Federal Budget 2022 analysis

Federal Budget
analysis 2022

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Contents

The 2022 Federal Budget has met the
expectation of being an election budget.
It has delivered measures that will relieve some
of the acute pain points, particularly around
cost-of-living pressures. Bentleys’ tax experts
outline the key impacts and opportunities for
businesses, families and individuals.

Introduction 03

Business 04

Families and individuals 07

Introducing the authors 09

Disclaimer: This information is general in nature and should not be relied on as advice.
It does not take into account the objectives, financial situation or needs of any particular
person. You need to consider your financial situation and needs and seek professional
advice before making any decisions based on this information

Introducing the 2022 Federal Budget

Similar to the 2020 and 2021 budgets – which were
strongly focussed on the spending necessary to ensure
the Australian economy survived the impacts of the COVID
pandemic – the 2022 budget has proposed the delivery
of measures that will relieve some of the acute pain points,
particularly around cost-of-living pressures.

For the small business sector, there is targeted stimulus
spending designed to improve cashflow, sustain employment
and encourage investment in business efficiency measures.

Tony Sacre The budget measures provide temporary or one-off benefits
Chief Executive Officer to help families with the cost of living, including a temporary
Bentleys Network reduction in fuel excise, cost of living payments and tax offset,
expansion of the home guarantee scheme, and greater
“The 2022 Federal flexibility for parental leave payments.
Budget has met the
expectation of being Stabilising our increasing debt levels, addressing workforce
an election budget. shortages, and investing in skills growth are also key themes.

The Government’s Disappointingly, Australia continues to miss the global
focus on ‘temporary, message on taking the right steps to decarbonising the planet.
targeted and responsible’
measures have been The Government’s clear purpose for this budget is
designed to drive a demonstrating why they should be given a mandate to
favourable outcome at return for the next three years.
the polling booths in May.”
Our team of experts have collaborated to share their
interpretation of what the budget means for you, your family,
and your business. For more insights, we invite you visit our
2022 Federal Budget hub – www.bentleys.com.au/budget

If you have any questions as to how this budget impacts you
and your business, please do not hesitate to contact your
local Bentleys advisor.

We are here to help you navigate through the information,
and help you get where you want to be.

Federal Budget analysis 2022 page 3

Business

The smalll business Small & Medium the end of 30 June 2023 which also aligns
sector, in particular, has Businesses with the cut off date for the temporary full
received some targeted expensing measure. Typically such capital
stimulus spending in Small business – technology expenditures can have a long lead time and
this year’s budget, as investment boost a deduction will generally only arise where
business comes out the the asset is actually installed and in use.
other side of COVID. A technology investment boost will be
This is designed to introduced to encourage small business Small business – skills and
improve cashflow, investment in digital technologies. training boost
sustain employment and
encourage investment Small businesses (aggregated turnover less A skills and training boost will be introduced
in business efficiency than $50 million) will be able to claim an to support small businesses to train and
measures. additional 20 percent of the cost incurred upskill their employees.
on up to $100,000 eligible expenditure (per
income year) incurred from 7.30pm (AEDT) Small businesses (aggregated turnover
on 29 March 2022 until 30 June 2023. less than $50 million) will be able to claim
an additional 20 percent of the cost incurred
Eligible expenditure will include costs on eligible expenditure incurred from
incurred on business expenses and 7.30pm (AEDT) on 29 March 2022 until
depreciating assets that support their 30 June 2024.
digital adoption, such as portable payment
devices, cyber security systems or Eligible expenditure will include costs
subscriptions to cloud-based services. incurred on external training courses
provided to their employees. The external
The boost for eligible expenditure incurred training courses will need to be provided
by 30 June 2022 will be claimed in tax to employees in Australia or online, and
returns for the following income year. delivered by entities registered in Australia.

The boost for eligible expenditure incurred Ineligible expenditure will include in-house
between 1 July 2022 and 30 June 2023 or on-the-job training and expenditure on
will be claimed in tax returns in the year external training courses for persons other
the expense is incurred. than employees.

The short timing in relation to this measure The boost for eligible expenditure incurred
may encourage small businesses to by 30 June 2022 will be claimed in tax
accelerate new tech investment before returns for the following income year.

Federal Budget analysis 2022 page 4

Business

The boost for eligible expenditure incurred
between 1 July 2022 and 30 June 2024
will be claimed in tax returns in the year
the expense is incurred.

This measure may have the effect of
changing which courses employers will
fund. Training providers will need to closely
review their programs to ensure they are
eligible programs under the scheme.

Making COVID-19 business grants In making this cost tax deductible, the Modernisation of pay-as-you-go
non-assessable non-exempt Government will also ensure that where a (PAYG) instalment systems
business incurs the expense in providing
The Government has extended the the COVID-19 tests to employees, the The Government will look to assist
measure which enables payments from expense will be exempt from FBT. companies improve their cashflow by
certain state and territory COVID-19 improving the alignment between PAYG
business support programs to be made Small business cash flow boost instalment liabilities and profitability.
non-assessable non-exempt for income – varying the GDP uplift factor This will be done by enabling companies
tax purposes until 30 June 2022. This for tax instalments to choose to have their PAYG instalments
measure was originally announced on calculated based on current business
13 September 2020. Legislation is to be introduced such that performance extracted from accounting
regular tax instalments will be calculated software, with some tax adjustments.
The state government grants which have based on the previous year plus two (2)
been made non-assessable non-exempt are: percent rather than the current legislated 10 The Government plan to consult with
percent GDP uplift factor for tax instalments. the affected stakeholders, including tax
• New South Wales Accommodation practitioners and digital service providers
Support Grant The lower uplift rate will provide cash to finalise the policy.
flow support to eligible small to medium
• New South Wales Commercial enterprises eligible to use the relevant It is anticipated that this will be ready to
Landlord Hardship Grant instalment methods in respect of commence on 1 January 2024, subject to
instalments for the 2022-23 income year. advice from the software providers about their
• New South Wales Performing capacity to deliver the integration required.
Arts Relaunch Package This change applies to small businesses,
including sole traders and other individuals Smarter reporting of Taxable
• New South Wales Festival with investment income. Payments Reporting System data
Relaunch Package
Businesses need to be aware that it is From 1 January 2024, businesses will
• New South Wales 2022 Small just allowing them to keep potential tax have the option to report Taxable Payments
Business Support Program payments as cashflow for longer. They Reporting System data (via accounting
will need to forecast their tax cashflows software) on the same lodgement cycle
• Queensland 2021 COVID-19 carefully to ensure they keep sufficient as their activity statements which start on
Business Support Grant amounts aside to fund future liabilities. or after that date.

• South Australia COVID-19 Tourism This measure is intended to increase the
and Hospitality Support Grant accuracy and timeliness of reporting while
lowering compliance costs for taxpayers.
• South Australia COVID-19
Business Hardship Grant.

Where businesses have received these
grants you will need to pay close attention
to the tax treatment adopted in the income
tax return to ensure it is correctly showing
as non-assessable.

Tax deductibility of COVID tests

The Government has announced that
the cost of a COVID-19 test to attend
a workplace will be tax deductible for
individuals from 1 July 2022.

Federal Budget analysis 2022 page 5

Business

Digitalising trust income reporting Large Businesses The latter is designed to drive the
and processing Government’s technology-focused
Tax Avoidance Taskforce approach to achieve the Government’s
Starting on 1 July 2024 the Government target of net zero emissions by 2050.
will digitalise trust and beneficiary income No new measures announced for the larger
reporting and processing. This is aimed end of town but Tax Office review and audit Eligible corporate income from patents
to increase pre-filling and automating the activity for larger businesses will continue. relating to agricultural innovations, Plant
ATO assurance processes. Breeders Rights (PBRs) and patents relating
The Tax Office has been provided additional to low emissions technology will be subject
In recent years the trust income reporting funding to support the continued operation to an effective income tax rate of 17 percent
processes have not been automated to of the Tax Avoidance Taskforce. for patents granted or issued after 29 March
the same extent as individual or company 2022 with respect to income years starting
tax returns. This has resulted in longer Additional Government funding of over on or after 1 July 2023. Eligible income will
processing times and limited pre-filling $650 million will be provided to the Tax be taxed at the concessional tax rate to the
opportunities. This measure is aimed Office to extend the operation of its Tax extent that the research and development
at reducing the compliance burden on Avoidance Taskforce for an additional of the innovation takes place in Australia.
taxpayers, reduce processing times and two years up to 30 June 2025.
enhance ATO procedures. The patent box will offer a competitive
The role of the Taskforce is to monitor tax tax rate for profits generated from eligible
Primary producers – increasing compliance activities at the larger end of Australian owned and developed patents,
concessional tax treatment for town. Such activities have included the supporting the commercialisation of
carbon abatement and biodiversity Top 1000 Public Groups Performance innovation in Australia.
stewardship income Program and next 5000 Private Groups
Tax Performance Program. Importantly, only granted patents,
The Government will allow proceeds from which were applied for after the Budget
the sale of Australian Carbon Credit Units The Government has seen additional announcement, will be eligible for support
(ACCUs) and biodiversity certificates revenue collections exceeding $12 billion through Patent Box.
generated from on-farm activities to be over a five-year period as a result of
treated as primary production income the Taskforce review activities since its The implementation of the Patent Box
for the purposes of Farm Management establishment in July 2016. An additional should increase the number of patent
Deposits (FMD) scheme and tax averaging $2.1 billion in additional revenue is applications lodged in Australia which is
from 1 July 2022. expected by the Government. currently low by international standards.
However, given the time it takes (two to
The Government will also change the taxing With ongoing Tax Office scrutiny, it is four years) to secure a granted patent
point of ACCUs and biodiversity certificates expected that many larger businesses from application any tangible benefits from
issued under the Agriculture Biodiversity including multinationals operating in the program are unlikely to be realised for
Stewardship Market Scheme for eligible Australia will now review or reassess several years.
primary producers to when they are sold their current tax governance protocols
from 1 July 2022. Eligible producers are and procedures. Nevertheless, the Patent Box has the
those who are currently eligible for the potential for Australia to further enhance
FMD scheme and tax averaging. Innovation & Incentives its already strong competitive advantage
in the AgTech sector and, with regards to
This is a change from the current Expansion and enhancement of CleanTech support the Government’s target
arrangement where the proceeds from Patent Box to agriculture and the to achieve net zero emissions by 2050.
selling are treated as non-primary CleanTech sectors
production income and generally ineligible
for concessional tax treatment under Commencing 1 July 2023, the Patent Box
either the FMD scheme or tax averaging. Tax Incentive announced in the 2021 budget
specifically for the Biotech sector will be
Currently ACCU holders are taxed expanded to support technology-focused
based on the changes in value of their innovations in the both the Australian
ACCU each year, which can result in agricultural and CleanTech sectors.
tax liabilities prior to sale.

Federal Budget analysis 2022 page 6

Families and individuals

The 2022 Federal Budget is supporting families Temporary reduction in fuel excise
by providing temporary or one-off benefits to
help families with the cost of living. This includes The Government will halve the fuel excise
a temporary reduction in fuel excise for six on petrol and diesel, a reduction of 22.1
(6) months, cost of living payments to eligible cents per litre from 30 March 2022.
recipients in April 2022 and a one-off cost of This is a temporary measure for six (6)
living tax offset from July 2022. Other key months ending on 28 September 2022.
measures are expanding the home guarantee
scheme and providing greater flexibility for It aims to provide temporary relief from
parental leave payments. the current high fuel prices for individuals
and families.
As expected, there were no personal income
tax cuts in the budget and no bringing forward Cost of living payment
of previously legislated personal income tax
changes that apply from 1 July 2024. The Government will provide a one-off
$250 economic support payment to
eligible recipients to help with cost of living
pressures. Eligible recipients are Australian
residents in receipt of the age pension
and other government support payments
and certain concession card holders.
The payment will be made in April 2022.

One-off cost of living tax offset for
low and middle income earners

The Government announced a one-off
cost of living tax offset through an increase
to the Low and Middle Income Tax
Offset (LMITO) for the 2022 income year.
The proposal will increase the LMITO
by $420 for the 2022 income year.

Federal Budget analysis 2022 page 7

Families and individuals

This change will increase the maximum
LMITO benefit to $1,500 (up from $1,080)
for individuals and $3,000 for couples.
The LMITO benefit will be received from
1 July 2022 when individuals lodge their
tax return for the 2022 income year.

There was no extension to the LMITO
which ceases to apply after the 2022
income year.

Supporting home ownership The new scheme will allow parents to share Retirement, superannuation and
the Paid Parental Leave entitlement in a way aged care
The Government is expanding on the that suits their family and enables single
Home Guarantee Scheme announced in parents to benefit from the full 20 weeks It was a quiet night for the superannuation
last year’s budget by increasing the number pay at the minimum wage, now equal to sector in the Budget with the only
of places to 50,000 for the 2023 to 2025 what a household with two (2) parents is announcement being an extension of
financial years. There will be an ongoing entitled to under the existing schemes. an existing concessional provision with
35,000 places a year beyond 2025 but pension drawdowns.
only under the First Home Guarantee. There is also an extension to the means
testing to include a household income The Government has extended the 50
This Scheme supports eligible homebuyers threshold of $350,000. Under the current percent reduction of the superannuation
to purchase a home with a lower deposit Paid Parental Leave Scheme there is an minimum drawdown requirements for
(5 percent) without lenders mortgage income cap on the primary caregiver making account-based pensions and similar
insurance. the claim of $151,350, meaning some products for a further year until 30
families will be ineligible for the scheme June 2023.
The 50,000 places are to be allocated: even where their partner has a lower or no
income. This change is designed to support Given ongoing volatility, this change will
• 35,000 places per year for first home those families where the primary earner is to allow retirees to avoid selling assets in
buyers under the First Home Guarantee become the primary caregiver. No families order to satisfy the minimum drawdown
will be worse off as a result of this additional requirements.
• 5,000 places per year will be available means test.
under the Family Home Guarantee for Retirees who may have other sources of
eligible single parents with dependents It is expected that these changes will be income or who simply don’t need to draw
introduced no later than 1 March 2023. down on their super for living expenses
• 10,000 places per year will be available will benefit most, allowing them to keep
under a new Regional Home Guarantee more money in the favourably taxed
to support homebuyers who have superannuation environment.
not owned a home for at least five (5)
years to purchase a new home in a The Treasurer also pledged that the
regional area Government will not increase taxes on
superannuation if re-elected.
Paid parental leave

The Government is proposing to make
changes to the existing 18 week Paid
Parental Leave Scheme and two (2) week
Dad and Partner Pay Scheme by rolling
these payments into a single 20 week
scheme which is designed to be fairer
and provide greater flexibility to families.

Federal Budget analysis 2022 page 8

Introducing the authors

Bentleys is a network of advisory and accounting firms, with over 700 talented staff delivering solutions from 18 locations
across Australia, New Zealand and China. We work with aspirational businesses and entrepreneurial people to help them
achieve their objectives and get where they want to be. We take this opportunity to introduce you to some of our tax,
R&D incentives,superannuation and business advisory specialists - the authors of this report.

Simon How Nicole Black Mike Burfield
Partner, Tax (Chair of Tax Committee) Director, Tax Managing Director
Bentleys SA/NT Bentleys Queensland Bentleys R&D Services
[email protected] [email protected] [email protected]
+61 8 8372 7900 +61 7 3222 9777 +61 8 8372 7900

Vicki Cremona Chris Hodgins Darren Lee
Associate, Tax Client Director Director, Tax
McLean Delmo Bentleys Bentleys NSW Bentleys NSW
[email protected] [email protected] [email protected]
+61 3 9018 4666 +61 2 9220 0700 +61 2 9220 0700

Tomas Mackay Sonia Mascolo Ross Prosper
Manager Partner, Tax Partner, Tax and Business Services
Bentleys Tasmania Bentleys SA/NT Bentleys WA
[email protected] [email protected] [email protected]
+61 3 6242 7000 +61 8 8372 7900 +61 8 9226 4500

Michael Senchenko David Spurritt Dean Steer
Client Director Partner, Tax Partner, Tax
Bentleys NSW Bentleys SA/NT Bentleys Queensland
[email protected] [email protected] [email protected]
+61 2 9220 0700 +61 8 8372 7900 +61 7 3222 9777

Federal Budget analysis 2022 page 9

Where you want to be.

If you’re passionate about your
business and ambitious about
growth, then talk to Bentleys.

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