The upcoming changes for individuals, businesses and investors

The 2022/23 Federal Budget was handed down on Tuesday evening with the key focus on reducing the cost of living and incentives for small business.

For individuals, we saw the announcement of funding and schemes to ease the cost of living with tax cuts and cash payments for millions of Australians. For businesses, incentives were introduced to both upskill staff and embrace digital technology and for investors, there were fewer policies directly impacting investors compared to previous years.

The announcement of the upcoming deficit spending has some economists believe we may see a fast-tracked interest rate rise sooner than expected.

We outline the main takeaways from the budget below.

Announcement for Individuals

  1. Tax relief

    The Government has announced a one-off $420 ‘cost of living tax offset’ for the 2022 income year for Australians earning up to $126,000.

    Additionally we will see an expansion of the Low-and Middle-income Tax Offset (LMITO), which currently gives eligible taxpayers an offset worth $255 to $1,080. It will be bumped up to between $675 and $1,500 and available when taxes are filed from 1 July, 2022. This will increase the maximum LMITO benefit to $1,500 for individuals and $3,000 for couples.

  2. Cost of living payment for the vulnerable

    The Government will provide a one-off $250 cost of living payment to help eligible recipients with higher cost of living pressures from April 2022. The payments are available to Australian residents, are exempt from tax and will be made to the following payments and to concession cardholders: (one payment per person only no matter how many concessions are held)

    • Age Pension
    • Disability Support Pension
    • Parenting Payment
    • Carer Payment
    • Carer Allowance
    • Jobseeker Payment
    • Youth Allowance
    • Austudy and Abstudy Living Allowance
    • Double Orphan Pension
    • Special Benefit
    • Farm Household Allowance
    • Pensioner Concession Cardholders
    • Commonwealth Seniors Health Cardholders
    • Eligible Veterans’ Affairs payment recipients and
    • Veteran Gold cardholders
  3. Fuel cost relief

    The Government will help reduce the burden of higher fuel prices for 6 months by halving the excise from 30 March 2022 for six months taking it from 44.2 cents per litre to 22.1 cents.

  4. Superannuation drawdown

    The government is extending the 50% reduction in superannuation minimum drawdown requirements through to 30 June 2023.

  5. Interest rate pressure

    Continued deficit spending could add to the growing pressure on the Reserve Bank to raise rates. Economists predict the cash rate to reach 0.75% this year, with a first hike in June to 0.25%. This is earlier than the previously indicated rise in the latter half of 2022.

  6. COVID test offset for individuals

    The costs of taking a COVID-19 test to attend a place of work will be tax-deductible for individuals from 1 July 2021.

Announcement for Businesses

  1. Skills and training boost

    A skills and training boost will be introduced to support small and medium-sized businesses to train and upskill their employees until 30 June 2024. Small and medium-sized businesses will be able to deduct an additional 20% off expenditure incurred on external training courses provided to their employees, provided online or delivered by entities registered in Australia.

  2. Technology investment boost

    A technology investment boost will be introduced to support digital adoption by small and medium-sized businesses from 29 March 2022 until 30 June 2023. Small and medium-sized businesses will be able to deduct an additional 20% off expenditure incurred on business expenses and depreciating assets that support their digital adoption. An annual cap will apply equating to a maximum additional deduction of $20,000 per eligible year.

  3. COVID test offset for business

    The Government will also ensure FBT will not be incurred by businesses where COVID tests are provided to employees.

If you’d like to discuss how this budget affects you or your business, get in touch and make an appointment with the team.