2022 budget

2022 Budget Brief

The federal budgets for the past two years have had overwhelming stimulus measures designed to get businesses to spend their way out of the covid recession.  This year’s budget has relatively little for businesses with the main focus being on cost of living payments.

Coming out of the Omicron wave that hit us at the start of the year, we have been confronted with a prevalence of bad news.  From the war in Ukraine to natural disasters closer to home.  On top of this, we have inflation on the increase, concerns about the cost of living, and potentially higher interest rates.  It is no wonder that household confidence levels are at their lowest levels since September 2020 (Westpac Consumer Confidence Index).

The Budget seeks to ease some of these concerns and boost consumer confidence with several temporary measures.  There is also little doubt the forthcoming election played a big part in this Budget.

This brief summarises the key tax and superannuation announcements that we expect will most affect Activ8 individual and business clients.

INDIVIDUALS

The key announcements for individuals include:

  • Low and middle-income tax offset to be increased by $420
  • One-off $250 welfare payment to ease cost of living pressure
  • Work-related Covid-19 tests tax deductible from 1 July 2021
  • 50% temporary reduction on fuel excise
  • Paid parental leave scheme streamlined to 20 weeks
  • Medicare low-income threshold has increased
  • Increased support for affordable housing and home ownership with Home Guarantee Scheme places increased to 50,000
  • Income tax rates remain unchanged.

BUSINESSES

The key announcements for businesses include:

  • New tax incentives to help small businesses with turnover of less than $50 million/year, adopt digital technology and train and upskill employees.
    • Until June 2024 for every $100 a small business invests in external training courses for their employees they will get a $120 tax deduction (Skills and Training Boost).
    • Until June 2023 for every $100 a small business spends on new digitalising their business (for items such as cloud accounting, online security and eInvoicing software) they will get a $120 tax deduction up to $100,000/year (Technology Investment Boost).
  • Apprenticeship wage subsidy extended
  • Primary producers – Concessional tax treatment for carbon abatement and biodiversity stewardship income
  • Expanded access to unlisted company employee share schemes
  • PAYG income tax instalment system set for structural overhaul
  • Business registry fees to be streamlined
  • Indirect taxes – excise and customs duty reduction and concession
  • Various tax administration changes.

One long-standing policy that has been repeatedly extended is the instant asset depreciation program. This was not extended in the Budget and could end on 30 June 2023.

SUPERANNUATION

The only measure announced relating to superannuation was the extension of the temporary reduction in minimum drawdown rates.

Overall, this Budget is designed to provide relief from cost of living pressures and minimise ‘losers’ from any policy decisions. Attention will now turn to next week’s Reserve Bank Board meeting to understand how this Budget may impact the Bank’s thinking around interest rates. Then the focus will be firmly on the timing of the federal election.

Please note these are just announcements and cannot be regarded as law until legislated.  Whilst Labor has come out in support of many of the “proposed” announcements earlier in the week, some of the budget measures may not pass parliament if they win the election; the election must be announced within two weeks.

If you require further information on any of these announced measures, please do not hesitate to contact our office on (07) 3367 3366.

 

2021 budget

2021 Budget Overview

The 2021 Federal Budget has been delivered, with the budget designed to keep the country out of recession through prolonged spending, with the goal to drive down unemployment.

From a pure tax perspective, it was a fairly uneventful budget.

There are a few key changes, however, and these are summarised below.

Extension of the Instant Asset Write-Off: An extension of this program out to June 2023 to allow businesses to immediately depreciate eligible assets, with no cap on the value of these assets. This not only directly benefits small businesses that invest but some of these assets will be purchased from or serviced by other small businesses.

Low & Middle Income Earner Tax Offsets Extended Another 12 Months:  The low and middle-income tax offset, which was due to end on June 30, will be extended for another 12 months. The offset is worth up to $1080 as a refund for about 10 million workers earning between $48,000 and $90,000 when they file their tax returns.

Loss Carry Back: Extended to 30 June 2023.  Losses incurred during the 2020 to 2023 years can be carried back to offset profits as far back as the 2019 year as a refundable tax offset.

Changes To Minimum Super Payments:  From 1 July 2022, the minimum threshold of $450 ordinary earnings before superannuation is payable will be removed. This ensures casual and part time workers are not penalised with less superannuation savings.

Super Contributions Limit for over 60’s: The access age to the “super downsizing scheme” will be reduced from 65 to 60 from 1 July 2022, allowing more people to boost their superannuation with the proceeds of the sale of their home. Contributions of up to $300,000 are allowed, but the home must have been owned for at least 10 years and the money must be paid into super within 90 days of receiving cash from the sale.

Superannuation – Removal of The Work Test: Work test rules for older Australians – which restrict contributions to super unless you are working a certain number of hours – will be scrapped.  This change means people who are between 67 and 74 who may have already retired, are doing volunteer work or who have more flexible work arrangements can continue to make voluntary contributions or salary sacrifice.

Self-Education Deductions – Removal Of $250 Adjustment: From 1 July 2022 the exclusion for the first $250 of deductions for self-education expenses will be removed from the first income year after Royal Assent.

Changes to Residency Rules: From 1 July 2022 they will replace the individual tax residency rules with new primary and secondary tests to determine residency.

– a primary ‘bright line’ test — under which a person who is physically present in Australia for 183 days or more in an income year will be an Australian resident for tax purposes;

– secondary tests depending on a combination of physical presence and measurable, objective criteria — for individuals who do not meet the primary test.

Tax Breaks for Aussie Patents: From 1 July 2022, companies that develop patents in Australia will receive tax reductions under an initiative to promote the manufacturing sector and innovations in the medical and biotech sectors.

Dubbed the “patent box”, the initiative will see corporate profits taxed at a concessional rate of 17 percent if the patents are developed in Australia. The scheme is expected to take effect on July 1.

Please contact Activ8 Accountants and Advisors if you have any questions about how the budget may affect you or your business.

Budget2020

Federal Budget 2020-21. What Does It Mean For You?

“There is a monumental task ahead,” the Treasurer admitted in his budget speech on Tuesday night.  For once this does not seem like an overstatement.  The coronavirus pandemic has fundamentally changed the way we do business in this country.

The challenge for the Government in this Budget was to outline a plan to kickstart the economy by encouraging jobs, investment, and household spending.  To this end they have delivered one of the most stimulatory budgets we have ever seen, featuring tax breaks for individuals and businesses.

The Government’s road to recovery hinges on middle- and high-income earners and businesses spending big.  The Government’s task now is to encourage businesses and households to take advantage of the new programs to deliver stronger economic growth and more jobs.

The three pillars of the Budget, that will underpin jobs, investment and household spending are:

  • Significant personal income tax cuts
  • JobMaker Hiring Credit for businesses employing new staff under 35
  • Immediate write off for any business assets purchased from 7:30pm last night

Lower taxes for households

  • Tax relief for over 11 million individuals.
  • Low- and middle-income earners to receive tax relief of up to $2,745 for singles or up to $5,490 for dual income families in 2020–21 compared with 2017–18 settings

Empowering businesses to grow, invest and innovate

  • 12 month wage subsidies to hire new apprentices and people under 35 who are on JobSeeker.
  • Temporary full expensing available to around 3.5 million businesses on purchases of eligible depreciable assets. No asset limits.
  • Temporary loss carry‑back available to around 1 million companies. Companies can offset tax losses against previously taxed profits to generate a refund.
  • Investing an additional $2 billion through the R&D Tax Incentive.

Cutting red tape for businesses

  • Reducing record keeping requirements for fringe benefits tax.
  • Exempting employer‑provided retraining activities from fringe benefits tax to encourage reskilling.

Lower personal income taxes

The centerpiece of the Budget were the personal income tax cuts, including the continuation of the Low and Medium Income Tax Offset, which will flow to more than 11 million taxpayers. They have also backdated these tax cuts to start on 1 July 2020.  This should mean the extra money will be in bank accounts as soon as the legislation is passed and payroll software is updated.

Workers earning between $50,000 and $90,000 will receive an extra $1,080 in 2020-21 as an extension of the low and middle income tax offset that was introduced last year.

People earning more than $120,000, on the other hand, will receive the biggest benefit with a permanent tax cut of $2,565 in 2020-21 and beyond.

The government is also looking at removing the 37% tax rate, so anyone earning between $45,000 and $200,000 only pays 30% tax.

In addition, sole traders will also benefit from the unincorporated tax discount of $1000.

For those people who receive a range of government payments, including aged pension, carer payment and family tax benefit, they will receive two $250 cash payments paid in December and March 2021.

Business-related policies

Business measures in this year’s Federal Budget focused on jobs recovery, tax breaks and the expansion of the instant asset write-off.

Job creation announcements:

JobMaker Hiring Credit – a 12-month wage subsidy for businesses that hire 16 to 35-year-olds for at least 20 hours per week, who were on JobSeeker. It will be a $200/week subsidy for those under 30 and $100/week for those aged 30-35. It’s expected that employers will report JobMaker Hiring Credits using Single Touch Payroll.

Apprentice wage subsidy scheme – businesses that hire new apprentices will be eligible for a 50% wage subsidy. The $1.2 billion scheme will support 100,000 apprentices and be available to businesses of all sizes.

Business investment announcements:

Extension of the Instant Asset Write-Off – An extension of this program out to June 2022 to allow businesses to immediately depreciate eligible assets, with no cap on the value of these assets. This not only directly benefits small businesses that invest but some of these assets will be purchased from or serviced by other small businesses.

R&D tax incentive changes – For small companies (annual turnover of less than $20 million) the refundable R&D tax offset will be set at 18.5 percentage points above the claimant’s company tax rate and there will be no cap on annual cash refunds.

Loss carry-back provisions – Companies will be able to offset losses incurred to June 2022 against prior profits made in or after the 2018/19 financial year.

Digital adoption announcements:

JobMaker Digital Business Plan – $800m for a series of measures to help Australia become a leading digital economy by 2030 and to improve productivity, income growth and jobs by supporting the adoption of digital technologies by Australian businesses.

Cyber security program – $1.7B to improve cyber security within government agencies and increase the confidence of small businesses to engage in the digital economy.

As with the tax cuts, the key to the success of these business-based programs is that they are used. Businesses will need to have the confidence to take on new staff and buy new equipment if the economy is to feel the full benefit of these programs.

Infrastructure projects

The Budget is not leaving all the responsibility of economic recovery to businesses and households, there was also an additional $7.5 billion spending for new national-level infrastructure projects. This funding is in addition to the $100 billion infrastructure fund (over ten years) announced in previous Budgets. In addition, $3.5 billion has been allocated for upgrades to the NBN roll-out to deliver more Fibre to the Premises connections.

Small businesses are also likely to benefit from the additional $1 billion for the Local Roads and Community Infrastructure program. This is for smaller, local projects to help councils to deliver immediate upgrades of local roads, footpaths and street lighting.

Budget success depends on confidence to spend and invest

The success of this Budget in rebooting the economy largely depends on the public response. Households will need to be confident enough to spend the tax cuts and businesses will need to be willing to invest in their future and hire new staff. If the tax cuts sit in bank accounts, business hiring and investment programs go unused and infrastructure projects are delayed then the economic recovery is less likely to eventuate.

A surprise coming out of this Budget was not bringing forward the timing of “Stage 3” tax cuts (which the Opposition opposes) or permanently increasing the JobSeeker payment.   The government has stayed silent on where it expects the level of unemployment benefits will eventually land permanently when the JobSeeker supplement ends. However, we note that there is an allowance for spending decisions not yet announced worth more than $6 billion over four years.

The politics of this Budget lies in the hope for the Government that the strategy works, and that all the huge uncertainties in the domestic and global outlook fall its way, so that by the middle of next year it can contemplate going to an election with voters feeling it has protected them from the worst a pandemic has thrown at them.

Please contact Activ8 Business Advisors if you have any questions about how the budget may affect you or your business.