The October 2022 Federal Budget announced on Tuesday night was the second for 2022, and represents the new Government drawing a line under the previous government’s policies. The Budget itself did not present many substantial reforms or initiatives.
You should also be aware that many initiatives from the Morrison Government have either lapsed or have just completed consultation phases. In particular, the Small Business Technology Boost (20% bonus tax deduction for expenses and depreciating assets that support digital operations) and the Small Business Skills and Training boost (20% bonus tax deduction for external training from registered providers) aren’t law yet. If there are any surprises when these and other reforms pass Parliament, we’ll let you know.
Small Business
The Budget didn’t include much for small business. Much of the small amount of money earmarked for small business actually goes to setting up or continuing government programs that offer non-financial support (like the Small Business Debt Helpline, or the Access for Small Business Owners mental health program), or to implementing similar items agreed at the Jobs and Skills Summit.
No Current Effect on Stage 3 Personal Tax Cuts
The Morrison Government passed Stage 3 personal tax cuts to take effect on 1 July 2024. They abolish the 37% marginal tax rate and reduce the 32.5% rate to 30%.
This Budget did not change or flag any changes to those cuts. Because Labor supported them at the time, any reversal will be difficult for the current government, and will be more about politics than economics. It remains possible that the tax cuts may be reversed in the first half of 2024.
More ATO Compliance Measures
The Government put a lot of focus on improving tax compliance (and collecting more tax) by allocating money to staff and other resources to address:
- Personal taxpayers overclaiming deductions and under-reporting income
- The shadow economy (unreported cash transactions)
- Business taxpayers in “new priority areas” of tax risk, which aren’t listed but in the context seem to be related to small and medium-sized businesses. This is something to keep an eye on.
- Tax practitioners who engage in poor and unlawful tax advice, or who are unregistered preparers. This is not something to worry about with Inline Partners.
Superannuation – Downsizer Concessions to apply from 55
Currently if you are over 60 and you sell your main residence (downsize) you and your spouse can both make a once-off post-tax contribution of up to $300,000 to a complying superannuation plan from the proceeds. This payment doesn’t contribute to your non-concessional contribution cap.
The proposal is to make this available to people over 55.
Warning: Parliament hasn’t passed this legislation yet. It will only apply after Parliament passes the legislation and it is given assent. Be aware the details may change from the announced policy in ways that may restrict its application.
Electric Car FBT Exemptions
The Government announced it will exempt battery, hydrogen fuel cell and plug-in hybrid electric cars from Fringe Benefits Tax (FBT) and import tariffs if the car:
- has a first retail price below the luxury car tax threshold for fuel-efficient cars ($84,916 for 2022-23), and
- has not been held or used before 1 July 2022.
This means if an employer provides an electric-type car that meets the criteria, the employer won’t have to pay FBT on it. Even though it will be FBT-exempt, employers will still have to list it in the reportable fringe benefits for the employee.
This is proposed to start from 1 July 2022.
Warning: Parliament hasn’t passed this legislation yet. Be aware the details may change from the announced policy in ways that may restrict its application.
$10,000 Business Cash Transaction Limit Scrapped
In 2018-19 the previous Government had proposed a limit of $10,000 on cash payments to businesses. This will not go ahead.
Sharing Economy Reporting Changes Deferred
The previous Government had proposed a stricter reporting regime for transactions in sharing economy businesses. These include rideshare (like Uber), accommodation (like Airbnb), and task completion (AirTasker). These have been deferred to:
- 1 July 2023 for transactions relating to the supply of ride sourcing and short-term accommodation
- 1 July 2024 for all other transactions including but not limited to asset sharing, food delivery and tasking-based services.
Child Care
The Government will provide $4.7 billion over four years from 2022–23, and $1.7 billion per year after that to support proposed changes to child care. These include:
- an increase in the maximum Child Care Subsidy (CCS) rate from 85 per cent to 90 percent for the first child in care
- increasing the CCS family income eligibility threshold to $530,000
- increasing the CCS rate for all families earning less than the threshold.
This is proposed to start based on your income for the 2022-2023 year (so not this year).
Warning: Parliament hasn’t passed this legislation yet. Be aware the details may change from the announced policy in ways that may restrict its application.
Parental Leave
The Government also announced large extensions and more flexibility to the Government funded Paid Parental Leave (PPL) scheme.
The PPL payment is currently available for mothers for up to 18 weeks, while up to two weeks is available for fathers and partners, for a total of 20 weeks.
Under the proposed legislation:
- The total PPL time will increase to 26 weeks over 3 years
- both parents will be able to share the entitlement, with a ‘use it or lose it’ portion for each parent
- parents will be able to claim the payment concurrently and take leave at the same time
- parents will be able to take leave in blocks as small as a day at a time, with periods of work in between
- a $350,000 family income test will be introduced as an alternative to the individual income test.
The expansion of the PPL scheme to 26 weeks will be phased in from 1 July 2024 to 1 July 2026.
Tax Hike on Heavy Vehicle Users
The Heavy vehicle road user charge rate will increase from 26.4 cents per litre to 27.2 cents per litre of diesel fuel.
Note that if you claim the fuel tax credit for heavy vehicles on public roads, it is reduced by the amount of the user charge rate.
More Covid Grants Non-Assessable, Non-Exempt for Tax
The Government had previously identified a large number of Covid business grants as non-assessable, non-exempt – which means businesses don’t have to pay tax on them.
This Budget expands on that list for Covid business grants in Victoria and ACT.
Other Items
For completeness, the Budget also included announcements relating to:
- clarifying digital currencies are not taxed as foreign currency (for you bitcoin operators)
- a range of multinational tax changes, including changes to thin capitalisation (limits on deducting interest costs if you load up a local company with debt).
Want to know more about the midyear budget, the tax implications and what your small business is entitled to? Book a free consultation with us.
