July 2024, as previously legislated. From 1 July 2024, the 32.5% marginal tax rate will be cut to 30% for one big tax bracket between $45,000 and $200,000. This will more closely align the middle tax bracket of the personal income tax system with corporate tax rates. The 37% tax bracket will be entirely abolished at this time.
Therefore, from 1 July 2024, there will only be 3 personal income tax rates – 19%, 30% and 45%. From 1 July 2024, taxpayers earning between $45,000 and $200,000 will face a marginal tax rate of 30%. With these changes, around 94% of Australian taxpayers are projected to face a marginal tax rate of 30% or less.
Resident rates and thresholds – from 2024-25 onwards
The Government has proposed that the existing tax residency tests for individuals will be replaced with a The tax rates and income thresholds from the 2024-25 for residents (as already legislated) are:
Taxable income ($)
Tax Payable ($)
0 – 18,200
Nil
18,201 – 45,000
Nil + 19% of excess over 18,200
45,001 – 200,000
5,092 + 30% of excess over 45,000
200,001+
51,592 + 45% of excess over 200,000
Rates and thresholds – summary
Tax rates and income thresholds
Rate
2021-22
2022-23 to 2023-24
From 1.7.2024 (unchanged)
Nil
$0 – $18,200
$0 – $18,200
$0 – $18,200
19%
$18,201 – $45,000
$18,201 – $45,000
$18,201 – $45,000
30%
N/A
N/A
$45,001 – $200,000
32.5%
$45,001 – $120,000
$45,001 – $120,000
N/A
37%
$120,001 – $180,000
$120,001 – $180,000
N/A
45%
$180,001 +
$180,001 +
$200,001 +
Low and middle income tax offset (LMITO)
Up to $1,500 (proposed)
N/A
N/A
Low income tax offset (LITO)
Up to $700
Up to $700
Up to $700
Foreign residents
For 2022-23, the tax rates for foreign residents (unchanged from 2021-22) are:
$0 – $120,000 – 32.5%;
$120,001 – $180,000 – 37%;
$180,001+ – 45%.
For 2024-25 and later income years, the tax rates for foreign residents are:
$0 – 200,000 – 30%;
$200,001+ – 45%.
Working holidaymakers
For 2022-23, the rates of tax for working holiday makers (unchanged from 2021-22) are:
$0 – $45,000 – 15%;
$45,001 – $120,000 – 32.5%;
$120,001 – $180,000 – 37%;
$180,001+ – 45%.
For 2024-25 and later income years, the rates of tax for working holiday makers are:
$0 – $45,000 – 15%;
$45,001 – $200,000 – 30%;
$200,001+ – 45%.
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.
Date of effect
The increased thresholds will apply to the 2021-22 and later income years. Note that legislation is required to amend the thresholds and a Bill will be introduced shortly.
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.
Date of effect
The changes will take effect from 1 July 2021 (ie last year). It was previously announced on 8 February 2022: see 2022 WTB 6 [105].
The cost to revenue is stated to be “significant but unquantifiable”.
Businesses
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
Superannuation 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 30 June 2023.
The 50% reduction in the minimum pension drawdowns, which has applied for the 2019-20, 2020-21 and 2021-22 income years, was due to end on 30 June 2022. However, the Government announced that the SIS Regulations will be amended to extend this temporary 50% reduction for minimum annual pension payments to the 2022-23 income year. Given ongoing volatility, the Government said the extension of this measure to 2022-23 will allow retirees to avoid selling assets in order to satisfy the minimum drawdown requirements.
Minimum drawdowns reduced 50% for 2022-23
The reduction in the minimum payment amounts for 2022-23 is expected to apply to account-based, allocated and market linked pensions. Minimum payments are determined by age of the beneficiary and the value of the account balance as at 1 July each year under Sch 7 of the SIS Regs.
Age of beneficiary (years)
Standard percentage factor (%)
Minimum drawdown for 2019-20 to 2021-22 (and 2022-23 proposed) (after 50% reduction)
0-64
4
2
65-74
5
2.5
75-79
6
3
80-84
7
3.5
85-89
9
4.5
90-94
11
5.5
95+
14
7
No maximum annual payments apply, except for transition to retirement pensions which have a maximum annual payment limit of 10% of the account balance at the start of each financial year.
For the purposes of determining the minimum payment amount for an account-based pension or annuity for the financial years commencing 1 July 2019, 1 July 2020, 1 July 2021 (and 1 July 2022 proposed), the minimum payment amount is half the amount worked under the formula in clause 1 of Sch 7 of the SIS Regs. The relevant percentage factor is based on the age of the beneficiary on 1 July in the financial year in which the payment is made (or on the commencement day if the pension commenced in that year).
For market linked income streams (MLIS), the minimum payment amount for the financial years commencing 1 July 2019, 1 July 2020, 1 July 2021 (and 1 July 2022 proposed) must be not less than 45% (and not greater than 110%) of the amount determined under the standard formula in clause 1 of Sch 6 of the SIS Regs.
Super Guarantee no change to legislated rate rise to 10.5% for 2022-23
The Government introduced “Downsizer” contribution rules which allowed persons aged 65 or above to
The Budget did not announce any change to the timing of the next Super Guarantee (SG) rate increase. The SG rate is currently legislated to increase from 10% to 10.5% from 1 July 2022, and by 0.5% per year from 1 July 2023 until it reaches 12% from 1 July 2025.
With the SG rate set to increase to 10.5% for 2022-23 (up from 10%), employers need to be mindful that they cannot use an employee’s salary sacrificed contributions to reduce the employer’s extra 0.5% of super guarantee. The ordinary time earnings (OTE) base for super guarantee purposes now specifically includes any sacrificed OTE amounts. This means that contributions made on behalf of an employee under a salary sacrifice arrangement (defined in s 15A of the Superannuation Guarantee (Administration) Act 1992 (SGAA)) are not treated as employer contributions which reduce an employer’s charge percentage.
SG opt-out for high-income earners
The increase in the SG rate to 10.5% from 1 July 2022 also means that the SG opt-out income threshold will decrease to $261,904 from 1 July 2022 (down from $275,000). High-income earners with multiple employers can opt-out of the SG regime in respect of an employer to avoid unintentionally breaching the concessional contributions cap ($27,500 for 2021-22 and 2022-23). Therefore, the SG opt-out threshold from 1 July 2022 will be $261,904 ($27,500 divided by 0.105).
Other Measures
One-off $250 cost of living payment
The Government will make a $250 one-off cost of living payment in April 2022 to 6 million eligible pensioners, welfare recipients, veterans and eligible concession card holders.
The $250 payment will be tax-exempt and not count as income support for the purposes of any Government income support. A person can only receive one economic support payment, even if they are eligible under 2 or more of the categories outlined below.
The payment will only be available to Australian residents who are eligible recipients of the following payments and to concession card holders:
Age Pension
Disability Support
Pension
Parenting
Payment
Carer Payment
Carer Allowance (if not in receipt of a primary income support payment)
Jobseeker Payment
Youth Allowance
Austudy and Abstudy Living Allowance
Double Orphan Pension
Special Benefit
Farm Household Allowance
Pensioner Concession Card (PCC) holders
Commonwealth Seniors Health Card holders
eligible Veterans’ Affairs payment recipients and Veteran Gold card holders.
Temporary reduction in fuel excise
The Government will reduce the excise and excise-equivalent customs duty rate that applies to petrol and diesel for 6 months by 50%. The excise and excise-equivalent customs duty rates for all other fuel and petroleum-based products, except aviation fuels, will also be reduced by 50% for 6 months.
The Treasurer said this measure will see excise on petrol and diesel cut from 44.2 cents per litre to 22.1 cents. Mr Frydenberg said a family with 2 cars who fill up once a week could save around $30 a week or around $700 over the next 6 months. The Treasurer made a point of emphasising that the ACCC will monitor the price behaviour of retailers to ensure that the lower excise rate is fully passed on.
Date of effect
The measure will commence from 12.01am on 30 March 2022 and will remain in place for 6 months, ending at 11.59pm on 28 September 2022.
The measure is estimated to decrease receipts by $5.6bn, and decrease payments by $2.7bn over the forward estimates.
Apprentice wage subsidy support extension
The Budget confirms the Government’s earlier announcement to extend the Boosting Apprenticeship Commencement (BAC) and Completing Apprenticeship Commencements (CAC) wage subsidies by 3 months to 30 June 2022.
The Budget also includes funding over 5 years to introduce a new Australian Apprenticeships Incentive System from 1 July 2022 as further support to employers and apprentices in “priority occupations”.
Company registration and lifecycle management system to be modernised
The Government confirmed that Australia’s Business Registers (ie its company registration and lifecycle management system) will be moving to a modernised platform by September 2023. The reforms include:
removing the companies annual late review fee;
reducing the number of fees paid for ad hoc lodgements under current requirements;
removing fees for searches conducted on the new registry website; and
providing funding to Treasury to redesign wholesale business register search services (facilitated by third-party services).
First Home Guarantee Scheme: additional places announced
The Government has announced that it will expand the Home Guarantee Scheme in the 2022-23 Budget to make available up to 50,000 places each year, including 10,000 places for a new Regional Home Guarantee open to non-first home buyers.
Under the expanded Scheme, the Government said it will make available:
35,000 guarantees each year (up from the current 10,000), from 1 July 2022 under the First Home Guarantee, to support eligible first homebuyers to purchase a new or existing home with a deposit as low as 5%;
10,000 guarantees each year (from 1 October 2022 to 30 June 2025), under a new Regional Home Guarantee, to support eligible homebuyers (including non-first home buyers and permanent residents, to purchase or construct a new home in regional areas), subject to the passage of enabling legislation; and
5,000 guarantees each year (from 1 July 2022 to 30 June 2025) to expand the Family Home Guarantee to help eligible single parents with children to buy their first home or to re-enter the housing market with a deposit of as little as 2%.
Mr Frydenberg said the Home Guarantee Scheme seeks to ensure part of an eligible buyer’s home loan is guaranteed by the Government so they can buy a home sooner with a smaller deposit and without needing to pay lenders mortgage insurance.
Under the existing Scheme, eligible first home buyers can obtain a loan to build a new home or purchase a newly built home with a deposit of as little as 5%. The Scheme provides a Government-backed guarantee equals to the difference between the deposit and 20% of the purchase price. Applications can be made as part of the standard home loan application process through participating lenders.
If you would like to discuss how the 2022 – 2023 Federal Budget may impact you please contact our office.
Over the weekend the Victorian Government release details of another round of the Business Support Fund to assist ease the financial burden being felt by many businesses in Victoria that are being adversely impacted by the ongoing lock downs The amount of financial support on offer is unlikely to ease much of the pain that small businesses are suffering and if you are a sole trader then this package is offering no assistance. There is supposed to be further announcements setting out an assistance package to those sole traders so we will have to wait to see what form that assistance is likely to take.
Cash grants of between $10,000 and $20,000 depending on the business’ annual payroll. If you are an eligible business you will receive one of the following amounts:
$10,000 if your annual payroll is less than $650,000
$15,000 if your annual payroll is between $650,000 and $3.0m
$20,000 if your annual payroll is between $3.0m and $10.0m
To be eligible for the above cash grants you must:
Operate a business located in Victoria;
Participate in the JobKeeper Payment scheme;
Employ people and be registered with WorkSafe;
Have had an annual payroll of less than $10.0m in the 2020 financial year;
Be registered for GST;
Hold an ABN; and
Be registered with the responsible Federal or State regulator (waiting on clarification as to what this actually means)
Cash grants of up to $30,000 for licensed pubs, clubs, hotels, bars, restaurants and reception centres. The level of the cash grant is subject to venue capacity and location.
The latest round of assistance also includes additional funding, tools and resources to assist businesses prepare for re-opening. Under the business adaption the Victorian Government is allowing:
A $20.0m voucher program to assist sole traders and small businesses build their digital presence/capability
A $15.7m package to help Victorian exporters get their products to market and establish new trade channels
A $8.5m expansion to the “Click for Vic” campaign to encourage more Victorians to support local business
The Victorian Government is also offering some waivers and deferrals. These include:
A deferral of payroll tax liability for the full 2020/21 financial year
[This should come with a warning that it is a deferral of payroll tax payable and not a waiver. If your business is paying payroll tax and you are able to continue to fund the liability then we suggest that you do so as accepting a deferral can create it own cash flow problems down the track. An increase in the payroll tax threshold from $650,000 to $1.5m would have been more beneficial for businesses as it would provide relief from a tax that is imposed on businesses employing people. In an environment where unemployment is forecast to be greater than 10% you would think that they would put together a business support fund that encouraged businesses to employ people or at a minimum retain their current employees].
Bring forward the 50% Stamp Duty discount for commercial/industrial property for all of Regional Victoria.
Deferral of the planned increase in landfill levy for 6 months
25% waiver for the Congestion Levy for this year (presumably they refer to financial year but not clear in the current release)
Liquor license fee to be waived for 2021
Waiving of the Vacant Residential Land Tax for vacancies in 2020
We will advise you of when the application process opens for the third round of cash grants.
In the meantime please do not hesitate to contact us on on 03 96291433if you have any queries.
The Government announced on 21 July 2020 that they will be extending the JobKeeper scheme for another six months. Payments dates for the JobKeeper scheme when originally announced were to 27th September 2020.
Due to the continued deterioration of the economy and the community spread of COVID-19 the scheme will now run until 28 March 2021. We have outlined below some of the key points of the extended scheme as announced today.
Eligibility
To be eligible for the JobKeeper payments under the extended time frame you will need to have experienced an actual decline in turnover of:
50 per cent for those with an aggregated turnover of more than $1 billion;
30 per cent for those with an aggregated turnover of $1 billion or less; or
15 per cent for Australian Charities and Not for profits Commission-registered charities
The JobKeeper payment extension is open to both existing and new recipients as long as you meet the original eligibility requirements and the additional turnover tests during the extension period.
Comparison Period
For JobKeeper extension dates commencing 28th September 2020 and ending 3rd January 2021 you will need to demonstrate that you have met the relevant continuing decline in turnover test in both of the following quarters:
June 2020 quarter v June 2019 quarter; and
September 2020 quarter v September 2019 quarter.
You will then need to re-assess your ongoing eligibility in January for the period commencing 4th January 2021 and ending 28th March 2021. To be eligible for the continued JobKeeper payments you will need to demonstrate that you have met the relevant continuing decline in turnover test in all of the following quarters:
June 2020 quarter v June 2019 quarter; and
September 2020 quarter v September 2019 quarter; and
December 2020 quarter v December 2019 quarter.
Recipients will need to assess their eligibility in advance before finalising their Business Activity Statements in order to enrol in the extended JobKeeper scheme. To give employers time to evaluate, the Commission of Taxation will have the discretion to extend the time where employers are required to pay the JobKeeper top up in advance in order to be reimbursed by the Australian Tax Office.
The existing rules for eligible employees remain unchanged.
Payment rates
For JobKeeper extension dates commencing 28th September 2020 to 3rdJanuary 2021 the payment rate are as follows:
$1,200 per fortnight for all eligible employees who, in the four weeks before 1 March 2020, were working in the business or not-for-profit for 20 hours or more a week on average, and for eligible business participants who were actively engaged in the business for 20 hours or more per week on average in the month of February 2020
$750 per fortnight for other eligible employees and business participants.
For JobKeeper extension dates commencing 4th January 2021 to 28th March 2021 the payment rate are as follows:
$1,000 per fortnight for all eligible employees who, in the four weeks before 1 March 2020, were working in the business or not-for-profit for 20 hours or more a week on average and for business participants who were actively engaged in the business for 20 hours or more per week on average in the month of February 2020
$650 per fortnight for other eligible employees and business participants.
For further information, visit the Australian Government Treasury Website fact sheet.
Should you have any queries regarding the JobKeeper Scheme, please do not hesitate to contact either our office on 03 96291433 to discuss.
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