Key Takeaways From the October 2022 Federal Budget
The updated federal Budget for 2022-23 has been delivered. In contrast to the former government’s budget in March 2022, there are no targeted tax concessions for small and medium businesses. Instead, this updated budget is aimed at easing the growing pressure on the cost of living. Despite this, some of the measures from the former government’s 2022-23 budget, which provided for tax concessions for small businesses, are tipped to stay. More on these later.
Individuals and Families
Child Care Subsidy
- The maximum Child Care Subsidy will increase from 85% to 90% for families earning less than $80,000.
- The subsidy rates will taper down one percent for each additional $5,000 in income until it reaches 0% for families earning $530,000.
- This is illustrated in the below table.
| Your Family Income | Child Care Subsidy Percentage |
|---|---|
| $0 to $80,000 | 90% |
| More than $80,000 to below $180,000 | Between 90% and 70% The percentage goes down by 1% for every $5,000 of income your family earns |
| More than $180,000 to below $280,000 | Between 70% and 50% The percentage goes down by 1% for every $5,000 of income your family earns |
| More than $280,000 to below $380,000 | Between 50% and 30% The percentage goes down by 1% for every $5,000 of income your family earns |
| More than $380,000 to below $480,000 | Between 30% and 10% The percentage goes down by 1% for every $5,000 of income your family earns |
| More than $480,000 to below $530,000 | Between 10% and 0% The percentage goes down by 1% for every $5,000 of income your family earns |
| $530,000 or more | 0% |
Paid Parental Leave
- From 1 July 2023, the Paid Parental Leave Scheme will be flexible for families so that either parent is able to claim the payment.
- They will also be able to claim weeks of the payment concurrently.
Superannuation and Investors
Downsizer Superannuation Contributions
- Reduction in the age an individual can make a ‘downsizer’ contribution to superannuation from the current 60 years to 55 years of age.
- Each individual aged 55 years of age or over, will be able to contribute up to $300,000 into superannuation from the proceeds of selling their principal residence, where the residence has been owned for at least ten years.
Cryptocurrency
- Digital currencies, otherwise known as cryptocurrency, will not be taxed under foreign currency exchange rules.
- These investments will be treated the same way as shares and will be taxed under the capital gains regime, with each buy, swap, and sale being treated as a capital gains tax event.
- Any income earned from holding cryptocurrency will be taxed as financial investment income.
Former Government’s Budget Items Expected to be Re-Introduced
Key tax measures announced by the previous Government in its last federal Budget 2022-23 on 29 March 2022, which had bipartisan support and are expected to be re-introduced to parliament, include.
Small Business Technology Investment Boost
- An eligible business will be able to deduct 120% of the cost incurred on business expenses and depreciating assets that support its digital operations, e.g. spend $100 and get a $120 tax deduction.
- This includes portable payment devices, cyber security systems, and subscriptions to cloud-based services.
- The boost will apply from 30 March 2022 until 30 June 2023, with an annual cap applying in each qualifying income year, so that expenditures up to $100,000 will be eligible for the boost.
Small Business Skills and Training Boost
- Eligible businesses will be able to deduct 120% of expenditure incurred on external training courses provided to their employees.
- The boost will apply from 30 March 2022 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.
PAYG Instalment Adjustments
- Companies will be allowed to choose to have their PAYG installments calculated based on their current financial performance.
- This will ensure the installments reflect current business performance rather than being based on prior years.
Previous Years Key Budgetary Measures
Temporary Full Expensing
- The temporary full expensing measures are still scheduled to end on 30 June 2023.
- Unfortunately, there was no extension in this budget.
- Temporary full expensing enables full claiming of depreciable assets upfront, once the asset is installed and ready to use.
- To take advantage of this measure and claim the deduction in full upfront, businesses need to ensure that the depreciable asset is installed and ready for use on or before 30 June 2023.
Stage 3 Tax Cuts
- The Stage 3 income tax cuts passed by the Australian parliament in 2018/2019 are scheduled to commence on 1 July 2024 and are unchanged in this budget.
- The Stage 3 tax cuts will abolish the current 37% tax bracket, lower the existing 32.5% tax bracket to 30% and raise the threshold for the top tax bracket from $180,001 to $200,001.
- These tax bracket changes are summarised in the following table;
| Tax Rate | Thresholds in 2022-23 | New Tax Rate | New thresholds in 2024-25 |
|---|---|---|---|
| Nil | Up to $18,200 | Nil | Up to $18,200 |
| 19 per cent | $18,201-$45,000 | 19 per cent | $18,201-$45,000 |
| 32.5 per cent | $45,001-$120,000 | 30 per cent | $45,001-$200,000 |
| 37 per cent | $120,001-$180,000 | N/A | N/A |
| 45 per cent | $180,001 and over | 45 per cent | $200,001 and over |
If you need help understanding what these budget announcements mean for you reach out to one of our Client Advisors for a chat. We’ll be happy to help.