A Budget for the current conditions
The Federal Treasurer, Dr Jim Chalmers, handed down the Albanese Government’s first Federal Budget at 7:30pm (AEDT) on 25 October 2022.
Despite an uncertain global economic environment, the Treasurer has lauded Australia’s low unemployment and strong export prices as reason for a 3.5% growth in the current financial year, slowing to 1.5% in 2023–24. The Budget projects a deficit of $36.9 billion, lower than the forecast earlier this year of $78 billion.
Described as a sensible Budget for the current conditions, it contains various cost of living relief measures including cheaper child care, expanding paid parental leave and encouraging downsizing to free up housing stock. Key tax measures are targeted at multinationals, particularly changes to the thin capitalisation rules, and changes to deduction rules for intangibles.
Importantly, no amendments have been proposed to the already legislated Stage-3 individual tax rate cuts. Additional funding for a range of tax administration and compliance programs have also been announced. Finally, the fate of a suite of announced but unenacted tax measures, including a few that have been around for at least 10 years, has been confirmed.
The full Budget papers are available at budget.gov.au and the Treasury ministers’ media releases are available at ministers.treasury.gov.au. The tax, superannuation and social security highlights are set out in Our Federal Budget Update.
The Highlights
Individuals
» The amount pensioners can earn in 2022–23 will increase by $4,000 before their pension is reduced, supporting pensioners who want to work or work more hours to do so without losing their pension.
» To incentivise pensioners to downsize their homes, the assets test exemption for principal home sale proceeds will be extended and the income test changed.
» 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 Paid Parental Leave Scheme will be amended so that either parent is able to claim the payment from 1 July 2023. The scheme will also be expanded by 2 additional weeks a year from 1 July 2024 until it reaches 26 weeks from 1 July 2026.
» The maximum Child Care Subsidy (CCS) rate and the CCS rate for all families earning less than $530,000 in household income will be increased.
» The current higher Child Care Subsidy (CCS) rates for families with multiple children aged 5 or under in child care will be maintained.
» Legislation will be introduced to clarify that digital currency (or crypto currencies) will not be treated as foreign currency for income tax purposes.
Companies & Business
» Electric vehicles under the luxury car tax threshold will be exempt from fringe benefits tax and import tariffs.
» A number of Victorian and ACT based business grants relating to the COVID-19 pandemic will be non-assessable non-exempt income for tax purposes.
» Grants will be provided to small and medium-sized businesses to fund energy efficient equipment upgrades.
» The tax treatment for off-market share buy-backs undertaken by listed public companies will be aligned with the treatment of on-market share buybacks.
» The 2021–22 Budget measure to allow taxpayers to self-assess the effective life of intangible depreciating assets will not proceed.
» Heavy Vehicle Road User Charge rate increased from 26.4 to 27.2 cents per litre of diesel fuel, effective from 29 September 2022.
» The proposed measure from the 2018–19 Budget to impose a limit of $10,000 for cash payments will not proceed.
Multinationals
» Thin capitalisation rules for non-ADIs will be amended from 1 July 2023, with tests relating to ratios replaced by earnings-based tests.
» Significant global entities will be denied a tax deduction for payments to related parties in relation to intangibles held in low- or no-tax jurisdictions.
» Significant global entities and public companies will have additional reporting requirements for income years commencing from 1 July 2023.
Superannuation
» Eligibility to make a downsizer contribution to superannuation will be expanded by reducing the minimum age from 60 to 55 years.
» The 2021–22 Budget measure that proposed relaxing residency requirements for SMSFs and small APRAregulated funds (SAFs) from 1 July 2022, has been deferred.
» The 2018–19 Budget measure that proposed changing the annual audit requirement for certain self-managed superannuation funds (SMSFs) will not proceed.
Tax Administration
» Penalty unit increase to $275 from 1 January 2023.
» Personal Income Taxation Compliance Program extended a further 2 years to 30 June 2025
» Shadow economy compliance program extended to 30 June 2026.
» The ATO tax avoidance taskforce will receive additional funding and is being extended to 30 June 2026.
» Financial penalties for breaches of foreign investment compliance to double from 1 January 2023.
» The proposed extension of reportable transactions relating to the sharing economy deferred by 12 months to 1 July 2024.