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.
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.
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.
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.