Last night, Treasurer Jim Chalmers handed down an updated 2022-23 Federal Budget (“hear hear!”). The first budget for the Albanese Labor Government ran to the theme of responsible, reasonable and targeted as a way to navigate the current economic climate.
The budget is fairly light on tax and fortunately ALSO on any Super changes, with an improvement put forward in relation to accessing the $300K per person downsizer measures (see below).
The points below summarise the key tax and Superannuation elements from our perspective.
If you have any questions about how any measures may impact your personal situation, please do not hesitate to contact Huw, Ollie or I.
What will and will not proceed?
The following previous measures will not proceed.
- The 2018/19 Budget measure that proposed changing the annual audit requirement for certain self-managed superannuation funds (‘SMSFs’). The previous Government announced it would change the annual audit requirement to a three-yearly requirement for SMSFs with a history of good record-keeping and compliance.
The following measures will be deferred.
- The 2021/22 Federal Budget measure that proposed relaxing residency requirements for SMSFs, from 1 July 2022 to the income year commencing on or after the date of Royal Assent of the enabling legislation. The previous Government announced that it would relax residency requirements for SMSFs by extending the ‘central control and management test’ safe harbour from two years to five years and removing the ‘active member test’. This measure is intended to allow SMSF members to continue to contribute to their superannuation fund whilst temporarily overseas.
Digital Currency – Clarifying that digital currencies are not taxed as foreign currency
- The Government will introduce legislation to clarify that digital currencies (such as Bitcoin) continue to be excluded from the Australian income tax treatment of foreign currency. This maintains the current tax treatment of digital currencies, including the capital gains tax treatment where they are held as an investment. This measure removes uncertainty following the decision of the Government of El Salvador to adopt Bitcoin as legal tender and will be backdated to income years that include 1 July 2021. The exclusion does not apply to digital currencies issued by, or under the authority of, a government agency, which continue to be taxed as foreign currency.
Superannuation – Expanding the eligibility for downsizer contributions
- The Government will allow more people to make downsizer contributions to their superannuation, by reducing the minimum eligibility age from 60 to 55 years of age. The measure will have effect from the start of the first quarter after Royal Assent of the enabling legislation. The downsizer contribution allows people to make a one-off post-tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home. Both members of a couple can contribute and contributions do not count towards non-concessional contribution caps.
- Further to this announcement, the Government has also announced further (non-tax) measures to reduce the financial impact on pensioners looking to downsize their homes in an effort to minimise the burden on older Australians and free up housing stock for younger families, as follows:
- Extending the assets test exemption for principal home sale proceeds from 12 months to 24 months for income support recipients.
- Changing the income test to apply only the lower deeming rate (0.25%) to principal home sale proceeds when calculating deemed income for 24 months after the sale of the principal home.
FBT – Electric cars
- From 1 July 2022, the measure will exempt battery, hydrogen fuel cell and plug-in hybrid electric cars from fringe benefits tax and import tariffs if they have a first retail price below the luxury car tax threshold for fuel-efficient cars. The car must not have been held or used before 1 July 2022. Employers will need to include exempt electric car fringe benefits in an employee’s reportable fringe benefits amount.
Energy Efficiency Grants for small and medium sized enterprises
- The Government will provide funding to support small to medium enterprises to fund energy efficient equipment upgrades. The funding will support studies, planning, equipment and facility upgrade projects that will improve energy efficiency, reduce emissions or improve the management of power demand.
Boosting Paid Parental Leave and Child Care Subsidy
- The Government has announced it will introduce reforms from 1 July 2023 to make the Paid Parental Leave Scheme flexible for families so that either parent is able to claim the payment and both birth parents and non-birth parents are allowed to receive the payment if they meet the eligibility criteria. Parents will also be able to claim weeks of the payment concurrently so they can take leave at the same time.
- From 1 July 2024, the Government will start expanding the scheme 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.
- From July 2023, Child Care Subsidy rates will increase up to 90 per cent for eligible families earning less than $530,000. Families will continue to receive existing higher subsidy rates of up to 95 per cent for any additional children in care aged 5 and under.
Extending ATO Compliance Programs
- The Government has announced it will extend the following ATO compliance programs:
- Personal Income Taxation Compliance Program The Government will provide funding to the ATO to extend its Personal Income Taxation Compliance Program for two years from 1 July 2023. This extension will enable the ATO to continue to deliver a combination of proactive, preventative and corrective activities in key areas of non-compliance, including overclaiming deductions and incorrect reporting of income.
- Shadow Economy Program The Government will extend the existing ATO Shadow Economy Program for a further three years from 1 July 2023. The extension of the Shadow Economy Program will enable the ATO to continue a strong and co-ordinated response to target shadow economy activity, protect revenue and level the playing field for those businesses that are following the rules.
- Tax Avoidance Taskforce The Government has boosted funding for the ATO Tax Avoidance Taskforce by around $200 million per year over four years from 1 July 2022, in addition to extending this Taskforce for a further year from 1 July 2025. The boosting and extension of the Tax Avoidance Taskforce will support the ATO to pursue new priority areas of observed business tax risks, complementing the ongoing focus on multinational enterprises and large public and private businesses.
Tax Practitioners Board – Compliance program to enhance tax system integrity
- The Government will provide $30.4 million to the Tax Practitioners Board (‘TPB’) to increase compliance investigations into high-risk tax practitioners and unregistered preparers over four years from 1 July 2023. The TPB will use new risk engines to better identify tax practitioners who engage in poor and unlawful tax advice, to improve tax compliance and raise industry standards.
Supporting Small Business Owners
- The Government will provide $15.1 million over two calendar years from 1 January 2023 until 31 December 2024 to extend the Small Business Debt Helpline and the NewAccess for Small Business Owners programs to support the financial and mental wellbeing of small business owners.
Off-market share buy-backs
- The Government will improve the integrity of the tax system by aligning the tax treatment of offmarket share buy-backs undertaken by listed public companies with the treatment of on-market share buy-backs. This measure is proposed to apply from 7:30pm AEDT, 25 October 2022 (i.e., Budget night).