On Tuesday night, 25 October 2022, Federal Treasurer Jim Chalmers handed down his first Federal Budget for the Labor Government. The economic outlook for Australia in this Budget is heavily influenced by the current inflation rate and the rising cost of living pressures. According to the Budget papers, inflation is now expected to peak at 7.75% by the end of 2022 before starting to settle down next year. While it is forecast that Australia will likely avoid a recession, the impact of large price increases in everyday staples like fuel, electricity and groceries have impacted on the framing of this budget.
Dr Chalmers has described his budget as:
- Providing responsible cost of living relief that doesn’t put additional pressure on inflation;
- Investing in a stronger and more resilient modern economy; and
- Responsibly repairing the Budget.
We’ve outlined below some of the measures that were announced in the Budget that will impact on our clients. As with all budgetary measures, these measures are not final until the relevant legislation has been passed by the Government. We will keep you updated on the status of any proposed measures.
Income Tax
The previously legislated stage 3 tax cuts for individuals starting 1 July 2024 remain untouched.
Cost of Living Relief
The budget has a five-point plan for cost-of-living relief:
- Cheaper child care;
- Expanding Paid Parental Leave;
- Cheaper medicines;
- More affordable housing;
- Getting wages moving again.
Cheaper Child Care
$4.6 billion will be provided to increase the maximum Child Care Subsidy (CCS) rate from 85% to 90% for families for their first child in care and to increase the CCS rate for all families earning less than $530,000 in household income.
Paid Parental Leave
Paid Parental Leave will also be expanded so that it will be available to families earning up to $350,000 per year. Either parent will also be 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 can claim weeks of the payment concurrently so they can take leave at the same time.
From 1 July 2024, the Government will start expanding the scheme by two additional weeks a year until it reaches 26 weeks from 1 July 2026.
Cheaper Medicines
$787 million over four years will be committed to reducing the costs of medicines under the Pharmaceutical Benefits Scheme (PBS). The maximum general co-payment for medicines on the PBS will be reduced fro $42.50 to $30.
More Affordable Housing
Housing Australia Future Fund: $10 billion will be invested into a newly created Housing Australia Future Fund. The returns generated from this fund will be used to deliver 30,000 social and affordable homes over 5 years and allocate $330 million for acute housing needs (remote Indigenous communities, women and children fleeing domestic and family violence, homeless veterans).
Housing Accord: $350 million will be provided over 5 years from 2024-25 to support funding of an additional 10,000 affordable homes under a Housing Accord with state and territory governments.
Help To Buy Scheme: $324.6 million over 4 years from 2022-23 to establish a Help to Buy scheme to assist people on low to moderate incomes to purchase a new or existing home using an equity contribution from the Government. This means more people will be able to buy a home with a smaller deposit and smaller mortgage.
Expanded ATO Compliance Programs
Funding is being provided to extend several ATO compliance programs.
Personal Income Tax Compliance Program
$80.3 million will be provided to the ATO to extend the Personal Income Tax Compliance Program for 2 years from 1 July 2023. This enables the ATO to continue to deliver a combination of proactive, preventative and corrective activities in key areas of non-compliance, including over-claiming of deductions and incorrect reporting of income. The compliance program is expected to generate additional tax revenue of $674.4 million.
Shadow Economy Program
The ATO Shadow Economy Program will be extended for a further 3 years from 1 July 2023. It will enable the ATO to target shadow economy (dishonest and illegal) activity to protect revenue and level the playing field for businesses that are following the rules. It is estimated that this program will generate additional tax revenue of $2.1 billion.
Tax Avoidance Taskforce
The ATO will receive an additional $200 million over 4 years from 1 July 2022 to help fund the Tax Avoidance Taskforce. The Taskforce will also be extended for a further year from 1 July 2025. The program is expected to generate additional tax receipts of $2.8 billion.
Older Australians
Expanded Downsizer Contribution
The Downsizer Contribution enables people 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 contributions do not count towards their non-concessional cap. The Government is proposing to reduce the minimum eligible age from 60 to 55 which will enable more people to access the concession.
Work Incentives for Pensioners
Under the proposed budget, age and veteran pensioners will be able to earn up to $11,800 before their pension is reduced (this is currently $7,800). This will support pensioners who want to work, or work more hours, to do so without losing their pension.
Seniors Health Card – Income Threshold Lifted
The income threshold for the Commonwealth Seniors Health Card will increase from $61,284 to $90,000 for singles and from $98,054 to $144,000 for couples.
Other measures of interest
Some other measures of interest include:
- Digital Currencies
- The budget has confirmed that digital currencies (for example, bitcoin) will not be taxed as foreign currency. The current tax treatment of digital currencies will be maintained – including capital gains tax where the currency is held as an investment.
- Support for Small Business Owners:
- $15.1 million will be provided over 2 calendar years from 1 January 2023 to 31 December 2024 to extend the Small Business Debt Hotline and the New Access for Small Business Owners programs to support the financial and mental wellbeing of small business owners.
- Depreciation of Intangible Assets
- The Government will not proceed with a measure to allow taxpayers to self-assess the effective life of intangible assets.
- Greater Penalties for Breaching Competition and Consumer Laws
- Maximum penalties for corporations breaching competition and consumer laws will increase from $10 million to $50 million per breach and from 10% to 30% of turnover (whichever is greater).
We will keep you up-to-date with the progress of the implementation of these Budget measures.
If you would like to discuss the tax implications of the budget proposals, please call us on (07) 56656469.
DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article 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 consent.
Jeanette has over 20 years experience as an accountant in public practice. She is a Chartered Accountant, registered tax agent and accredited SMSF Association advisor. When she is not helping business owners grow their empires, you will likely find her out running on the trails or at the gym. Book in to see Jeanette today.