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Taxation Measures from the October 2022 Federal Budget

Taxation Measures from the October 2022 Federal Budget
The Low and Middle Income Tax Offset (LMITO) will no longer be available for the 2022-23 income year and subsequent years. Additionally, there have been no changes to the personal income tax rates for the 2022-23 income year or for subsequent years.
Tax Rates Remain Unchanged

The Budget did not announce any changes to the personal income tax rates for the 2022-23 income year. The tax rates and income thresholds for residents are unchanged from the previous year. The taxable income thresholds and corresponding tax rates listed are accurate. Additionally, the Stage 3 tax changes, which were previously legislated, will commence from 1 July 2024.

The 2022–2023 tax rates and income thresholds for residents are unchanged from 2021–2022: taxable income up to $18,200 – nil; taxable income of $18,201 to $45,000 – nil plus 19% of excess over $18,200; taxable income of $45,001 to $120,000 – $5,092 plus 32.5% of excess over $45,000; taxable income of $120,001 to $180,000 – $29,467 plus 37% of excess over $120,000; and taxable income of more than $180,001 – $51,667 plus 45% of excess over $180,000.

The Budget did not announce any changes to the previously legislated Stage 3 personal income tax changes, which are set to commence from 1 July 2024. The 32.5% marginal tax rate will be cut to 30% for the tax bracket between $45,000 and $200,000, and the 37% tax bracket will be entirely abolished at this time.

This will create a more closely aligned middle tax bracket of the personal income tax system with corporate tax rates. The new tax structure will have three personal income tax rates: 19%, 30% and 45%. With these changes, around 94% of Australian taxpayers are projected to face a marginal tax rate of 30% or less.

Paid Parental Leave

The Government has also announced plans to expand the paid parental leave (PPL) scheme from 1 July 2023. The changes will allow either parent to claim the payment and both birth parents and non-birth parents to receive the payment if they meet the eligibility criteria. Parents will also be able to claim weeks of the payment concurrently, allowing them to take leave at the same time. From 1 July 2024, the scheme will be expanded by two additional weeks a year until it reaches a full 26 weeks from 1 July 2026.

Both parents will be able to share the leave entitlement, with a proportion maintained on a “use it or lose it” basis, to encourage and facilitate both parents to access the scheme and to share the caring responsibilities more equally. Sole parents will be able to access the full 26 weeks.

The expansion of the PPL scheme will benefit over 180,000 families each year and the amount of PPL available for families will increase up to a total of 26 weeks from July 2026.

For further information about how this applies to you, please call us at High Numbers on 03 9837 5464

  1. From 1 July 2020, eligible businesses will be able to immediately deduct certain start-up expenses and certain prepaid expenditure.
  2. From 1 April 2021, eligible businesses will be exempt from FBT on car parking and multiple work-related portable electronic devices, such as phones or laptops, provided to employees.
  3. From 1 July 2021:
  • Eligible businesses will be able to access the simplified trading stock rules, remit pay as you go (PAYG) instalments based on GDP adjusted notional tax and settle excise duty and excise-equivalent customs duty monthly on eligible goods.
  • Eligible businesses will generally have a two-year amendment periodapply to income tax assessments for income years starting from 1 July 2021.
JobMaker Hiring Credit
The Government will introduce a JobMaker Hiring Credit to incentivise businesses to take on additional young job seekers. From 7 October 2020, eligible employerswill be able to claim $200 a week for each additional eligible employeethey hire aged 16 to 29 years old and $100 a week for each additional eligible employee aged 30 to 35 years old. New jobs created until 6 October 2021 will attract the credit for up to 12 months from the date the new position is created. The amount of the credit is capped at $10,400 for each additional new position created.
Uncapped immediate write-off for depreciable assets:
  • Businesses with an aggregated annual turnover of less than $5 billion will be able to claim an immediate deduction (what the Budget terms as ‘full expensing’) for the full (uncapped) cost of an eligible depreciable asset, in the year the asset is first used or is installed ready for use.
  • The period in which such assets must first be used or installed ready for use will be extended by 6 months, until 30 June 2021.
Changes Affecting Companies
Temporary loss carry back for eligible companies

Companies with a turnover of less than $5 billion can now carry back losses from the 2020, 2021 or 2022 income years to offset previously taxed profits made in or after the 2019 income year.

This will allow such companies to generate a refundable tax offset in the year in which the loss is made. The tax refund is limited by requiring that the amount carried back is not more than the earlier taxed profits and that the carry back does not generate a franking account deficit.

Clarifying the corporate residency test
A company that is incorporated offshore will be treated as an Australian tax resident if it has a ‘significant economic connection to Australia’. This test will be satisfied where both the company’s core commercial activities are undertaken in Australia and its central management and control is in Australia.

Meetings conducted via virtual attendance

In order to reduce regulatory barriers, the Government will undertake public consultation on making permanent changes to the Corporations Act 2001. These changes would allow companies to call and conduct meetings electronically (with a quorum achievable through virtual attendance of shareholders and officers) and also to provide certainty that company officers can electronically execute a document.

FBT Changes
FBT exemption for retraining and reskilling employees

From 2 October 2020, the Government will introduce an FBT exemption for retraining and reskilling benefits provided by an employer to redundant, or soon to be redundant employees, where the benefits may not be related to their current employment (e.g., where an employer retrains a sales assistant in web design in order to redeploy them to an online marketing role in the business).

This measure is designed to encourage employers to assist redundant workers to transition to new employment opportunities within or outside an employer’s business, without triggering an FBT liability.

Reducing the compliance burden of FBT record keeping
The Government will provide the ATO with the power to allow employers to rely on existing corporate records, rather than employee declarations and other prescribed records, to finalise their FBT returns. This measure will help reduce compliance costs for employers, while maintaining the integrity of the FBT system.