Budget 2022: a Budget for the Ballot Box

On Tuesday the Government delivered the 2022 Federal Budget. With the federal election looming, Treasurer Josh Frydenberg argued that the country has “remained resilient and strong” after the last two years, overcoming “the biggest economic shock since the Great Depression.” Indeed, Australia has outperformed other advanced economies with unemployment sitting at a historic low of 4% and real GDP expected to grow by 4.25% in 2021-22 (but then falling over the next 2 years).

The deficit is expected to be $78 billion or 3.4% of GDP in 2022-23 and then fall to 1.6% by 2025-26. It’s unclear how this is expected to happen.

It’s also unclear if any of the proposed measures will come to fruition in the event of a Labor election victory in May, however, it’s worth looking at some of the main changes in detail. 

Many Australians have been feeling the sting of higher prices due to rising inflation and stagnating wages growth. Many of the most popular initiatives in this Budget relate to cost of living relief. The most disappointing aspect was the total lack of substantive tax reform – the burden of this task has been pushed to future governments.

Of the many aspects to consider, here are some of the key initiatives we think will most affect the Allworths community. Please contact us if we can help you evaluate possible impacts on your business and personal financial position.

Support for SMEs and startups

• 120% tax deduction on digital adoption: small businesses (with aggregated annual turnover of up to $50 million) will be able to deduct $120 for every $100 spent on digital adoption e.g. cloud-based software subscriptions, cybersecurity systems and portable payment devices. There will be a $100,000 expenditure limit.
• Skills and training boost: businesses of the same size will also be able to deduct 120% of expenditure on external training courses for their employees with a focus on digital skills and literacy e.g. cloud computing, eInvoicing and web design. Again, there will be a $100,000 expenditure limit.
• Reducing the GDP uplift factor for tax instalments: provided the enabling legislation can be passed, what would have been a 10% uplift for the 2022-23 tax year will be reduced to 2% for businesses with up to a $10 million annual aggregated turnover for GST instalments, and $50 million for PAYG instalments. 
• Apprenticeship incentive scheme: an overhauled approach will see $2.8 billion allocated to subsidising the wages of apprentices and trainees (via $5,000 payments to new apprentices in priority sectors and up to $15,000 in wage subsidies for their employers). 
• COVID-19 grants: the tax status of COVID-19 business support grants as non-assessable non-exempt (NANE) has been extended until 30 June 2022. NSW programs included in this category are:
  • Accommodation Support Grant
  • Commercial Landlord Hardship Grant
  • Performing Arts Relaunch Package
  • Festival Relaunch Package
  • 2022 Small Business Support Program
• Connecting PAYG instalments to financial performance: businesses will have the ability to have their PAYG instalments calculated in conjunction with their current financial performance, but with adjustments for tax.

Some other measures: 

• NewAccess for Small Business Owners: over the next two years, an additional $4.6 million will be put towards ensuring this Beyond Blue program will continue to provide tailored mental health support to small and family business owners.
• Small Business Debt Helpline: $2.1 million will be extended to Financial Counselling Australia to provide free financial counselling services.
• Unit in the Fair Work Commission: to help small businesses dealing with unfair dismissal and general protections disputes, a dedicated unit in the Fair Work Commission will be established.
• Australian Small Business and Family Enterprise Ombudsman: the ASBFEO will work with proven service providers to offer business planning, capacity building and financial literacy, receiving $8 million in the budget.

Expanding access to employee share schemes

• Employee Share Schemes (ESS) provide employees with an ownership stake in the business and are of particular interest to startups looking to attract high quality talent without the ability to offer market competitive salaries. The rules have changed in this budget, removing the previous $5,000 annual cap on shares given to each non-C-Suite employee. 

The six month cut to petrol excise

• Motorists (and roadgoing businesses) across the country will be given assistance with sky high petrol prices, with the fuel excise being cut in half to 22.1c a litre for six months as of Tuesday. This will finish up on 22 September 2022.

Temporary superannuation relief

• The reduction to the minimum pension drawdown relief will be further temporarily extended until 30 June 2023, to minimise the need for people to sell down assets. The proposed minimum pension drawdown is:

Another important note is that from 1 July 2024, trust and beneficiary income reporting will be digitised to provide the ATO with greater oversight. Trusts will gain the option of lodging income tax returns electronically.

Other cost of living support measures

About 10 million Australians earning up to $126,000 will benefit from a $420 increase to the low and middle income tax offset, meaning the maximum possible offset will now be $1,500 instead of $1,080.

A one-off cost of living payment of $250 will be extended to social security payment recipients and concession card holders including those on the Age Pension, Disability Support Pension and others (there are 14 included categories).

Conclusion

With big spending on road and rail infrastructure and defence over the next 10 years, this is a Budget that will appeal to conservative voters, as well as some low and middle income earners. Many hoped for more in a range of areas and will be disappointed with the Budget having fallen short in their eyes. However, whether we like it or not, with the federal election around the corner, these Budget papers may be headed for the shredder anyway!

IMPORTANT NOTICE

This blog post contains general information only and has been prepared by Allworths without reference to your objectives, financial situation or needs. Allworths cannot guarantee the accuracy, completeness or timeliness of the information contained here. By making this information available to you, we are not providing professional advice or recommendations. Before acting on any of the information contained here, you should seek professional advice.