2022/23 Federal Budget: Personal income tax changes.
Below is a summary of matters handed down in the Federal Budget on Tuesday 29th March 2022 which impact on businesses. These are all proposals and will still need to be passed by the Senate. We will keep you posted when/if relevant legislation is passed by the Senate and of any changes.
Increase to low and middle income tax offset (‘LMITO’)
The Government has announced a once-off $420 ‘cost of living tax offset’ for the 2022 income year, which will be provided in the form of an increase to the existing LMITO. The LMITO will be increased to up to $1,500 for individuals and $3,000 for couples and will be paid from 1 July 2022 when Australians submit their tax returns for the 2022 income year.
The LMITO is a non-refundable tax offset that provides tax relief for low and middle income taxpayers and is available in addition to the Low Income Tax Offset (‘LITO’).
The LMITO is proposed to apply as follows for the 2022 income year.
Consistent with current arrangements, the LMITO will be applied to reduce the tax payable by individuals when they lodge their tax returns for the 2022 income year. The LMITO is not available from the 2023 income year.
Increasing the Medicare levy low-income thresholds
The Government will increase the Medicare levy low-income thresholds for singles, families and seniors and pensioners for the 2022 income year, as follows:
The threshold for singles will be increased from $23,226 to $23,365.
The family threshold will be increased from $39,167 to $39,402.
For single seniors and pensioners, the threshold will be increased from $36,705 to $36,925.
The family threshold for seniors and pensioners will be increased from $51,094 to $51,401.
For each dependent child or student, the family income thresholds will increase by a further $3,619 instead of the previous amount of $3,597
Tax deductibility of COVID-19 test expenses
The Government will ensure that the costs of taking a COVID-19 test to attend a place of work are tax deductible for individuals from 1 July 2021. In making these costs tax deductible, the Government will also ensure FBT will not be incurred by businesses where COVID-19 tests are provided to employees for this purpose.
One-off Cost of living payment - Social security, families, and aged care
The Government will provide a one-off $250 cost of living payment to help eligible recipients with higher cost of living pressures. The payment will be made in April 2022 to eligible recipients of the following payments and to concession cardholders:
Age Pension
Disability Support Pension
Parenting Payment
Carer Payment
Carer Allowance (if not in receipt of a primary income support payment)
Jobseeker Payment
Youth Allowance
Austudy and Abstudy Living Allowance
Double Orphan Pension
Special Benefit
Farm Household Allowance
Pensioner Concession Card holders
Commonwealth Seniors Health Card holders
Eligible Veterans’ Affairs payment recipients and Veteran Gold cardholders.
The payments are exempt from tax and will not count as income support for the purposes of any income support payment. A person can only receive one economic support payment, even if they are eligible under two or more categories outlined above. The payment will only be available to Australian residents.
Enhancing the Paid Parental Leave scheme
Currently, the Paid Parental Leave scheme is made up of two payments for eligible carers of a newborn or recently adopted child:
Parental Leave Pay of up to 18 weeks at a rate based on the national minimum wage.
Dad and Partner Pay of up to 2 weeks at a rate based on the national minimum wage.
The Government plans to create a single scheme of up to 20 weeks, fully flexible and shareable for working parents within two years of their child’s birth or adoption. Single parents will also benefit from the extended 20-week entitlement.
The income test will also be broadened. Parents who don’t meet the individual income threshold (currently $151,350) can still qualify for payment if they meet a family income threshold of $350,000 a year.
Temporary Reduction in Fuel Excise
Fuel excise will temporarily be cut by half, or 22.1 cents per litre, to save families an estimated $30 a week. This measure will end on 28 September 2022.
Expanding access to employee share schemes
The Government will expand access to employee share schemes and further reduce red tape so that employees of all levels can directly share in the business growth they help to generate.
Where employers make larger offers in connection with employee share schemes in unlisted companies, participants can invest up to the following amounts (thereby allowing employers to access simplified disclosure requirements and exemptions from licensing):
$30,000 per participant per year (which is an increase from $5,000), accruable for unexercised options for up to five years, plus 70% of dividend and cash bonuses; or
any amount, if it would allow them to immediately take advantage of a planned sale or listing of the company to sell their purchased interests at a profit.
The Government will also remove regulatory requirements for offers to independent contractors, where they do not have to pay for their interests.
Varying the GDP uplift factor for tax instalments
The Government has decided to set the GDP uplift factor for PAYG and GST instalments at 2% for the 2023 income year. This uplift factor is lower than the 10% that would have applied under the statutory formula.
The lower uplift rate will provide cash flow support to small businesses, including sole traders and other individuals with investment income.
The 2% GDP uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods (i.e., up to $10 million annual aggregated turnover for GST instalments and $50 million annual aggregated turnover for PAYG instalments) in respect of instalments that relate to the 2023 income year and fall due after the enabling legislation receives Royal Assent.
Should you require any further information regarding these announcements please don’t hesitate to contact this office.