• Federal Budget 2022

    Video Commentary

Video Commentary

Our subject matter experts provide video commentary for the 2022 Federal Budget.

"For individuals and employees, most of what was spoken about by the Treasurer tonight had actually been flagged in the week leading up to the Budget, so not much in the way of surprises.

Individuals will see an increase in the affectionately known 'Lamington', the Low and Middle-Income Tax Offset, with an increase of $420; from $1,080 up to $1,500 as a maximum amount.

This payment does start to phase out after $90,000 worth of taxable income and it is the last year that we will see it, there's been no announcement that this will be extended into next financial year so we'll start to see the payments come through after the 1st July 2022.

Employees who have to take a COVID test every day just to see if they can attend the workplace, will also benefit from tax deductions being available for COVID tests - the Rapid Tests that people need to take.

This will also see a corresponding exemption for Fringe Benefits Tax and this had been announced by the Government previously.

In relation to expatriates, we might see a few more of them coming onto our shores, obviously with all of the building and infrastructure spend, there needs to be a workforce, on hand, to actually do all of that building, and so what the Government has announced is an increase in the number of certain Visas that are available, a waiving of fees for particular Visas and also a relaxation of some of the work requirements or conditions around some visas, all in looking to expand the workforce that's available.

Finally, employers who have been reporting their salary and wage information to the ATO through Single Touch Payroll will see a benefit with this information now being shared with the State Revenue Authorities, something that was flagged when Single Touch Payroll first came in, but the Government's really committing to this digitisation and sharing of information amongst all regulators."

James Trainor, BDO Tax Partner.

"The 2022-23 Federal Budget is titled: 'Australia's Plan for a Stronger Future', and builds on the previous budget in terms of Australia's recovery from the COVID-19 pandemic as well as addressing global issues such as the war in Ukraine.

For Australian corporates, there are a number of measures in the Budget that will be relevant to them. The first is, the temporary reduction in Fuel Excise which will benefit many Australian businesses, the second is the extension of the Patent Box Regime which was announced in the previous year's Budget. Broadly, this measure provides a 17% reduced Corporate Tax Rate to eligible innovative activities, so that is on Australian agricultural innovations, secondly to low-cost emissions technologies and finally to Australian biotechnology and medical innovations.

The Federal Budget contains tax integrity measures providing the ATO with additional funding of approximately $650 million over the next 2 years, to fund an ATO taskforce into tax avoidance by multi-nationals as well as high net worth individuals; which is expected to raise approximately $2.1 billion in additional revenue for the Government, it's certainly a measure to be watched.

The Government has also announced measures applicable from 1 April 2022 allowing a streamlining of Australia's foreign investment review framework, broadly, this will allow some investors to invest without notifying the foreign investment review board but it is still subject to National Security Clearance by the Government, in certain cases.

There is a new Apprenticeships Incentives Scheme, offering employers a wage subsidy of up to 10% for first and second-year apprentices, and then reducing to 5% for third-year apprentices. It is limited to priority occupations.

The Federal Government referred to the UK/Australian Free Trade Agreement which was signed on the 17th December 2021, this will broadly reduce tariffs on over 99% of goods exported to the UK.

The Federal Budget contains some important tax compliance measures for corporates, the first is the modernisation of the PAYG instalment system to allow businesses to pay PAYG based on their most recent financial performance which will allow businesses to have better cash flow.

The Government will also digitalise Trust and Beneficiary reporting with electronic lodgement of tax returns.

The Federal Government has also announced a smarter reporting of taxable payments and reports, with the lodgement of these reports to be aligned with the business activity reporting cycle, this should reduce red tape for business.

The Federal Budget contains a number of measures applicable specifically to small business, that is aggregated turnover of below $50 million; the first is a skills and training boost measure, allowing employers to have an additional 20% uplift on any expenditure on training courses offered to employees by external providers, where those courses are in Australia.

There's an additional technology investment boost allowing small businesses an additional 20% uplift on deductions relating to digitalisation or updating their technology in their businesses, up to $100,000 cap per annum.

The Government's announced a 2% GDP uplift factor on PAYG instalments, which is a reduction from the 10% under the statutory formula method, however, for the last 2 years it has been reduced to nil, so it's an increase on the last 2 years; that is only applicable to small and medium businesses."

Catherine Dean, BDO Tax Partner.

Hi, this is Mark Pizzacalla and I wanted to discuss the federal budget and I want to discuss small business concessions, because they're always inextricably linked and what's happened this year is really important and I want to bring 3 things to your attention.

The first one is that the government has allowed an additional 20% tax deduction for all eligible expenditure in relation to external training provided to employees, so they're trying to get employees to be more competitive and more productive. 

The second thing that's happened is that there is an additional 20% deduction in relation to making sure that small businesses are embracing the digital technology world that we live in; things like e-invoicing, cyber security, web design, that sort of thing will attract an extra deduction. Now, there is an annual cap to that though of $100,000 per annum. The other catch is this, that if you're spending that money between now and 30 June 2022 it looks like that additional deduction won't be available to you until the following year, which means you won't see the benefit until the 30 June 2023 return is lodged, so that could be problematic.

The government, lastly, has announced also some cash flow initiatives and particularly in relation to PAYG, by ensuring that there are lower tax instalments to be paid by small businesses.

So, what that effectively means is that if you're paying lower tax instalments you just need to really make sure that you're focused on your cash flow budget and that you're making the best possible use of that additional cash.

The other thing is this, that tax deductions are great, but only when you're profitable. So, if you're making losses I don't think you're going to see any benefit in those tax deductions necessarily.

Is small business going to be happy with this? Well, I think they're going to be receptive, but I think they may not be satisfied because it's going to take too long for them to see the benefit of those tax deductions in their hip pocket, speak to you soon.

International border closures during the pandemic, slow population growth, to such an extent that Australia's population declined for the first time since World War 1. The closure of borders also resulted in skill shortages and labour market tightening.

This year's Federal Budget revealed a more optimistic outlook for population growth than previously released by Treasury.

The main driver is a return to positive international migration by June of this year. It should be noted that Treasury was expecting negative international migration over the same time period in its December 2021 forecasts. 

While the size of Australia's permanent migration program has remained unchanged from the previous budget, the composition has been adjusted. The skilled Visa stream has been increased and now accounts for 70% of permanent migration, which is a shift away from the family Visa stream. This should provide a boost in skilled labour force for the business sector, but might not be enough to alleviate recruitment issues.

Despite the change in permanent migration program and increases to working holiday Visas, the budget is projecting the lowest unemployment rate since the 1970s, predicting it will fall to 3.75% by June of next year. While the Government may boast about the low unemployment rate projections, this may simply signify trouble for businesses with tighter labour market conditions to come.

Within the skilled migration scheme, regional Visas have seen some of the largest increases, this, along with settling of humanitarian migrants in regional areas where possible, is likely to increase population growth. While there is investment in infrastructure across our regions, without targeted job creation, the pushing of people into regional areas is likely to lead to an ongoing issue of migrants working below their skill level.