For a full detailed overview of this Federal Budget, click here or see the highlights below.

Despite an uncertain global economic environment, the Treasurer has lauded Australia's low unemployment and strong export prices as reason for a 3.5% growth in the current financial year, slowing to 1.5% in 2023–24. The Budget projects a deficit of $36.9 billion, lower than the forecast earlier this year of $78 billion.

Described as a sensible Budget for the current conditions, it contains various cost of living relief measures including cheaper child care, expanding paid parental leave and encouraging downsizing to free up housing stock. Key tax measures are targeted at multinationals, particularly changes to the thin capitalisation rules, and changes to deduction rules for intangibles.

Importantly, no amendments have been proposed to the already legislated Stage-3 individual tax rate cuts. Additional funding for a range of tax administration and compliance programs have also been announced. Finally, the fate of a suite of announced but unenacted tax measures, including a few that have been around for at least 10 years, has been confirmed.

Of particular interest is the Government's intention to fund the Australian Taxation Office with several hundreds of millions of dollars per year to counter personal income tax non-compliance, tax avoidance and shadow economy tax evasion to "protect revenue and level the playing field for those individuals and businesses that are following the rules". These resources are expected to generate over $2.8 billion in additional government tax revenue.

The full Budget papers are available at www.budget.gov.au and the Treasury ministers’ media releases are available at ministers.treasury.gov.au. The tax, superannuation and social security highlights are set out below.

Business

• Electric vehicles under the luxury car tax threshold will be exempt from fringe benefits tax and import tariffs.
• A number of Victorian and ACT based business grants relating to the COVID-19 pandemic will be non-assessable non-exempt income for tax purposes.
• Grants will be provided to small and medium-sized businesses to fund energy efficient equipment upgrades.
• The tax treatment for off-market share buy-backs undertaken by listed public companies will be aligned with the treatment of on-market share buy-backs.
• The 2021–22 Budget measure to allow taxpayers to self-assess the effective life of intangible depreciating assets will not proceed.
• Heavy Vehicle Road User Charge rate increased from 26.4 to 27.2 cents per litre of diesel fuel, effective from 29 September 2022.
• Australia has signed a new tax treaty with Iceland.
• Additional tariffs on goods imported from Russia and Belarus have been extended by a further 12 months, to 24 October 2023.
• Ukraine goods are exempted from import duties for a period of 12 months from 4 July 2022.
• Technical amendments to the taxation of financial arrangements (TOFA) rules proposed in the 2021–22 Budget will be deferred.
• Amendments to simplify the taxation of financial arrangements (TOFA) rules proposed in the 2016–17 Budget will not proceed.
• The proposed measure from the 2018–19 Budget to impose a limit of $10,000 for cash payments will not proceed.
• Proposed changes in the 2016–17 Budget to amend the taxation of asset-backed financing arrangements will not proceed.
• The new tax and regulatory regime for limited partnership collective investment vehicles proposed in the 2016–17 Budget will not proceed.
• The Pacific Australia Labour Mobility (PALM) scheme will be expanded and enhanced.

Individuals

• The amount pensioners can earn in 2022–23 will increase by $4,000 before their pension is reduced, supporting pensioners who want to work or work more hours to do so without losing their pension.
• To incentivise pensioners to downsize their homes, the assets test exemption for principal home sale proceeds will be extended and the income test changed.
• The income threshold for the Commonwealth Seniors Health Card will be increased from $61,284 to $90,000 for singles and from $98,054 to $144,000 (combined) for couples.
• The Paid Parental Leave Scheme will be amended so that either parent is able to claim the payment from 1 July 2023. The scheme will also be expanded by 2 additional weeks a year from 1 July 2024 until it reaches 26 weeks from 1 July 2026.
• The maximum Child Care Subsidy (CCS) rate and the CCS rate for all families earning less than $530,000 in household income will be increased.
• The current higher Child Care Subsidy (CCS) rates for families with multiple children aged 5 or under in child care will be maintained.
• Legislation will be introduced to clarify that digital currency (or crypto currencies) will not be treated as foreign currency for income tax purposes.

Superannuation

• Eligibility to make a downsizer contribution to superannuation will be expanded by reducing the minimum age from 60 to 55 years.
• The 2021–22 Budget measure that proposed relaxing residency requirements for SMSFs and small APRA-regulated funds (SAFs) from 1 July 2022, has been deferred.
• The 2018–19 Budget measure that proposed changing the annual audit requirement for certain self-managed superannuation funds (SMSFs) will not proceed.
• A requirement for retirement income product providers to report standardised metrics in product disclosure statements, originally announced in the 2018–19 Budget, will not proceed.

Multinationals

• Thin capitalisation rules for non-ADIs will be amended from 1 July 2023, with tests relating to ratios replaced by earnings-based tests.
• Significant global entities will be denied a tax deduction for payments to related parties in relation to intangibles held in low- or no-tax jurisdictions.
• Significant global entities and public companies will have additional reporting requirements for income years commencing from 1 July 2023.
• Proposed amendments to the debt/equity tax rules mentioned in the 2013–14 MYEFO will not proceed.

Tax administration

• Penalty unit increase to $275 from 1 January 2023.
• Personal Income Taxation Compliance Program extended a further 2 years to 30 June 2025
• Shadow economy compliance program extended to 30 June 2026.
• The ATO tax avoidance taskforce will receive additional funding and is being extended to 30 June 2026.
• Financial penalties for breaches of foreign investment compliance to double 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 proposed extension of reportable transactions relating to the sharing economy deferred by 12 months to 1 July 2024

Tax agents

• Funding to be given to the Tax Practitioners Board to increase compliance investigations.
• Additional funding will be provided to support the delivery of government priorities in the Treasury portfolio.

Not-for-profit

• Deductible gift recipients list to be updated.
• The 2021–22 MYEFO measure to establish a deductible gift recipient category for providers of pastoral care will not proceed.

DISCLAIMER:

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The content of this newsletter is general in nature. It does not constitute specific advice and readers are encouraged to consult their Ruddicks adviser on any matters of interest. Ruddicks accepts no liability for errors or omissions, or for any loss or damage suffered as a result of any person acting without such advice. This information is current as at 26 October 2022, and was published around that time. Ruddicks particularly accepts no obligation or responsibility for updating this publication for events, including changes to the law, the Australian Taxation Office’s interpretation of the law, or Government announcements arising after that time.

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