2022 Federal Budget

2022 Budget: The ‘Stronger Future For All Australians’ proposed measures

On 29 March 2022, Treasurer Josh Frydenberg delivered the 2022-23 Federal Budget. We provide an overview of key proposed policy measures that may be relevant to you and your personal finances.

Treasurer Josh Frydenberg delivered the 2022-23 Federal Budget at 7:30pm (AEDT) on 29 March 2022.

Given we are in an election year, this Budget is earlier than usual (traditionally delivered in May) which could be a strategic decision by the Government—to have the Federal Budget delivered well before the predicted May election.

Below, we touch on the Government’s policy priorities and the economic and fiscal position, followed by several key proposed policy measures that may be relevant to you and your personal finances.

Written and accurate as at: Mar 30, 2022 Current Stats & Facts

Budget overview

Policy priorities

The Government’s policy priorities—and the proposed policy measures announced to help achieve these policy priorities—centre on delivering on a plan to strengthen the future for all Australians by:

• building a stronger and more productive economy to create more jobs,
• addressing the cost of living pressures and managing current challenges,
• strengthening our regions and critical infrastructure,
• guaranteeing essential services, and
• protecting our interests.

In addition to the above, there is also a focus on improving women’s safety, economic security, and health and wellbeing.

Please see below for information on related proposed policy measures.

Economic and fiscal position

Major economic parameters overview

*Real GDP and Nominal GDP are percentage change on preceding year. The consumer price index, employment, and the wage price index are through the year growth to the June quarter. The unemployment rate is the rate for the June quarter.
Source: ABS Australian National Accounts: National Income, Expenditure and Product; Labour Force, Australia; Wage Price Index, Australia; Consumer Price Index, Australia and Treasury.

Budget aggregates overview

*Gross debt measures the face value of Australian Government Securities (AGS) on issue.

^Net debt is the sum of interest-bearing liabilities (which includes AGS on issue measured at market value) less the sum of selected financial assets (cash and deposits, advances paid and investments, loans and placements).

Policy measures: Individual taxation

Cost of living tax offset

The Government will increase the low- and middle-income tax offset (LMITO) by $420 for the 2021-22 income year—increasing the maximum LMITO benefit to $1,500 for individuals and $3,000 for couples. Please note: the Government has advised that other than those that don’t require the full offset to reduce their tax liability to zero, all LMITO recipients will benefit from the full $420 increase. All other features of the current LMITO remain unchanged. And, consistent with the current LMITO, taxpayers with incomes of $126,000 or more will not receive the additional $420.

The Government has advised that the LMITO for the 2021-22 income year will be paid from 1 July 2022 when Australians submit their tax returns for the 2021-22 income year. However, LMITO is still scheduled to end in the 2022-23 financial year.

Employee Share Schemes

The Government will expand access to employee share schemes and further reduce red tape so employees at all levels can directly share in the business growth they help to generate. Where employers make larger offers in connection with employee share schemes in unlisted companies, participants can invest up to:

• $30,000 per participant per year, accruable for unexercised options for up to five years, plus 70 per cent of dividends and cash bonuses; or
• any amount, if it would allow them to immediately take advantage of a planned sale or listing of the company to sell their purchased interests at a profit.

The Government will also remove regulatory requirements for offers to independent contractors, where they don’t have to pay for interests.

Medicare levy

The Government will increase the Medicare levy low-income thresholds for singles, families, and seniors and pensioners from 1 July 2021. The Medicare levy low-income thresholds will be increased:

• From $23,226 to $23,365 for singles,
• From $39,167 to $39,402 for families*,
• From $36,705 to $36,925 for single seniors and pensioners, and
• From $51,094 to $51,401 for family seniors and pensioners.

*For each dependent child or student, the family income thresholds increase by a further $3,619 (previously $3,597).

Redundancy payments

The Government will consult on amendments to redundancy payment calculation methods under the National Employment Standards in the Fair Work Act 2009 to ensure redundancy payments more fairly reflect average working hours over the course of a person’s employment.

Tax deductibility of COVID-19 test expenses

The Government will ensure that the cost of taking a COVID-19 test to attend a place of work is tax-deductible for individuals from 1 July 2021. Furthermore, the Government will also ensure fringe benefits tax (FBT) will not be incurred by businesses where COVID-19 tests are provided to employees.

Temporary reduction in fuel excise

The Government will reduce the excise and excise-equivalent customs duty rates that apply to petrol and diesel*, and all other fuel and petroleum-based products, except aviation fuels, by 50 per cent for six months. Please note: Under the measure, existing policy settings for fuel excise and excise-equivalent customs duty, including indexation in August, will continue but on the basis of the halved rates.

*The rate of excise and excise-equivalent customs duty currently applying to petrol and diesel is 44.2 cents per litre.

The Government has advised that the measure will commence from 12.01am on 30 March 2022 and remain in place for six months, ending at 11.59pm on 28 September 2022. The Australian Competition and Consumer Commission (ACCC) will monitor the price behaviour of retailers to ensure that the lower excise rate is fully passed on to Australians.

Policy measures: Company taxation

Modernisation of pay as you go instalment systems

The Government will enable companies to choose to have their pay as you go (PAYG) instalments calculated based on current financial performance, extracted from business accounting software, with some tax adjustments.

The Government will consult with affected stakeholders, tax practitioners, and digital service providers to finalise the policy scope, design, and specifications of this measure. Subject to advice from software providers regarding their capacity to deliver, the Government anticipates that systems will be in place by 31 December 2023, with the measure to commence on 1 January 2024, for application to periods starting on or after that date.

Patent Box

The Government will expand the patent box, announced in the 2021-22 Federal Budget and currently before Parliament, to agricultural sector innovations and low emissions technology innovations. The expanded patent box will provide concessional tax treatment for corporate taxpayers who commercialise their:

• eligible patents linked to agricultural and veterinary (agvet) chemical products listed on the Australian Pesticides and Veterinary Medicines Authority (APVMA), PubCRIS (Public Chemicals Registration Information System) register, or eligible Plant Breeder’s Rights (PBRs); or
• patented technologies that have the potential to lower emissions.

Eligible corporate income will be subject to an effective income tax rate of 17 per cent for PBRs and patents granted or issued after 29 March 2022, and for income years starting on or after 1 July 2023. Please note: eligible income will be taxed at the concessional tax rate to the extent that the research and development of the innovation took place in Australia.

Skills and Training Boost

The Government will allow small businesses (aggregated annual turnover of less than $50 million) to deduct an additional 20 per cent of expenditure incurred on external training courses provided to their employees. The external training courses will need to be provided to employees in Australia or online, and delivered by entities registered in Australia. Please note: some exclusions will apply, including for in-house or on-the-job training, and expenditure on external training courses for persons other than employees. Furthermore, the boost for eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year. And, 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.

The Government has advised that this measure will apply to eligible expenditure incurred between 7:30pm (AEDT) on 29 March 2022 and 30 June 2024.

Smarter reporting of Taxable Payments Reporting System data

The Government will allow businesses the option to report Taxable Payments Reporting System data (via accounting software) on the same lodgement cycle as their activity statements.

Subject to advice from software providers about their capacity to deliver, the Government anticipates that systems will be in place by 31 December 2023, with the measure to commence on 1 January 2024, for application to periods starting on or after that date.

Technology Investment Boost

The Government will allow small businesses (aggregated annual turnover of less than $50 million) to deduct an additional 20 per cent of the cost incurred on business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems, or subscriptions to cloud-based services. Please note: an annual cap ($100,000 of expenditure per year) will apply in each qualifying income year. Furthermore, the boost for eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year. And, the boost for eligible expenditure incurred between 1 July 2022 and 30 June 2023 will be included in that income year.

The Government has advised that this measure will apply to eligible expenditure incurred between 7:30pm (AEDT) on 29 March 2022 and 30 June 2023.

Varying the GDP uplift factor for tax instalments

The Government has decided to set the GDP uplift factor for pay as you go (PAYG) and GST instalments at two per cent for the 2022-23 income year. The two per cent GDP uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods (up to $10 million annual aggregated turnover for GST instalments and $50 million annual aggregated turnover for PAYG instalments) in respect of instalments that relate to the 2022-23 income year and fall due after the enabling legislation receives Royal Assent .

Policy measures: Housing

Supporting the delivery of more affordable housing

The Government will increase the number of guarantees under the Home Guarantee Scheme to 50,000 per year for three years from 2022-23, and then 35,000 a year ongoing to support homebuyers to purchase a home with a lower deposit. The guarantees will be allocated to provide up to:

• 5,000 places per year to 30 June 2025 for the Family Home Guarantee,
• 35,000 places per year ongoing for the First Home Guarantee (formerly the First Home Loan Deposit Scheme), and
• 10,000 places per year to 30 June 2025 for a new Regional Home Guarantee that will support eligible citizens and permanent residents who have not owned a home for five years to purchase a new home in a regional location with a minimum five per cent deposit.

Policy measures: Superannuation

Extension of the temporary reduction in superannuation minimum drawdown rates

The Government will extend the 50 per cent reduction of the superannuation minimum drawdown requirements for account-based pensions and similar products for a further year to 30 June 2023.

Policy measures: Social security

Cost of living payment

The Government will provide a one-off $250 economic support payment to eligible pensioners, welfare recipients, veterans and concession cardholders. The payments are exempt from taxation and will not count as income support for the purposes of any income support payment. Please note: the payment is only available to Australian residents, and a person can only receive one economic support payment, even if they are eligible for two or more of the aforementioned categories.

The Government has advised that the payment will be made in April 2022 to eligible recipients of the following payments and to concession cardholders:

• 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 cardholders.

Paid Parental Leave

The Government will introduce an enhanced Paid Parental Leave (PPL) scheme for eligible working families by integrating Dad and Partner Pay and Parental Leave Pay to provide eligible families access to up to 20 weeks’ leave to use in ways that suit their specific circumstances. The Government will also broaden the income test threshold to apply it to a household instead of an individual. A household income threshold of $350,000 will apply, instead of an individual income threshold of $151,350.

With the introduction of this measure, eligible single parents will also be able to access an additional two weeks of PPL and benefit from the household income threshold test. And, dads and partners will be able to access the PPL scheme at the same time as any employer-funded leave.

The Government has advised that it anticipates the measure (ie changes to PPL) will be introduced no later than 1 March 2023 following stakeholder consultations.

Pharmaceutical Benefits Scheme Safety Net thresholds

From 1 July 2022, the Government will reduce the Pharmaceutical Benefits Scheme (PBS) Safety Net thresholds, from $1,542.10 to $1,457.10 for general patients and from $326.40 to $244.80 for concessional patients.

Other policy measures

The Government will provide:

• $5.6 million over four years from 2022-23 for the Fair Work Commission to establish a dedicated unit to support small businesses, including with unfair dismissal and general protections disputes.
• an additional $84.5 million over four years from 2022-23 (and $10.0 million over two years from 2026-27) for activities to improve the drought readiness and resilience of Australian farmers and communities. The cost of this will be met from the $100.0 million per year expenditure under the Future Drought Fund.
• $1.9 million over five years from 2021-22 to extend the pension suspension period and Pensioner Concession Card access period to two years for pensioners that receive a nil payment due to their partner’s employment income or working hours, where this has also resulted in the suspension of their partner’s pension for up to two years.
• support for the recovery from the February / March 2022 floods in New South Wales (NSW) and Queensland. Funding includes, among other things, the provision of a special supplement of two additional payments of the Australian Government Disaster Recovery Payment (AGDRP) to residents in catastrophically impacted areas.
• $954.0 million over five years from 2021-22 to introduce a new Australian Apprenticeships Incentive System from 1 July 2022, providing support to employers and apprentices in priority occupations. Also, $365.3 million to extend the Boosting Apprenticeship Commencements and Completing Apprenticeship Commencements wage subsidies by three months to 30 June 2022, to further support employers taking on and retaining new apprentices. And, $2.8 million in 2022-23 to increase apprenticeship In-Training Support by an additional 2,500 places for Australians aged 15-20 years.
• $480.1 million over six years from 2021-22 to fund programs to support women and their children who are experiencing family, domestic and sexual violence (FDSV). Funding includes, among other things, $240.0 million from 2023-24 to extend funding for the Escaping Violence Payment—the payment provides up to $5,000 in financial assistance to establish a life free from violence.
• $10.5 million over four years from 2021-22 to develop a voluntary industry funding model which will help meet the shortfall in general financial counselling services, including $1.5 million in seed funding to establish a new not-for-profit body to implement the scheme. And, $2.1 million over two years from 2021-22 to extend the Small Business Debt Helpline program operated by Financial Counselling Australia to continue to provide financial counselling to small businesses facing financial issues.

Moving forward

In this year’s Federal Budget, there were many proposed policy measures announced. We provided a brief summary of several of these proposed policy measures that may be relevant to you and your personal finances.

Please contact us if you wish to discuss any aspect of this year’s Federal Budget or how it may affect you.