2022 Federal Budget Report – Important changes you should know

2022 Federal Budget Report – Tax and business summary

What an exciting night! The Federal Budget consists of many changes that benefits Australians across the country, especially low-to-middle income earners and small-medium businesses. This article summarises the key initiatives that last night's federal budget announced. There is a substantial opportunity for those wanting to invest in digitisation and training for their small businesses, a 6-month 50% reduction in fuel excise, increased tax offsets for low- and middle-income earners and support for some social security recipients. 

What are the personal income tax changes? 

Low- and middle-income tax offset $420 top up 

Individuals earning less than $126,000 in the 2022 financial year will receive an additional $420 cost of living tax offset. This is on top of the already existing low and middle income tax offset, increasing the maximum benefit from $1,080 to $1,500. This will be received when taxpayers submit their 2022 tax returns. 

Increasing the Medicare levy low-income thresholds 

These changes mean more low-income earners can benefit from lower or no Medicare Levy. The changes are as follows: 

  • Singles from $23,226 to 23,365 
  • Families from $39,167 to $39,402 
  • Single Seniors and Pensioners from $36,705 to $36,925 
  • Family Seniors and Pensioners from $51,094 to 51,401 
  • Student increase from $3,619 to 3,597 

Tax deductibility of COVID-19 test expenses 

Costs of taking COVID-19 test to attend work are tax deductible starting 1 July 2021. They will also not incur FBT where the tests are provided by the employer. 

Varying the GDP uplift factor for tax instalments 

This applies for individuals paying PAYG Instalments for income received from sole trader activities or investments. The nominal 10% increase as per the statutory formula will be reduced to 2%. Effectively providing better cashflow throughout the year. It is important to note that this will not result in paying less tax, it is only deferring the payment to the end of the year. This applies to PAYGI from 1 July 2022. 

What are the changes for businesses? 

Supercharged Skills and Training Tax Deductions  

Eligible businesses will be able to deduct 120% of expenditure incurred on external training courses provided to its employees e.g. spend $100 and get $120 tax deduction. The boost will apply from now until 30 June 2024. Some exclusions will apply, such as for in-house or on-the-job training and expenditure on external training courses for people other than employees. 

Supercharged Technology Investment Deductions  

An eligible business will be able to deduct 120% of the cost incurred on business expenses and depreciating assets that support its digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud-based services. An annual cap will apply in each qualifying income year so that expenditure up to $100,000 will be eligible for the boost. The boost will apply from now until 30 June 2023.  

PAYG Instalment Adjustments 

Companies will be allowed to choose to have their PAYG instalments calculated based on their current financial performance. This will ensure the instalments reflect current business performance rather than being based on prior years.  

COVID Business Grants will be tax free  

Certain state and territory COVID grants will be made non assessable non exempt (NANE) income until 30 June 2022, these include:  

  1. New South Wales Accommodation and Support Grant. 
  1. New South Wales Commercial Landlord Hardship Grant. 
  1. New South Wales Performing Arts Relaunch Package. 
  1. New South Wales Festival Relaunch Package. 
  1. New South Wales 2022 Small Business Support Program. 
  1. Queensland 2021 COVID-19 Business Support Grant. 
  1. South Australia COVID-19 Tourism and Hospitality Support Grant. 
  1. South Australia COVID-19 Business Hardship Grant. 

ASIC search fees for companies are scrapped 

Prior to this announcement, searches conducted on ASIC for information on companies started at $40 per search. These have now been scrapped, with the government forsaking $65 million in revenue over the next 3 years associated with these searches. 

It is great to see the Federal Government incentivising businesses to upskill their staff and invest in technology-based solutions. Please contact LINK Advisors if you’d like to know more about what is eligible for a 120% deduction or if you’d like guidance with the new measures described in the 2022 Federal Budget.