2022-23 Labor Federal Budget Highlights

2022-23 Labor Federal Budget Highlights

On the 25th of October 2022, treasurer Dr Jim Chalmers delivered the Labor Government's first Federal 2022-23 Budget, which pledges to provide cost-of-living relief, whilst investing in Australia's future – particularly with reference to responding to external economic and natural disaster challenges and providing affordable clean energy. 

While there haven't been any amendments to the already legislated individual tax rate cuts, key tax measures have been targeted at multinationals, particularly with reference to changes to thin capitalisation rules and reformed deduction policies for intangible assets. 

The Federal Government has also announced that additional funding will be used to support tax compliance measures and administration, indicating a potential need for businesses to uphold tax obligations in a more vigilant manner moving forward. 

Finally, the Labor Government has confirmed the actions taken towards previously announced tax measures, that have never been enacted. 

We outline below the key changes affecting businesses and individuals. 

Implications for Businesses 

• Fringe benefits tax and import exemptions will apply to electric vehicles under the luxury car tax threshold. 
• For tax purposes, a number of Victorian and ACT-based business grants relating to the COVID-19 pandemic will be non-assessable non-exempt income. 
• Small and medium-sized businesses will be eligible for grants to fund energy-efficient equipment upgrades.  
• The tax treatment for off-market share buy-backs undertaken by listed public companies will be reformed so that it aligns with that of on-market share buy-backs. 
  
• The rate associated with the Heavy Vehicle Road user Charge has increased from 26.4 to 27.2 cents per litre of diesel fuel. These adjustments are effective from 29 September 2022.                                                                 
• A new treaty between Australia and Iceland has been signed, and we suggest that businesses investigate the business opportunities that could arise from this. 
• Additional tariffs on goods imported from Russia and Belarus have been put in place for at least another 12 months, to 24 October 2023. 
  
• Goods imported from Ukraine are exempt from import duties for 12 months from 4 July 2022.                                                                                                                                                                                                   

The following previously announced proposals will either be deferred or will not proceed: 

• The proposed technical amendments to the taxation of financial arrangements (TOFA) rules in the 2021-22 Budget will be deferred.
• The proposed amendments to simplify the taxation of financial arrangements (TOFA) rules, initially announced in the 2016-17 Budget, will not proceed. 
• The measure from the 2018-19 Budget to establish a limit of $10,000 for cash payments will no longer proceed. 
• The 2016-17 Budget proposal to amend the taxation of asset-backed financing arrangements will not proceed. 
• The proposed tax and regulatory regime for limited partnership collective investment vehicles, which was initially announced in the 2016-17 Budget, will not proceed.                   
• The proposal that pledged to allow taxpayers to self-assess the effective life of intangible depreciating assets, will no longer proceed. 

Implications for Individuals

• In the interest of supporting pensioners that want to work more hours without losing their pension, the amount that pensioners can earn in 2022-23 will increase by $4,000 before their pension amount is impacted. 
• Changes will be made to the assets test exemption for principal home sale proceeds, which will encourage pensioners to downsize their homes. 
• Amendments will be made to the income threshold for the Commonwealth Seniors Health Card.  Specifically, it will be increased from $61,284 to $90,000 for singles and from $98,054 to $144,000 (combined) for couples.
•  Either parent will now be able to claim the Paid Parental Leave Scheme payment, effective from July 2023. The scheme will also be expanded by 2 weeks. 
• The current maximum Child Care Subsidy rate for all families earning less than  $530, 000 in household income will be amended so that more families can qualify for this. 
• There will be no changes to the current higher Child Care Subsidy (CCS) rates for families with multiple children aged 5 or under in child care. 
• Digital currency will not be treated as foreign currency for income tax purposes, however additional legislation will be introduced at a later date with regard to this.            

Implications for Multinationals              

• Tests relating to ratios with regard to thin capitalisation rules for non-ADIs will be amended from 1 July 2023 and replaced by earnings-based tests.     
• Significant global entities will be denied a tax deduction for payments to related parties, specifically,  in relation to intangibles held in low- or no-tax jurisdictions.
• Additional reporting requirements for income years commencing from 1 July 2023 will be implemented for significant global entities and public companies. 
  

The following previously announced proposals will not proceed: 

• The debt/equity tax rules proposed in the 2013-14 MYEFO will not proceed. 
  

Superannuation Changes  

• The minimum age to make a downsizer contribution to superannuation will be reduced from 60  to 55 years. 
  
• The 2021–22 Budget proposal that residency requirements for SMSFs and small APRA-regulated funds (SAFs) from 1 July 2022 will be relaxed, has been deferred.

The following previously announced proposals will not proceed: 

• The 2018–19 Budget proposal that incorporated changing the annual audit requirement for certain self-managed superannuation funds (SMSFs), will no longer be continued. 
• An obligation that dictates that retirement income product providers must report standardised metrics in product disclosure statements, originally announced in the 2018–19 Budget, will not be continued .
  

Tax Compliance and Administration Changes 

• An increase of $275 will apply to the penalty unit from 1 January 2023.                         
• A 2-year extension of the Personal Income Taxation Compliance Program was announced. 
• A 3-year extension to the Shadow economy compliance program was announced. 
• Additional funding will be provided to the ATO tax avoidance task force, and this is being extended to 30 June 2026.
• Breaches of foreign investment compliance will receive a penalty equal to double the amount of the existing penalty, effective from 1 January 2023. 
• Access to refunds of indirect tax, including GST, fuel and alcohol taxes, under the Indirect Tax Concession Scheme, has been expanded to the diplomatic and consular representations of Bhutan. 
• The extension of reportable transactions relating to the sharing economy that was previously proposed was deferred by 12 months to 1 July 2024
• The Practitioners Board to increase compliance investigations will receive additional funding. 
• The Government priorities in the Treasury portfolio will receive additional funding to ensure these are delivered. 

BUDGET CONCLUSION

In conclusion, the 2022-23 Labor Federal Budget aims to deliver a sensible approach to the cost of living, while addressing the pertinent challenges faced by Australians by virtue of the pandemic, natural disasters and uncertain economy. There are limited significant changes that will impact businesses at large. 

To find out more about the 2022-23 budget, or to discuss how your business will be impacted by these changes, get in touch with Azure Group. 

The full budget papers can be found via the button below.