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March 31, 2022

2022 Illumin8 Budget Recap

by Illumin8

Your Local Accountant

In the 9th edition of this government's budget, will they break out any new tunes or stick to playing the hits?

It's that time of year again, and it's a special edition because I feel like it wasn't too long ago that we had one of these. It's time for the 2022 Budget Recap, brought to you by the Illumin8 Accounting team!

NOTE: while Labour has come out in support of many of the "proposed" announcements earlier in the week, some of the budget measures may not pass parliament if they win the election; the election must be announced within two weeks. The opposition will be dropping their alternate budget on Thursday night. We'll provide an alternate blog on Friday outlining the difference (if any).

Here are some of the things that caught our eye.

$250 ONE-OFF COST OF LIVING PAYMENT

The $250 Cost of Living payment will be paid to eligible Australians in April 2022; when precisely in April 2022? They haven't said. They also haven't said exactly how people will receive these payments, but we do know they are tax free! To be eligible to receive the one-off payment you must receive one or more of the following payments:

Note: if you receive more than one of the below, you will still only receive one $250 payment.

  • Jobseeker Payment
  • Carer Payment or Carer Allowance
  • Parenting Payment
  • Youth Allowance
  • Austudy and Abstudy Living Allowance
  • Disability Support Pension
  • Age Pension
  • Pension Concession Card (PCC) Holders
  • Commonwealth Senior's Health Card Holders
  • Eligible Veteran's Affairs payment recipient and Veteran Gold Card Holder
  • Special Benefit
  • Double Orphan Benefit
  • Farm House Allowance

$420 COST OF LIVING OFFSET

Tax payers who have taxable income between $37,000 and $126,000 in their 2022 tax return will also receive a $420 cost of living tax offset. This offset is non-refundable - meaning it can only be used to offset tax on your income. For example, if you earned $20,000 during the 2022 financial year, the offsets applied would reduce any tax owing to $0; however, you will not receive any refund due to 'unused tax offsets'. This is for the 2022 financial year only, and there's no expectation this will be extended to the 2023 financial year.

AUS APPRENTICESHIPS INCENTIVE SYSTEM

The Government will introduce a new Apprenticeships Incentive System to replace the existing Apprenticeships subsidies already in place. The changes will take effect from 1 July 2022 and apply to occupations on the Australian Apprenticeship Priority List. The new scheme will provide the apprentice up to $5,000 over apprenticeship to assist with the cost of living. And the employer will receive up to $15,000 in wages subsidies over the life of the apprenticeship to encourage small businesses to get amongst it.

Example from the Budget Overview: Georgia plans to work as an apprentice arborist and will have a starting salary of $45,000 per year. She will study a 2-year long Certificate III in Arboriculture and commence in July 2022. As arboriculture is an occupation on the Australian Apprenticeship Priority List, her employer will receive up to $9,000 in wage subsidies ($4,500 in the first year and $4,500 in the second year). In addition, the Government will pay Georgia $5,000 in Apprentice Training Support Payments ($1,250 every 6 months for 2 years) to help her with the cost of living while she trains. Georgia is also guaranteed an In-Training Support place and is eligible for up to $15,246 in Australian Apprentice Support Loans.

FIRST HOME GUARANTEE SCHEME

The Government will increase the number of guarantees under the Home Guarantee Scheme to 50,000 per year for 3 years from 2022-23 and then 35,000a year ongoing to support homebuyers to purchase a home with a lower deposit (as low as 5%).

Under the expanded scheme:

  • First Home Guarantee - 35,000 guarantees each year (up from the current 10,000), from 1 July 2022, to support eligible first home buyers to purchase a new or existing home with a minimum 5% deposit
  • Regional Home Guarantee - 10,000 guarantees each year (from 1 October 2022 to 30 June 2025) to support eligible homebuyers (including non-first home buyers and permanent residents, to purchase or construct a new home in regional areas), subject to the passage of enabling legislation, and
  • Family Home Guarantee - 5,000 guarantees each year (from 1 July 2022 to30 June 2025) to help eligible single parents with children buy their first home or re-enter the housing market with a deposit of as little as 2 per cent.

The Home Guarantee Scheme seeks to ensure part of an eligible buyer's home loan is guaranteed by the Government so they can buy a home sooner with a smaller deposit and without needing to pay the lender's mortgage insurance. Applications can be made as part of participating lenders' standard home loan application process.

DEDUCTION BOOST

Small businesses (aka revenue of less than $50 million per year) will now be eligible for two special deduction boosts. These deduction boosts allow a business to claim 120% of the expense value instead of the usual 100%. To put it into numbers, if a small business operating as a company spent $100 on external training (more on that later) pre-budget, they would receive a tax deduction with a dollar value of $25. Post budget, that tax deduction will now have a dollar value of $30 to the business, effectively changing the actual cost of the training from $75 pre-budget to $70 post-budget.

The first special deduction boosts are available for external training courses, provided to Australian employees and delivered by an Australian business. While there are some exceptions, this will be available to small businesses from 7:30pm (AEDT) on 29 March 2022 until 30 June 2024.

The second of the special deduction boosts is dubbed the digital adoption boost. It will be available to small businesses spending money to support their digital adoption with purchases, including payment devices (think Square terminals), subscriptions to cloud services (think Xero, Dext Prepare, Vend POS), and other related expenses. Of note, an annual cap of $100,000 will be eligible for the boost from 7:30pm (AEDT) on 29 March 2022 until 30 June 2023.

GET EXCISE-TED

With no tones of Joe Hockey's infamous "poor people don't drive" comment back in 2014, J-Fry announced a reduction in the excise paid on fuel for the next 6 months, reducing the rate from 44.2 cents per litre to 22.1 cents per litre. How excited you get about this measure will depend on individual circumstances … for me, I can now once again validate that chocolate bar. 

This measure took effect at midnight last night but is expected to take a few weeks to flow through to most service stations. The ACCC will be keeping an eye on prices to ensure this is passed on.

CASH FLOW SUPPORT

The GDP uplift rate that applies to PAYG income tax and GST instalments will be reduced to 2 per cent for the 2022‑23 income year. This will mean lower tax instalments, delivering $1.85 billion in cash flow support for 2.3 million small to medium businesses, sole traders and others who use the instalment amount method.

PAID PARENTAL LEAVE

Currently, new mothers can access 18 weeks of government-paid leave (at minimum wage amounts), and the other parent/primary carer can access a 2-week paid leave (at minimum wage amounts).

If that mother earns greater than $151,350, then they don't get access to the scheme whatsoever (needing to either go unpaid or dig into their annual/LSL/personal leave balances)

So what's the change? Well, 

  • the available weeks have increased to 20 weeks
  • This amount can be shared by both working parents
  • The income limit is now a household one, allowing up to $350,000 income to access the leave
  • The leave can be taken in the 2 years following the birth of their child

What's the deal here? The Government seems to be waking up to the world we all are living in. A world where both parents/carers would want to be able to take time to spend with their children without the significant potential loss of income and via a leave policy that CAN NOT be refused by their employer.

As a parent, I know those early weeks are incredible, and I'm a fan of this.

One thing to celebrate – there has been a rapid growth in women with a taxable income of over $150,000 – hurrah for some potential wage gap closure! This was one of the reasons they shifted the income levels to be that for a family, not an individual – now to see if they ever change the income tax rates to be family-based so that 1 income families are not taxed unfairly.

Some thoughts on what this means:

Employees

  • Great for employees to be able to share the early weeks of their child's life together
  • Fabulous for mothers who are the breadwinner to ensure they still get access to maternity leave

Employers

  • They will need to plan better for fathers taking leave where they didn't in the past.
  • Might see an increase in their Annual & Long Service Leave balances where their workforce is primarily men due to that time not being utilised as much as in the past
  • Access to more women returning to work earlier might help solve capacity issues.


LET'S TALK ABOUT OTHER STUFF

There was a bunch of other stuff (devil) hidden in the details of what is known as Budget Paper No. 2

The majority of this stuff was at an economy and compliance level and did not directly impact individuals and businesses.

  • Non-Assessable, Non-Exempt (NANE) COVID-19 Grants – a measure to make a bunch of new grants in NSW, QLD and SA exempt; note there is nothing here for VIC as our grants were merely reincarnated, already exempt grants (new rounds).
  • COVID-19 Test Expenses – measure to make the cost of COVID-19 tests (e.g. RATS) tax-deductible when used "to attend a place of work".
  • PAYGi Uplift Reduction – marketed as an "$800, small business package boost" last week, in reality, this is all about timing; this measure will reduce the uplift factor from 10% to 2% for 2022-23 only on PAYG and GST Instalments. You'll still pay the same tax, but the 8% uplift difference will be deferred a year+/-.

A couple of other things that may have some impact:

  • Digitising Trust Income – from 1 July 2024, income distributed from trusts will automatically flow into beneficiary returns like wages currently do.
  • Patent Box – a measure announced last year to support businesses with patents, has been expanded to other sectors.
  • Insolvency Reform – a measure announced a couple of years ago during the initial stage of the pandemic; this will continue to support and ease the process of insolvency for small businesses.
  • STP Sharing – an interesting one, but funds have been invested in developing IT to enable sharing of STP data to state revenue offices, this for payroll and possibly WorkCover.

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