2022-23 Federal Budget Review

What this year’s Federal Government’s budget means for small and medium businesses, families and individuals

Treasurer The Hon. Josh Frydenberg, as featured delivering a ferocious backhand in the thumbnail for this blog post, delivered Scott Morrison’s Coalition Government’s (‘Government’) final budget on Tuesday, 29 March 2022. Based on the interests of our clients, Indiana Advisory has written a summary of what we think are the critical features of this year’s Budget.

Low and Middle Income Tax Offset

The Government has announced that it will increase the low and middle income tax offset (‘LMITO’) for the 2021–22 financial year by $420 to a maximum of $1,500. LMITO is a non-refundable offset that reduces the amount of tax payable by an individual taxpayer (thereby allowing them to either pay less income tax or increase the refund of tax amounts withheld).

For a taxable income between $48,000 to $90,000, taxpayers will be entitled to the maximum offset amount of $1,500. For taxable incomes greater than $90,000 the offset decreases by three cents for every $1 earned. On taxable incomes greater than $126,000 there is no offset.

Taxable Income

Offset

Up to $37,000

$255

$37,001 to $48,000

$255 + 7.5 cents for each dollar over $37,000

$48,001 to $90,000

$1,500

$90,001 to $126,000

$1,500 less 3 cents for each dollar over $90,000

$126,000+

$-

Technology Investment Boost

The Government announced that it is introducing a Technology Investment Boost (‘Boost’) to support digital adoption by small businesses (turnover <$50 million).

Small businesses will be able to deduct an additional 20 per cent of expenditure incurred on business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud-based services.

There is an annual limit of $100,000 for expenditure that will be eligible to have the 20 per cent uplift applied.

For expenses incurred from 29 March 2022 to 30 June 2022, the Boost will be allowable as a deduction in the tax return for the following income year i.e. 2022-23.

For expenses incurred from 1 July 2022 to 30 June 2023 the Boost will be allowable as a deduction in the tax return for this financial year.

For example, Entity A spends $10,000 on a new ordering system for their website. The Boost will allow for an additional $2,000 deduction therefore, a total of $12,000 allowable as a deduction in the tax return. This will result in a saving of $3,000 in income tax.

Skills and Training Boost

The Government announced that it is introducing a Skills and Training (‘Boost’) to support small businesses (turnover <$50 million) to train and upskill their employees.

Small businesses will be able to deduct an additional 20 per cent of expenditure incurred on external training courses provided to their employees. The external training courses will need to be provided to employees in Australia or online and delivered by entities registered in Australia.

Unlike the Technology Investment Boost, there is no annual limit for expenditure that will be eligible to have 20 per cent uplift applied.

For expenses incurred from 29 March 2022 to 30 June 2022, the Boost will be allowable as a deduction in the tax return for the following income year i.e. 2022-23.

For expenses incurred from 1 July 2022 to 30 June 2023 the Boost will be allowable as a deduction in the tax return for this financial year.

For example, Entity A spends $5,000 on a staff training day with an external provider. The Boost will allow for an additional $1,000 deduction (20 per cent of $5,000) therefore, a total of $6,000 allowable as a deduction in the tax return. This will result in a saving of $1,500 in income tax.

Australian Apprenticeships Incentive Scheme

Employers of apprentices in professions listed on the Australia Apprenticeships Priority List (‘List’) may be eligible for a wage subsidy of up to $1,500 per quarter for the first two years of the apprenticeship and up to $750 per quarter for the third year ($15,000 over the course of a three year apprenticeship).

The inaugural List (‘List’) published on 30 March 2022 sets out the occupations with an apprenticeship or traineeship pathway that have strong current and future demand. Current professions on the List include Bricklayer, Carpenter, Electrician (general), Glazier and Roof Tiler.

Click here for more information regarding the List and to see the complete list of professions.

An apprentice undertaking a qualification at either Certificate III, IV, Diploma or Advanced Diploma level leading to an occupation on the List may be eligible for an Apprentice Training Support Payment of up to $1,250 every six months for the first two years of their apprenticeship ($5,000 over the first two years).

The Australian Apprenticeships Incentive Scheme will replace the Boosting Apprenticeship Commencements 50 per cent wage subsidy that runs from 5 October 2020 to 30 June 2022 (see below).

Boosting Apprenticeship Commencements Scheme

The Boosting Apprenticeship Commencements 50 per cent wage subsidy (‘Subsidy’) that began on 5 October 2020 has been extended for another three months to 30 June 2022. The extension of the Subsidy is forecast to create another 35,000 apprenticeship places.

Any business that engages an Australian Apprentice between 5 October 2020 30 June 2022 may be eligible for a Subsidy of 50% of the apprentices gross wages paid.

The Subsidy is for a maximum of $7,000 per quarter, per eligible apprentice, for wages paid in the 12-month period from the date they start.

Home Guarantee Scheme

Formerly known as the First Home Loan Deposit Scheme, The Government has announced it will increase the number of guarantees under the Home Guarantee Scheme (‘Scheme’) to 50,000 per year for three years from 2022-23 and then 35,000 a year ongoing to support homebuyers to purchase a home with a lower deposit.

The Scheme is an initiative to support first home buyers to secure a mortgage with a low deposit of between 5 per cent and 20 per cent of the value of the property. Under the Scheme, the Government guarantees part of the mortgage which allows the borrower to not have to pay lenders mortgage insurance “LMI”, which protects the lender in the case of a default on the loan by the borrower.

The 50,000 places are broken down into categories of borrowers as follows:

1. 35,000 places a year to support eligible first home buyers

2. 10,000 places a year under a new Regional Home Guarantee

3. 5,000 places a year for the Family Home Guarantee for single parents with a deposit of 2 per cent.

For more information, there is authoritative and trustworthy reading by the NSW Government here.

Also, you can speak with your broker or if you don’t have a broker – call Nate from The Loan Suite on 0402 024 775.

 

If you have any questions related to any of the above Budget measures, would like to discuss any of the measures listed in the Budget but not mentioned in this blog post or just want an ear to slam the Government’s budget, please feel free to call Justin on (02) 9174 5238 – always happy to listen (:

 

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