Treasurer Frydenberg’s 2022 federal budget features a range of measures to assist Australian businesses through tax-related incentives.
A range of measures to assist with the cost of living, including a one-off payment LITMO payment, and a $250 payment for pensioners and welfare recipients will be given, alongside a 50% fuel excise reduction for 6 months starting from midnight on 29 March.
Small business are also winners, with a 20% Skills and Training Boost bonus, and a 20% reduction for expenditure on digital technologies such as could computing, elnvoicing, cyber security and web design for investments of up to $100,000 per year.
Low income offset – LMITO increased by $420 for 2021-22 (but not extended to 2022-23)
Several major tax-related measures were announced, helping many Australian across the board, starting with the increased Low To Middle Income Tax Offset (LMITO) of $1,080 up to $1,500 for individuals earning between $48,001 and $90,000. This once off increase of $420 will be made available for the 2021-22 income year. Those earning up to $48,000 will receive the $420 tax offset on top of their $255 LMITO benefit. There will be no benefit to those whose taxable income exceeds $126,000.
The LIMITO amount will be credited as part of the tax calculation on an individual’s 2021-2022 tax return which will result in either a larger refund or lower tax liability. Where a taxpayer’s income falls below having any tax payable, any leftover tax offset will not be refunded but will simply reduce the tax liability to nil.
|Taxable income (TI)||LMITO 2021-22 (current)||LMITO 2021-22 (proposed)|
|$0 – $37,000||$255||$675|
|$37,001 – $48,000||$255 + ([TI – 37,000] x 7.5%)||$675 + ([TI – 37,000] x 7.5%)|
|$48,001 – $90,000||$1,080||$1,500|
|$90,001 – 126,000||$1,080 – ([TI – 90,000] x 3%)||$1,500 – ([TI – 90,000] x 3%)|
No changes were made to the Low Income Tax Offset. The maximum amount of the LITO is $700.
Personal tax rates unchanged for 2022-23; Stage 3 start from 2024-25 unchanged
No changes were made to the personal tax rates for 2022-23, however the 2024-25 stage 3 tax rates remain unchanged.
Tax Thresholds and rates
|Taxable Income ($)||2021-22 & 22-23 Tax payable||2024-25 Tax Payable|
|0 – 18,200||Nil||Nil|
|18,201 – 45,000||Nil + 19% of excess over 18,200||Nil + 19% of excess over 18,200|
|45,001 – 120,000||5,092 + 32.5% of excess over 45,000||–|
|120,001 – 180,000||29,467 + 37% of excess over 120,000||–|
|180,001+||51,667 + 45% of excess over 180,000||–|
|45,001 – 200,000||–||5,092 + 30% of excess over 45,000|
|200,001+||–||51,592 + 45% of excess over 200,000|
Stage 3 tax rate changes will commence from 1 July 2024. There will be only 3 personal income tax rates – 19%, 30% and 45%. The 32.5% marginal tax rate will be cut to 30% for one big tax bracket extending between $45,000 and $200,000. The 37% tax rate will be abolished.
Medicare levy low-income thresholds for 2021-22
There are a few changes that will be made to the Medicare levy. Low-income thresholds will be increased to $23,365 (up from $23,226 for 2020-21). For couples with no children, the family threshold will be increased to $39,402 (up from $39,167 for 2020-21). Each additional child will be increased to $3,619 (up from $3,597).
Eligible single seniors and pensioners eligible for SAPTO will have their Medicare levy threshold increased to $36,925 (up from $36,705 for 2020-21). The family threshold for seniors and pensioners will be increased to $51,401 (up from $51,094), plus $3,619 for each dependent child or student.
Cost Of Living Payment
A $250 one-off cost of living payment will be made to eligible Australian pensioners, welfare recipients, veterans and eligible concession card holders. The $250 will be tax-exempt and not count as income of any Government support.
COVID-19 test expenses to be deductible
Covid-19 tests done for work are tax deductible for individuals from 1 July 2021. If tests are supplied by businesses for staff, Fringe Benefits Tax (FBT) will not be incurred.
Two support measures for small business were announced targeting businesses with an aggregated turnover of less than $50 million, receiving a 20% uplift of the amount deductible for expenses incurred on external training courses and digital technology. This boost will be available between 29 March 2022 until 30 June 2024.
Eligible businesses will be able to claim an additional 20% of expenditure incurred on courses and materials for its staff. Training courses must be provided to employees on Australia or online, or delivered by registered entities in Australia.
An extra 20% deduction on the cost of depreciating assets that support a business’s digital expenses, such as portable payment devices, cyber security systems or subscriptions to cloud-based services on expenses up to $100,000 will be eligible. This boost will apply between 29 March 2022 until 30 June 2023. This boost must be claimed with a business tax return is lodged for the following income year and expenses in the year in which it was incurred.
PAYG and GST instalments
Set in place by the 31 December, businesses can choose to have their PAYG instalments calculated based on their current financial performance if it’s extracted from accounting software with some tax adjustments.
In addition, the GDP uplift factor for PAYG and GST instalments will be set at 2% for the 2022-23 income year. The 2% GDP uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods (up to $10 million annual aggregated turnover for GST instalments and $50 million annual aggregated turnover for PAYG instalments).
A 50% reduction in minimum draw downs for the 2019-20, 2020-21 and 2021-22 income years will be extended to the 2022-23 income year. This is in the hope that retired Australians will not need to sell assets to satisfy the minimum drawdown requirements.
The super guarantee will rise from 10% to 10.5% as legislated. An employee’s salary sacrificed contributions cannot be used to reduce the employer’s extra 0.5% of super guarantee.
A temporary reduction in the fuel excise of 50% for 6 month will apply to both petrol and diesel, and other petroleum-based products. Drops in prices are due to hit the pumps in the next two weeks.
First Home Guarantee
The First Home Guarantee Scheme will be extended, offering up to 50,000 places each year, including 10,000 places for a new Regional Home Guarantee open to non-first home buyers. Eligible first home buyers can obtain a loan to build a new home or purchase a newly built home with a deposit of as little as 5%. Applications can be made as part of the standard home loan application process through participating lenders.