Federal Budget Update 2022-23

On Tuesday 25 October 2022, the Federal Treasurer Dr Jim Chalmers handed down the 2022/2023 Budget. It was the new Labor government's first budget, and according to Dr Chalmers "is a responsible budget that is right for the times and readies us for the future".  The three "primary objectives" of the economic policy that Labor has outlined are: 'responsible cost of living relief, strengthening the economy, and the beginning the hard yards of budget repair,' according to the Treasurer.

With that in mind, lets take a look at some of the key measures announced.

Personal Taxation

The Government did not announce any personal tax rate changes.  

The Stage 3 tax changes commence from 1 July 2024, as previously announced, but remain uncertain.  Despite a pre-election commitment that the Stage 3 tax cuts would remain, economic conditions have deteriorated, and the uncertainty around international conditions could force the Government to possibly delay, modify or even scrap the Stage 3 tax cuts.  It will be a wait and see approach.

Tax rates and income thresholds for 2022-23

Stage 3: rates & thresholds from 2024-25 onwards

Resident rates and thresholds - from 2024-25 onwards

The tax rates and income thresholds from the 2024-25 for residents (as already legislated) are:

Low income tax offsets 

The Budget did not announce any extension to the low and middle income tax offset (LMITO).  The 2021-22 income year was the last year this offset applies, in which eligible individuals received a maximum offset of up to $1,500.

The low income tax offset (LITO) will however continue to the 2022-23 income years and beyond, albeit no changes were announced in the Budget.  The maximum amount of the LITO is $700, with a reduction applying for taxable incomes between $37,500 and $66,667, and reduces to nil above this higher threshold.

Work from home temporary shortcut method - expired

This simple method of 80 cents per hour working-from-home-deduction has now lapsed.  The Budget did not announce any extension of this shortcut method beyond 30 June 2022.  The work-from-home 52 cents per hour fixed rate method is still available, as are alternative, 'actual costs' method, however this requires significantly more documentation for evidence of claims.  The compliance burden for individuals with work-from-home claims will likely increase given the popular shortcut method has expired.

Depending upon economic conditions and how well the economy picks up between now and the May-2023 Budget, it remains to be seen whether the personal income tax offsets and working-from-home measures are changed.

Small Business Taxation

Again, no major small business tax changes were announced in the Budget.

What was announced (which seems to be a regular occurrence in Federal Budgets), is more funding to the ATO for not only personal income tax compliance, but also to combat the shadow economy.  This all means more resources for the ATO to implement better systems to target non-compliance under the existing tax laws - both at the individual level - the usual targets of 'excessive' work related deduction claims and correct reporting of income, and for business - with some stronger integrity rules designed to protect the corporate tax base.  The $1.5 billion funding to the ATO is expected to raise an extra $5 billion in additional revenue to the Budget over four years.

Electric car tax measures

As previously announced, the Government will exempt zero or low emissions vehicles from Fringe Benefits tax (FBT) if:

 - the car is zero or low emissions vehicle (eg, battery, EV, hydrogen fuel cell EV, or PHEV);

 - the value of the car was below the luxury car threshold for fuel efficient vehicles (currently $84,916); and

 - the car is first held or used on or after 1 July 2022

Superannuation

3-year cycle for SMSF audits will not proceed

Previously announced in the 2018-19 Budget, the current Labor Government will not proceed to allow a 3-year cycle of audits for certain self-managed superannuation funds with a history of good record-keeping and compliance.

Super downsizer contributions eligibility age reduction to 55 years confirmed

The eligibility age will be lowered from 60 years to 55 years for making super downsizer contributions.  This proposal will allow individuals aged 55 or over to make additional non-concessional contributions of up to $300,000 from the proceeds of selling their main residence. This is provided either the individual or their spouse have owned the home for 10 years.  The cap is per contributor, therefore a total of up to $600,000 could be made for a couple, and there is a 90-day time limit from the date of settlement to do so.

For Families - Cost of living plan

The Government's plan for cost-of-living relief includes;

• Cheaper Childcare - the maximum childcare subsidy rate will increase from 85% to 90% for the first child in care and the rate will increase for all families earning less than $530,000;
• Paid Parental leave - increasing the current 20 weeks to 26 weeks leave by July 2026.  Eligibility has expanded to include families with up to $350,000 in income;
• More affordable housing - including helping 40,000 people to own their home with a lower deposit and smaller mortgage through the Help to Buy Scheme;
• Plan for wages growth - Government investment in the workforce - including 480,000 fee free TAFE places, 20,000 additional Uni places in 2023 & 2024 in areas of skills shortages such as nursing, teaching, engineering and technology.

As always, many of the announcements made in the Budget have not as yet been formally legislated.  Please feel free to contact our team of tax and superannuation experts if you have any questions regarding the 2022/2023 Federal Budget announcements and measures.