Federal Budget 2022 – 2023

The Federal Government announced its first budget last evening. The focus on this budget is to introduce measures to provide support for families in the face of rising interest rates and increasing inflation. The focus on this budget for individuals is to support the cost of living measures through the provision of paid parental leave, cheaper medicines and introducing measures to improve housing affordability. This is a high inflationary environment, and the budget is impacted by global factors.

The following is a summary of the key measures that will impact you.

Personal Income Tax Rates (this budget) – What it means for you

Despite some conjecture in recent weeks, this Budget has not sought to defer ‘Stage 3’ tax cuts, originally announced in 2018. From 1 July 2024, the 37 percent bracket will be removed entirely, and the 32.5 percent bracket will be reduced to 30 percent. In addition, the threshold above which the top marginal rate of 45 percent applies will increase from $180,000 to $200,000.

Taxable Income	Current Tax Rates
Up to $18,200	0
$18,201 – $45,000	19 percent
$45,001 – $120,000	32.5 percent
$120,001 – $180,000	37 percent
From $180,001	45 percent

Taxable Income	Tax Rates from 1 July 2024
Up to $18,200	0
$18,201 – $45,000	19 percent
$45,001 – $200,000	30 percent
From $200,001	45 percent

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Support for working parents

The Government announced that $4.7 billion will be provided over four years from 2022-23 to deliver cheaper childcare. These measures aim to help ease the cost of living for families and encourage greater workforce participation by reducing barriers.

Australia’s paid parental leave entitlement will be extended by six weeks to a total of 26 weeks (i.e. six months), easing the cost of living for families and reducing barriers to greater workforce participation. The extension will apply in increments of two weeks, starting from 1 July 2024 until it reaches the full 26 weeks, from July 2026.

• The maximum Child Care Subsidy (CCS) rate has increased to 90% from 85% in prior years
• An increase to the CCS rate for all families earning less than $530,000 in household income
• Whilst the current higher CCS rate for families with multiple children aged five or under has remained unchanged, the higher rate will cease 26 weeks after the oldest child’s last session

Uplift for paid parental leave

The Government has committed to a cost budget of $531.6 million over four years for this program in a bid to improve the flexibility of parental leave. The scheme will now allow either parent to claim the payment concurrently on a ‘use it or lose it’ basis.

• Some parents will be able to claim the full period of leave. These announcements also expand both the definition and quantum of parental leave, allowing both eligible birth parents and non-birth parents to receive the payment.
• The scheme starts with 20 weeks of leave in the 2023 financial year, and this will be extended by two weeks per financial year, until the target of 26 weeks is achieved from 1 July 2026.

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Superannuation – Downsizer contribution eligibility

The Government has confirmed its earlier announcement that the eligibility age to make downsizer contributions of up to $300,000 per person in a couple, will be reduced from 60 to 55 years of age.

The eligibility criteria remain unchanged:

• Your home was owned by you or your spouse for 10 years or more prior to the sale (the ownership period is generally calculated from the date of settlement of purchase to the date of settlement of sale)
• Your home is in Australia and is not a caravan, houseboat, or other mobile homes
• The proceeds (capital gain or loss) from the sale of the home are either exempt or partially exempt from Capital Gains Tax (CGT) under the main residence exemption or would be entitled to such an exemption if the home was a CGT rather than a pre-CGT asset (acquired before 20 September 1985)
• You provide your super fund with the downsizer contribution in super form, either before or at the time of making your downsizer contribution
• You make your downsizer contribution within 90 days of receiving the proceeds of the sale, which is usually at the date of settlement
• You have not previously made a downsizer contribution to your super from the sale of another home or from the part sale of your home.

Note: The Government has offered further incentives to older Australians to downsize their home. Extending the exemption for the asset test from 12 to 24 months and applying only the lower deeming rate of 0.25% to the proceeds for the first 24 months after the sale of the principal place of residence, is designed to reduce the financial impact on older Australians who choose to downsize.

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Support for Business – Depreciation of Intangible Assets

The Government has decided to reverse the previously announced measures that allowed taxpayers to self-assess the effective life of intangible depreciating assets. This unwinds the Morrison Government’s intentions for the Digital Economy Strategy announced in the previous Budget in March 2022.

• The superseded measures (which were due to commence with assets acquired from 1 July 2023) would have allowed business operators to self-assess the effective life of intangible depreciating assets in calculating their annual depreciation. This would have applied to patents, registered designs, copyrights, and in-house software.

The Labor Government will instead “maintain the status quo” to ensure the effective lives of intangible assets continue to be set by the legislation, rather than being self-assessed by taxpayers. This approach aims to mitigate any potential integrity concerns associated with taxpayers boosting their depreciation with overly favorable effective lives for intangible assets.

Fringe Benefits Tax Exemption for Electric Vehicles

The Government has announced that it will provide an exemption from Fringe Benefits Tax (FBT) in relation to electric vehicles commencing from 1 July 2022.  This measure has been previously announced. Legislation has already been introduced to Parliament and is currently before the Senate and scheduled for debate on Wednesday 26 October 2022.

• The FBT exemption will apply to battery, hydrogen fuel cell and plug-in hybrid electric cars that are below the luxury car tax threshold for fuel-efficient cars (being $84,916 for the 2022-23 financial year) and first held and used from 1 July 2022.
• The exempt electric car fringe benefits will be subject to the Reportable Fringe Benefits regime, and accordingly, will be reported on an employee’s annual PAYG Payment Summary.

The exemption is available notwithstanding that the car fringe benefit is provided under a salary packaging arrangement between an employer and an employee. The exemption also only applies to ‘cars’ as defined for FBT purposes, and therefore does not apply to vehicles designed to carry one tonne or more, or nine passengers or more.

The Government has indicated that this measure will be reviewed after three years.

Small Business Debt Hotline & NewAccess for Small Business Owners program

The Small Business Debt Helpline is a free service offered to small business owners in financial difficulty, allowing them to speak confidentially to qualified financial counselors.

The NewAccess for Small Business Owners program is a free and confidential, guided self-help mental health coaching program. The program is developed by Beyond Blue and offers small business owners the opportunity to:

• Talk through their challenges
• Develop a problem statement
• Create a plan based on their needs.

Where symptoms are too severe or complex for the program, the coach will help the owner find a more appropriate service.

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Housing Affordability

The Government has announced a Housing Accord with a target to build one million homes in five years commencing from 2024-25. It has outlined three key measures it believes will assist to provide more affordable housing.

• Firstly, the Government has committed $350 million over five years from 2024-25 to support the funding of an additional 10,000 affordable homes. The state and territory governments have agreed to a Housing Accord to collectively match the 10,000 affordable homes provided by the Federal Government
• Secondly, $324.6 million has been allocated to the Help to Buy scheme, which will be established to assist people on low to moderate incomes to purchase a new or existing home with an equity contribution from the Government.
• Invest $10 billion in the Housing Australia Future Fund, which will generate returns that will fund 30,000 social and affordable homes over five years. In the first five years, $330 million of the fund’s returns will be allocated to finance acute housing needs for remote indigenous communities, women and children fleeing family violence, older women on low incomes and veterans at risk of homelessness.

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Digital Currency ‘is not a foreign currency

As previously flagged, the Government will legislate to clarify that digital currencies such as Bitcoin will continue to be excluded from the Australian income tax treatment of foreign currency. The exclusion does not apply to digital currencies issued by, or under the authority of, a government agency, which continues to be taxed as foreign currency.

ATO Targeting 

Personal income tax deductions and incorrect reporting

The ATO will receive an additional $80.3 to crack down on non-compliance including:

• Overclaiming deductions; and
• Incorrect reporting of income

The spend is expected to increase tax receipts by $674.4m and payment by $80.3m over 4 years.

 Cash payments and tax evasion by business

The ‘shadow economy’, cash-in-hand payments including underpayment of wages, visa fraud, and other nefarious activity that deprives the economy of the income from tax receipts, will come under scrutiny with the extension of the ATO’s Shadow Economy Program for a further 3 years from 1 July 2023. Over this period, the program is estimated to increase tax receipts by $2.1bn and payments by $685.2m over the 4 years from 2022-23.

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