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2022 Federal budget wrap made easy.

Last night, the government released the 2022/23 Budget. Understanding the Budget and what it means to you can be daunting, and it doesn’t have to be. In this article, we will simplify the 2022 budget wrap. While there was some specialised boutique help for small companies, the Budget was largely concerned with alleviating the cost of living pressures faced by individuals and families. On the issue of superannuation, the Budget was notably quiet compared to previous years.

Touch base with your advisor for more information and suggestions on these and other Budget proposals and how they might influence you or your company. Each measure is generally subject to the passage of legislation through Parliament.

Business

What does the 2022 budget wrap mean for your business?

Additional Deduction for Skills Training and Digital Adoption 20%

Do you have a business with a turnover of less than $50 million that will benefit from a 20% increase in deductions (on what they would receive without the incentive) for eligible training expenses and digital technology? This 20% boost is available for digital adoption and skills training expenditures incurred between last night’s Budget and June 30 2023, and June 30 2024, for skills training.

Apprentice Wage Subsidies Extended

The Boosting Apprenticeship Commencement (BAC) and Completing Apprenticeship Commencements (CAC) wage subsidies will be extended by three months to June 30 2022. Furthermore, funding has been set aside for a new Australian Apprenticeships Incentive System for over five years to support ‘priority occupations for employers and apprentices.

Reduction in GDP Uplift Factor for PAYG and GST Instalments for 2022/23

The scheduled rate for the 2021/22 and 2022/23 financial years is 2%, significantly lower than the statutory formula of 10%. It will apply to small and medium-sized enterprises eligible to utilise the relevant instalment techniques (up To $10 million annual aggregate turnover for GST instalments and $50 million annual aggregate turnover for PAYG.

For context, the Australian Taxation Office adjusts GST and PAYG instalments using a formula called the gross domestic product (GDP) adjustment every year. This is based on statistics released by the Australian Bureau of Statistics. This measure may help eligible firms enjoy true cash flow in the upcoming financial year. Contact Ingrams Accounting if you have any questions about what was contained in the 2022 Budget wrap and how it may impact you or your business moving forward.

PAYG instalments: Option to Base on Current Financial Performance

Business accounting programs will be able to provide company income data (such as operating profit and turnover) that allows firms to opt-out of the current year’s financial performance being used in calculating their PAYG instalments. While this is a step in the right direction, it will not be implemented until January 1, 2024, when it will reflect real-time company performance.

Employee Share Schemes for Unlisted Companies – Thresholds Amended

The investment thresholds for unlisted firms with employee share plans (ESS) will be changed. Participants will be able to invest up to:

$30,000 per participant each year for five years, accrued for unexercised options up to five years and 70% of dividends and cash bonuses, or

No matter how small, any amount will enable them to take advantage of a planned sale or listing of the firm to sell their acquired interests at a profit as soon as possible.

The regulatory stipulations for offers to independent contractors that do not require payment of interests will be eliminated.

No date of commencement was announced.

NOW, ONE OF THE MOST POPULAR ways to incentivise employees by (at least in part) tying their remuneration to the company’s success is giving INCENTIVES. Contact Ingrams Accounting if you have any questions about what was contained in the 2022 Budget wrap and how it may impact you or your business moving forward.

Individuals

In a cost-conscious campaign, some of the major initiatives targeted towards the pocket included what does the 2022 budget wrap mean for individuals?

LMITO Increased

The low and middle-income tax offset (LMITO) will rise by $420 in 2021/22, meaning that eligible individuals may receive a tax benefit of up to $1,500 for the upcoming 2021/22 tax season. For those who make between $48,001 and $90,000 per year, this will phase out at $126,000

From July 1, 2020, the instant asset write-off will be increased from $30,000 to $100,000 and will be available to businesses with an annual turnover of less than $50 million (up from $10 million).

Depending on your tax position, this could be an enticement to submit your tax returns early next year. Contact Ingrams Accounting if you have any questions about what was contained in the 2022 Budget wrap and how it may impact you or your business moving forward.

$250 Cost of Living Payment

A one-time, tax-free cost of living payment will be paid out to six million eligible pensioners, welfare recipients, veterans, and concession cardholders.

This will provide immediate relief as the payment is made in April 2022.

COVID Test Expenses Deductible

As previously announced, the cost of taking a COVID test (PCR or RAT) to get employment will be tax-deductible, dating back to July 1, 2021. In addition, employers will not be subjected to FBT in this scenario due to the provision of COVID tests to workers.

Employees and businesses should maintain records of their expenses (for example, receipts).

2022/23 Income Tax Rates Unchanged

The tax rates for the next financial year are unchanged from this year’s rates.

The next round of personal income tax cuts, which have already been enacted, will not be implemented for another two years (July 2024). Contact Ingrams Accounting if you have any questions about what was contained in the 2022 Budget wrap and how it may impact you or your business moving forward.

Superannuation

In comparison to recent years, the Budget was relatively quiet on this topic, with only two items of note:

Pension Drawdowns – 50% Reduction Extended to 2022/23 

The reduction to the minimum yearly drawdown amount for superannuation pensions and annuities will be extended by one year to June 30 2023. This is meant to prevent pensioners from being forced to sell assets in economic uncertainty to keep up with the required drawdown percentage standards.

Of course, this limit will be just enough. Recipients are free to take more than this if they so desire. Contact Ingrams Accounting if you have any questions about what was contained in the 2022 Budget wrap and how it may impact you or your business moving forward.

Super Guarantee Increase to Proceed 

There was no indication that the government would bring legislation to repeal the existing law, which would raise the SG rate to 10.5% (from 10%) on July 1, 2022. SG is a pay measure for hourly employees and some contractors.

Employers will need to account for the expense in their budgets, depending on how existing employment remuneration systems are set up. If you have any questions, contact your advisor.

Other July 1 Changes

Although it was not mentioned in the Budget, you should be aware of the following superannuation changes that will go into effect on July 1, 2022:

Extend the non-concessional cap to individuals under 75 (subject to their total superannuation balance)

For individuals aged 67 to 74, the requirement to pass a work test in order to make or receive personal and salary sacrificed contributions has been removed.

For SG contributions, the $450 per month income cutoff has been lifted – those making less than this amount can now qualify for SG.

For the home downsizer contribution plan, contributors must be under the age of 65 (down from 65).

Increase the release amount for first-time home savings members under the Super Saver Plan from $30,000 to $50,000.

Contact Ingrams Accounting if you have any questions about what was contained in the 2022 Budget wrap and how it may impact you or your business moving forward.

Other

Temporary Reduction in Fuel Excise 

For a period of six months, this has been reduced by half. If the total tax is passed on, the excise (and fuel price) will be lowered by about 22 cents per litre, which takes effect immediately after March 30 2022.

Relief for First Home Buyers 

The Home Guarantee Scheme will continue to expand, with 50,000 people and couples added each year. This program helps individuals overcome the most significant barrier in the housing market: saving for a deposit. Eligible first-time buyers can borrow money from the government to buy a new home or build one themselves.

Further information

These are just the headline measures! The full Budget papers can be found here.

Contact Ingrams Accounting if you have any questions about what was contained in the 2022 Budget wrap and how it may impact you or your business moving forward.

This information is general and has been prepared without considering your objectives, personal or business circumstances, financial situation, or needs. Because of this, you should, before acting on this information, consider in consultation with your adviser its appropriateness, having regard to your objectives, personal or business circumstances, financial situation and needs.

Chris Sheppard

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