Nov 4, 2022

Labor’s Federal Budget 2022-23

Key measures in the Albanese Government’s first Budget

The Federal election on 21 May 2022 ushered in a Labor Government promising a better future. Disdaining the ‘all announcement, no delivery’ style of government, which was so characteristic of Scott Morrison’s government, Mr Albanese promised that if he won the election: ‘the work of building that better future will start the very next day.’

The cost of building that better future is now estimated at $40.1 billion over the four years to 2025–26, with key commitments including but not limited to:

  • Medicare, medicines and NDIS: Making it easier to see a doctor, cutting the cost of medicines and improving access to the NDIS
  • Jobs and skills Australia — investing in the skills of our people: Identifying skills gaps and then connecting a fee-free TAFE and training with good jobs and growing businesses
  • Cheaper childcare: Making it easier for working families to get ahead
  • A National Reconstruction Fund: Working with business to invest in manufacturing and renewables to make things in Australia again
  • A Powering Australia plan: Seizing the opportunities of climate action to create jobs and boost industry

Below we look at some key items we think will be of interest to the Bramelle community and as always please contact us if we can assist you with any questions in relation to your own businesses or investments.

Noteworthy items for businesses

Funding of $15.1 million over two calendar years from 1 January 2023 until 31 December 2024 will be provided to extend the Small Business Debt Helpline and the NewAccess for Small Business Owners programs to support financial and mental wellbeing.

Funding of $3.4 million will be provided over four years from the 2022–23 income year to support the development and delivery of education, technical advice and support services targeting the needs of small business employers to support the implementation of the Government’s election commitment to legislate ten days of paid family and domestic violence leave.

The Government announced it will exempt battery, hydrogen fuel cell and plug-in hybrid electric cars from FBT and import tariffs if the car:

  • Has a first retail price below the luxury car tax threshold for fuel-efficient cars, and
  • Has not been held or used before 1 July 2022

The Government announced that it will not proceed with the proposed measure to allow taxpayers to self-assess the effective life of intangible depreciating assets and these will remain as is, prescribed by statute.

Labor also announced that it has made a further 13 State and Territory COVID-19 grant programs eligible for non-assessable non-exempt (NANE) treatment, which will exempt eligible businesses from paying tax on these grants.

Australia’s thin capitalisation rules will be amended to replace the safe harbour and worldwide gearing tests with earnings-based tests to limit debt deductions in line with an entity’s profits. The changes will apply to multinational entities operating in Australia and any inward or outward investor, in line with the existing thin capitalisation regime. Financial entities will continue to be subject to the existing thin capitalisation rules.

Additionally, the Government announced that it will provide $80.3 million to the ATO to extend the Personal Income Taxation Compliance Program for two years from 1 July 2023. The extension is intended to enable the ATO to continue to deliver a combination of proactive, preventative, and corrective activities in key areas of non-compliance, including overclaiming of deductions and incorrect reporting of income. The funding is also intended to enable the ATO to modernise its guidance products, engage earlier with taxpayers and tax agents, and target its compliance activity.

Funding for the ATO Tax Avoidance Taskforce will also be boosted by around $200 million per year over four years from 1 July 2022, in addition to extending this Taskforce for a further year from 1 July 2025. The boosting of funding and the extension of the ATO Tax Avoidance Taskforce is intended to support the ATO pursue new priority areas of observed business tax risks, complementing the ongoing focus on multinational enterprises and large public and private businesses.

Noteworthy items for individuals and families

As part of the October 2022–23 Federal Budget, the Government announced that it will deliver cheaper childcare, easing the cost of living for families and reducing barriers to greater workforce participation. The Government will provide $4.7 billion over four years from 2022–23, and $1.7 billion per year ongoing.

On 27 September 2022, the Government introduced into Parliament the Family Assistance Legislation Amendment (Cheaper Child Care) Bill 2022 which contains proposed legislative amendments to give effect to the proposed changes. The Government proposes to increase the maximum Child Care Subsidy (CCS) rate from 85 per cent to 90 per cent for families for the first child in care as well as increase the CCS rate for all families earning less than $530,000 in family income — currently the CCS percentage is 0 per cent if family income is $356,756 or more.

The Budget also maintains current higher CCS rates — of up to 95 per cent — for families with multiple children aged five or under in child care, with higher CCS rates to cease 26 weeks after the older child’s last session of care, or when the child turns 6 years old.

Reforms will also be introduced to the Government funded Paid Parental Leave (PPL) scheme, at a cost of $531.6 million over four years from 2022–23, and $619.3 million per year ongoing.

Finally, from an investor and superannuation perspective, the minimum age will be reduced for making a downsizer contribution. The measure is contained in Schedule 5 to the Treasury Laws Amendment (2022 Measures No. 2) Bill 2022 which was introduced into Parliament on 3 August 2022.

Legislation will be introduced to clarify that digital currencies — such as Bitcoin — will continue to be excluded from the Australian income tax treatment of foreign currency.

As always, we’re here if you need us!

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