The Federal Treasurer, Dr Jim Chalmers, handed down the Labor government’s first Federal Budget at 7:30 pm (AEDT) on 25 October 2022.
The following provides the key points in relation to business, individuals and superannuation:
Businesses
FBT and tariff exemptions for electric vehicles
Electric vehicles under the luxury car tax threshold ($84,916 for 2022–23) will be exempt from fringe benefits tax and import tariffs. To qualify for the exemption, the electric vehicle must not have been held or used prior to 1 July 2022. Legislation introducing the FBT exemption is before the Senate.
The FBT exemption ultimately provides an opportunity for individuals to purchase an electric vehicle under a salary sacrifice novated lease arrangement. Without the FBT exemption, any benefit of this type of arrangement can be negligible. This is especially the case when an employee’s business use percentage is very low or nil. A salary sacrifice arrangement effectively a saving for the user of an electric vehicle, as the payment of the vehicle will reduce their income tax. Along with the FBT savings, consumers of electric vehicle will also benefit from the removal of a 5% import tariff.
Despite the FBT exemption, an employer will still be required to report their employee’s reportable car fringe benefits in the employee’s reportable fringe benefits amount. This reportable amount is part of the payment summary reporting requirements and is used to calculate various tax rebates and thresholds.
More business grants to be given non-assessable non-exempt income status
State-based business grants handed out during the COVID-19 pandemic are assessable income to the recipient unless the government places that grant in a special exclusion category. The government has announced the following Victorian and ACT business grants to be non-assessable non-exempt income for tax purposes:
Victoria
- Victoria Business Costs Assistance Program Round 2 – Top up, Round 3, Round 4, Round 4 – Construction and Round 5
- Victoria Commercial Landlord Hardship Fund 3
- Victoria Impacted Public Events Support Program Round 2
- Victoria Licensed Hospitality Venue Fund 2021 – July extension and Top up payments
- Victoria Live Performance Support Program (Presenters) Round 2 and (Suppliers) Round 2
Australian Capital Territory
- ACT HOMEFRONT 3
- ACT Small Business Hardship Scheme
This announcement is in addition to several other state-based business grants that have been give non-assessable non-exempt status since the beginning of the COVID-19 pandemic.
Energy efficiency grants for SMEs
Grants will be provided to small and medium-sized businesses to fund energy efficient equipment upgrades.
The grants will be available to support studies, planning, equipment and facility upgrade projects that improve energy efficiency, reduce emissions or improve management of power demand.
The government will provide $62.6 million over 3 years from 2022–23 for this measure.
Tax treatment for off-market share buy-backs of listed public companies
The tax treatment for off-market share buy-backs undertaken by listed public companies will be aligned with the treatment of on-market share buy-backs.
Under the current tax treatment for an off-market buy-back, the difference between the purchase price and the part of the purchase price in respect of the buy-back which is debited against the company’s share capital account is taken to be a dividend. Franking credits may be available with respect to such a dividend. In the case of an on-market buy-back, no part of the buy-back price is treated as a dividend and the total amount received by the shareholder is treated as consideration for the share sale.
The measure will apply from 7:30pm AEDT on 25 October 2022 (Budget night).
Intangible asset depreciation measure — not proceeding
The 2021–22 Budget measure to allow taxpayers to self-assess the effective life of intangible depreciating assets will not proceed. A Bill introduced to implement the measure lapsed upon the proroguing of parliament.
The statutory effective lives for intangible depreciating assets set out in the table under s 40-95(7) of ITAA 1997 will continue to apply.
The measure was previously proposed to apply to certain intangible depreciating assets first held on or after 1 July 2023.
The measure has been discontinued to avoid potential integrity concerns and contribute to budget repair.
Fuel tax credits — heavy vehicle road user charge increased
The Heavy Vehicle Road User Charge rate has been increased from 26.4 cents per litre to 27.2 cents per litre of diesel fuel, effective from 29 September 2022.
The previous rate of 26.4 cents per litre was announced in the 2021–22 Budget and commenced on 1 July 2021. The increased rate will reduce expenditure on the Fuel Tax Credit from the 2022–23 income year.
Limit on cash payments to businesses — not proceeding
A proposed measure from the 2018–19 Budget to impose a limit of $10,000 for cash payments made to businesses for goods and services will not proceed.
A Bill implementing the measure had been previously introduced into parliament in 2019 but was discharged from the Senate notice paper following recommendations from a Senate Economics Legislation Committee in February 2020 that the measure be reviewed.
Individuals
Incentivising pensioners into the workforce
Age and veterans pensioners will be provided with a once off credit of $4,000 to their Work Bonus income bank. This will increase the amount pensioners can earn in 2022–23 from $7,800 to $11,800, before their pension is reduced. The measure will support pensioners who want to work or work more hours to do so without losing their pension.
Incentivising pensioners to downsize
The assets test exemption for principal home sale proceeds will be extended from 12 months to 24 months for income support recipients. The income test will also be changed, to apply only the lower deeming rate (0.25%) to principal home sale proceeds when calculating deemed income for 24 months after the sale of the principal home.
Income threshold for the Commonwealth Seniors Health Card increased
The income threshold for the Commonwealth Seniors Health Card will be increased from $61,284 to $90,000 for singles and from $98,054 to $144,000 (combined) for couples.
The government will also freeze social security deeming rates at their current levels for a further 2 years until 30 June 2024, to support older Australians who rely on income from deemed financial investments, as well as the pension, to deal with the rising cost of living.
Paid Parental Leave flexibility reforms
The Paid Parental Leave Scheme will be amended from 1 July 2023 so that either parent is able to claim the payment and both birth parents and non-birth parents are allowed to receive the payment if they meet the eligibility criteria. Parents will also be able to claim weeks of the payment concurrently so they can take leave at the same time.
From 1 July 2024, the scheme will be expanded by 2 additional weeks a year until it reaches a full 26 weeks from 1 July 2026. Both parents will be able to share the leave entitlement, with a proportion maintained on a “use it or lose it” basis, to encourage and facilitate both parents to access the scheme. Sole parents will be able to access the full 26 weeks.
The Women’s Economic Equality Taskforce will assist in the finalisation of the changes to the scheme to ensure that the final model supports women’s economic participation and gender equality, including the period of concurrence and the most appropriate proportion of “use it or lose it” weeks.
Child care subsidy rate increased
The maximum Child Care Subsidy (CCS) rate will be increased from 85% to 90% for families for the first child in care and the CCS rate for all families earning less than $530,000 in household income will be increased.
Higher child care subsidy rates for families with multiple children maintained
The current higher Child Care Subsidy (CCS) rates for families with multiple children aged 5 or under in child care will be maintained, 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.
Digital currency will not be taxed as foreign currency
Legislation will be introduced to clarify that digital currency (or crypto currencies) will continue to not be treated as foreign currency for income tax purposes. The treatment does not apply to digital currencies issued by, or under the authority of, a government agency, which continue to be taxed as foreign currency.
This tax treatment for digital currency will be backdated to apply to income years that include 1 July 2021. The position was announced on 22 June 2022 following the decision of the government of El Salvador to adopt Bitcoin as legal tender, and draft legislation was released by Treasury on 6 September 2022 for consultation.
Superannuation
Minimum age to make downsizer superannuation contribution reduced
Eligibility to make a downsizer contribution to superannuation will be expanded by reducing the minimum age from 60 to 55 years.
The downsizer contribution allows an individual to make a one-off post-tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home.
Both members of a couple can contribute and the contributions do not count towards non-concessional contribution caps.
The measure will take effect from the start of the first quarter after Royal Assent of the enabling legislation.
Proposed changes to SMSF residency requirements — deferred
The 2021–22 Budget measure that proposed relaxing residency requirements for SMSFs and small APRA-regulated funds (SAFs) from 1 July 2022, has been deferred.
The proposed measure relaxes the residency requirements for SMSFs by extending the central control and management test safe harbour from two to five years for SMSFs. In addition, the active member test will also be removed for both SMSFs and SAFs.
The change will allow members to continue to contribute to their superannuation fund whilst temporarily overseas, ensuring parity with members of large APRA-regulated funds.
This measure will now take effect on or after the date of Royal Assent of the enabling legislation.
Proposed changes to audit requirements for certain SMSFs — not proceeding
The 2018–19 Budget measure that proposed changing the annual audit requirement for certain self-managed superannuation funds (SMSFs) will not proceed.
The measure had proposed to change the annual SMSF audit requirement to a 3 yearly requirement for SMSFs with a history of good record-keeping and compliance.
Proposed requirement for retirement income products metric reporting — not proceeding
The 2018–19 Budget measure that proposed introducing a requirement for retirement income product providers to report standardised metrics in product disclosure statements will not proceed.
The measure had proposed forcing retirement income product providers to report simplified, standardised metrics in product disclosure statements to assist customer decision making. The proposed measure had been announced alongside the introduction of a retirement covenant requiring superannuation trustees to formulate a retirement income strategy for superannuation fund members.
The full Budget papers are available at www.budget.gov.au.
Any Questions?
If you have questions on the federal budget, please contact us.
Become Money Smart
Build your financial knowledge and join our online community where you will receive TAG updates and invites to our Information Sessions.
Meet with us
If you would like to discuss your financial goals further, contact us to arrange a time.
Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2022. Please do not reproduce without the expressed written consent of the author.