Budget Items of Note
The Federal Budget handed down on 29 March 2022 was not a world changing document, but did contain a number of measures that will impact our clients. We have picked out a few of the more relevant ones and listed them below with a comment. Some of these have already been passed into law and incorporated into our tax landscape.
Making COVID-19 business grants non-assessable non-exempt
The Government has extended the measures that enable payments from certain state and territory COVID-19 business programs to be made non-assessable non-exempt income (NANE) for income tax purposes until 30 June 2022. This means these payments will not be assessed as taxable income to the recipients. Below are a couple of the grant programs that this applies to:
NSW Accommodation and Support Grant
NSW 2020 Small Business Support Program
Extending the reduction in minimum drawdowns from superannuation.
The Government will extend the 50% reduction of superannuation minimum drawdown requirements for account-based pensions (‘ABPs’) and similar products for a further year to 30 June 2023 (i.e., for the 2023 income year).
Tax deductions for work related Covid-19 Tests
The government has now allowed a tax deduction for taxpayers who incur relevant Covid-19 testing expenses in producing assessable income. This deduction applies retrospectively to relevant expenses incurred on or after 1 July 2021. For a deduction to be available under this new law, the purpose of getting the COVID 19 test must be to determine whether or not the person is allowed to attend or remain at a workplace or carry on a business.
Temporary reduction in fuel excise
The Government will help reduce the burden of higher fuel prices by halving the excise and excise-equivalent customs duty rate that applies to petrol and diesel, and all other fuel and petroleum-based products except aviation fuels, for six months. This measure will commence from 12.01am on 30 March 2022 and will remain in place for six months. It should be noted that the amount of fuel tax credits that businesses will be able to claim on their fuel purchases will also be halved i.e. from 44.2 cents to 22.1 cents for off-road use. The link to the updated rates are here.
Skills and training boost
The Government will introduce a skills and training boost to support small and medium-sized businesses to train and upskill their employees. The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 (i.e., Budget night) until 30 June 2024. Small and medium-sized businesses (with aggregated annual turnover of less than $50 million) will be able to deduct an additional 20% of expenditure incurred on external training courses provided to their employees. The external training courses will need to be provided to employees in Australia or online and delivered by entities registered in Australia. For eligible expenditure incurred by 30 June 2022, the boost will be claimed in tax returns for the following income year. For eligible expenditure incurred between 1 July 2022 and 30 June 2024, the boost will be claimed in the income year in which the expenditure is incurred.
Increase to low and middle income tax offset (‘LMITO’)
A measure that will undoubtedly be beneficial for individual clients is the increase in the LMITO. The Government has announced a once-off $420 ‘cost of living tax offset’ for the 2022 income year, which will be provided in the form of an increase to the existing LMITO. This will increase the maximum LMITO benefit to $1,500 for individuals and $3,000 for couples, and will be paid from 1 July 2022 when Australians submit their tax returns for the 2022 income year.
Other than those who do not require the full offset to reduce their tax liability to zero, all LMITO recipients will benefit from the full $420 increase. All other features of the LMITO remain unchanged.
2022 Fringe Benefits Tax (FBT) Returns Now Need To Be Prepared and Lodged
It is now FBT return preparation time. A taxpayer needs to lodge a 2022 FBT Return if they have provided fringe benefits to employees that results in a FBT liability. An FBT Return needs to be lodged and paid by 23 May 2022 unless it is done through a tax agent – who have an extended lodgement date.
March 2022 QTR Superannuation Guarantee Levy (SGL) Due
Employers are reminded that their Superannuation Guarantee obligation for the 1 January 2022 to 31 March 2022 quarter is due by 28 April 2022. It is also worth mentioning that employers compulsory 10% SGL rate is going to increase to 10.5% for the period 1 July 2022 to 30 June 2023. If you calculate superannuation via a payroll program, it would be prudent to get this updated prior to 1 July 2022 so super is calculated on the correct rate.
Tax Changes to Treat Carbon Credit Sales as Primary Production Income
The Morrison government has announced it will apply concessional tax treatment to primary producers who sell Australian Carbon Credit Units (ACCU’s) and biodiversity certificates. The treatment of biodiversity certificates will be aligned with the new tax regime for ACCU’s
Under the new tax regime, farmers will be able to sell carbon credits and include income from the sale of ACCU's as primary production income. This enables the recipient to the benefits of income averaging and entitles them to use the Farm Management Deposit scheme for managing the taxation impact of this revenue. It will be a significant benefit for the farmers who have embarked on the carbon credit scheme.
Although farmers who gain revenue from the sale of ACCU’s will benefit because the character of the income will now be primary production, the recipients of biodiversity credits revenue will not benefit and will be taxed more than previously. The reason for this is that biodiversity credits are currently regarded as a capital gains tax asset and potentially eligible for the 50% discount and small business concessions. Changing this tax treatment so it aligns with the carbon credit income will generally result in more tax being applicable to biodiversity credits. We are in discussions with our local MP on this issue as it appears that not many people understand the implications of this change of tax treatment for biodiversity credits.
Super Guarantee $450 Threshold Being Removed
Currently there is a $450 threshold on which an employer will need to pay superannuation guarantee to an employee if he/she earns above that amount in a calendar month. This threshold will be removed on 1 July 2022. This means that superannuation will need to be paid to all employees regardless of how much they earn and what age they are after 1 July 2022. It is worth keeping this in mind when you are next preparing your quarterly Superannuation Guarantee lodgement.
