The second federal budget of the year, and the first of Labor’s term, was handed down on Tuesday 25th October for the remainder of FY 2023. A new Government’s first budget often sets the tone for its term and the budget is consistent with Labor’s ‘sensible and low impact’ approach.
There has been a significant change in the global economic landscape since the previous budget was presented in March, namely rapidly rising interest rates and inflation resulting from war and international tensions. Closer to home, businesses around Australia continue to be impacted by the effects of climate change, from bushfires to flooding. There are $3 billion dollars set aside in this budget for recovery from such natural disasters. The cash rate has risen from 0.1% in March 2022 to 2.6% today and is expected to continue to 3.1% by the end of the year. Meanwhile, Australia is experiencing its highest inflation in 40 years, which is driving higher prices and rising interest rates. Conversely, wage growth has not experienced the same increase, with growth at its lowest rate in ten years.
Whereas previous budgets during the Covid-19 pandemic have focused more on short-term reactions and stimulus, the 2022-23 budget looks towards a longer-term strategy of sustainability and growth.
TAXATION HIGHLIGHTS
Increasing Paid Parental Leave (PPL) to support economic security and flexibility for Australian families
The PPL scheme will be reformed so that either parent can claim the payment, and the payment can be apportioned between two working parents.
The PPL scheme will be extended by an additional two weeks per year, until it reaches 26 weeks by 1 July 2026, currently 18 weeks.
Superannuation – expanding eligibility for downsizer contributions
Under the downsizer scheme, older Australians can contribute up to $300,000 from the proceeds of the sale of their home into superannuation.
The current age threshold is 60 years, and this will be reduced to 55 years of age.
Digital Currency – not taxed as foreign currency
The Government will introduce legislation to confirm that cryptocurrency is not a foreign currency for taxation purposes.
The current tax treatment of digital currencies will be maintained, such as the capital gains tax treatment where they are held as an investment.
Making Covid-19 Business Grants Non-Assessable Non-Exempt (NANE) Income
The Government will make certain state and territory Covid-19 grant programs NANE income and eligible businesses are exempt from paying tax on these.
Electric Cars – discounts and import tariff cuts
From 1 July 2022, battery, hydrogen fuel cell and plug-in hybrid electric cars will be exempt from Fringe Benefits Tax (FBT) and import tariffs if the retail price is below the luxury car tax threshold of $84,916.
For employers, the exempt electrical car fringe benefits must be included in an employee’s reportable FBT amount.
Modernising business registers
For the ATO and ASIC to operate and regulate the Director Identification Numbers (DIN) regime and maintain ASIC’s registry systems.
Philanthropy – updates to specifically listed Deductible Gift Recipient (DGR)
The tax law will be amended to specifically list Australians for Indigenous Constitutional Recognition as a DGR for donations made from 1 July 2022 to 30 June 2025.
The Government will also extend the listing of the Australian Women Donors Network as a DGR for 5 years, for gifts made from 9 March 2023 to 8 March 2028.
WHAT’S MISSING?
A few significant items on the 'tax agenda' are not mentioned in the Budget:
The legislated Stage 3 tax cuts, under which income between $45,000 and $200,000 would be taxed at a flat 30% rate from 1 July 2024;
Temporary full expensing rules, which are currently due to expire on 30 June 2023;
Loss carry-back rules, also due to expire on 30 June 2023;
The Low- and Middle-Income Tax Offset, which expired on 30 June 2022;
Division 7A reform;
Tax residency rules reform;
CGT and demerger rollover relief and CGT concessions for small businesses;
Trust taxation and reimbursement integrity rules, including section 100A.
Should you wish to discuss any of these items in further detail or have any questions, please do not hesitate to contact your usual Jaquillard Minns contact.