2022-2023 Federal Budget

Posted 30 Mar '22

The Highlights

1. Individuals

1.1. Increase to low and middle income tax offset (“LMITO”):

The low and middle income tax offset (LMITO) currently provides a reduction in tax of up to $1,080 for individuals with a taxable income of up to $126,000.

The tax offset is triggered when a taxpayer lodges their 2021-22 tax return.

For the 2021-22, the LMITO will be increased by $420 which means that the proposed new rates for individuals are as follow, as follows:

1.2 Increasing the Medicare Levy low-income thresholds:

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

• The threshold for singles will be increased from $23,226 to $23,365
• The family threshold will be increased from $39,167 to $39,402
• For singles seniors and pensioners, the threshold will be increased from $36,705 to $36,925
• The family threshold for seniors and pensioners will be increased from $51,094 to $51,401

For each dependent child or student, the family income thresholds will increase by a further $3,619 instead of the previous amount of $3,597.

1.3. $250 Cost of living expenses:

A one-off $250 “cost of living payment” will be provided to eligible recipients. The payment will be made in April 2022 to eligible recipients.

2. Changes affecting business taxpayers

2.1. Temporary fuel excise reduction:

To ease the pressure felt by drivers at petrol bowsers, the Government will reduce the fuel excise by half – or 22.1 cents per litre for 6 months.

2.2. Instant asset write-off:

Maintained until 30 June 2023.

2.3. Technology Investment boost:

The Government intends to provide a 120% tax deduction for expenditure incurred by small businesses 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.

The technology boost will be available to small business with an aggregated annual turnover of less than $50 million.

An annual expenditure cap of $100,000 will apply to the boost.

2.4. Modernising the PAYG instalment system:

Normally GST and PAYG instalment amounts are adjusted using a GDP adjustment or uplift. For the 2022-23 income year, the Government is setting this uplift factor at 2% instead of the 10% that would have applied.

The 2% uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods for instalments for the 2022-23 income year and are due after the amending legislation comes into effect:

• Up to $10 million annual aggregated turnover for GST instalments; and
• $50 million annual aggregated turnover for PAYG instalments.

2.5. Small business productivity and security:

To boost investment in skills and new technology the Government has announced:

• $120 tax deduction for every $100 spent on training employees.
• $120 tax deduction for every hundred dollars spent on digital technologies such as cloud computing, e-invoicing, cyber security and web design.
• Supporting investments of up to $100,000 per year.

3. Other Budget announcements

3.1. Extending the reduction in minimum drawdowns:

The Government will extend the 50% reduction of superannuation minimum drawdown requirements for account-based pensions (“ABPs”) and similar products for a further year to 30 June 2023 (ie for the 2023 income year).

Based on this change, the (effective) reduced minimum percentage factors for ABPs (including TRISs), which are used to calculate the minimum annual pension amount under Schedule 7 to the SIS Regulations, are set out in the following table for the 2023 income year.

Note that, for ABPs and TRISs that commence or cease part-way through the 2023 income year, a pro-rated minimum pension payment applies (unless the pension commenced on or after 1 June 2023, in which case, no minimum pension payment is required).

Important: This is not advice. Clients should not act solely on the basis of the material contained in this Newsletter. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. The Newsletter is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.

If you would like to discuss any points raised in the above Newsletter or other elements relating to the 2022-2023 Federal Budget not mentioned, please feel free to contact your Accountant at PinnacleHPC Pty Ltd.

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