Federal Budget - Tax

Tax offsets and temporary cuts were at the heart of this year’s Federal Budget as the government attempts to woo voters in the run-up to the election.

Treasurer Josh Frydenberg emphasised the crucial role of his tax measures in helping Australians cope with the growing cost of living pressures and in supporting the small businesses he calls the “engine room of our economy”.

According to the Treasurer, the measures in this year’s Budget represent the “next stage in leading Australia’s strong economy into the future”.

One-off tax offset and payments

A signature announcement in the Federal Budget was providing one-off cost of living tax offsets and payments to lower-income earners.

From 1 July 2022, taxpayers will receive a one-off $420 cost of living offset. The offset will take effect when they submit their tax returns at the end of the 2021-22 financial year.

In addition, the Budget included a one-off income tax-exempt payment of $250 to help eligible pensioners, welfare recipients and concession card holders with their cost of living pressures. They will automatically receive the payment in April 2022.

A key tax omission in this year’s Budget was another extension to the existing Low and Middle Income Tax Offset (LMITO), which means eligible taxpayers will no longer receive the offset (currently worth up to $1,080) beyond the current financial year.

Cut to fuel excise

Another major measure in the Budget was a temporary halving of the current excise rates for petrol, diesel and other fuel and petroleum-based products for six months until 28 September 2022.

This temporary cut in petrol and diesel rates (from 44.2 cents to 22.1 cents) per litre is designed to reduce cost of living pressures for households and small businesses.

According to the Treasurer, households will be around $300 better off over the 6 month period. Businesses will receive fuel tax credits where fuel is used in light vehicles travelling off public roads and by heavy vehicles or plant and machinery. Light vehicles operating on public roads are ineligible for FTCs, but will benefit from cheaper bowser prices.

Small business support

The Budget also included a reduction in the GDP uplift rate to be used for 2022-23, which will provide $1.85 billion in cash flow support for small business.

Both the offsetting of losses against previously taxed profits and the instant write-off of assets for businesses with a turnover of less than $5 billion were extended again until 30 June 2023.

Businesses with annual turnover of less than $50 million will also gain access to a new bonus 20 per cent tax deduction for the costs (up to $100,000) of expenses and depreciating assets relating to improvement of the organisation’s uptake of digital technologies. These technologies include such things as cloud computing, cyber security enhancements and portable payment devices.

Training and apprenticeship subsidies

A new Skills and Training Boost will provide small businesses with an annual turnover of less than $50 million with access to a bonus 20 per cent tax deduction for the cost of external training courses delivered to their employees. The deduction will apply to training expenditure from Budget night until 30 June 2024.

Employers will also be able to access wage subsidies if they take on apprentices in occupations listed on the Australian Apprenticeship Priority List. For an apprentice earning $34,000 a year, an employer will be eligible to receive up to $8,750 in wage subsidies over two years.

The Budget also provided $5.6 million over four years in funding for a new dedicated small business unit in the Fair Work Commission and $2.1 million for Financial Counselling Australia’s Small Business Debt Helpline.

COVID-19 tests tax deductible

To clarify concerns expressed by taxpayers, the Budget included a provision to make the cost of taking a COVID-19 test to attend a place of work tax deductible for individuals from 1 July 2021. The government also announced that Fringe Benefits Tax (FBT) will not be incurred by businesses where they provide COVID-19 tests to their employees for this purpose.

If you would like to discuss any measures in the Federal Budget, please don’t hesitate to give us a call.

Information in this article has been sourced from the Budget Speech 2022-23 and Federal Budget support documents.

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