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2022 Federal Budget Summary

Source: Tax & Super Australia

On Tuesday, 29 March 2022, Treasurer Josh Frydenberg handed down the 2022-23 Federal Budget. This is a summary of the measures announced by the budget:

  • Small Businesses will be provided with a 20% bonus deduction for eligible external training courses as well as in their expenditure on digital technologies
  • Fuel excise reduced by 50% for 6 months
  • Low and middle-income earners will receive a one-off $420 cost of living tax offset 
  • Pensioners and welfare recipients will receive a one-off $250 payment 

Personal Taxation:

  • LMITO increased by $420 for 2021-22: The low and middle-income tax offset (LMITO) will increase by $420 for individuals with earnings up to $126,000 per annum, payable in respect of the 2021-22 income year. The maximum offset payable to an individual is $1,500 where their earnings are between $48,001 and $90,000 which then phases out up to an amount of $126,000. An extension of this tax offset has not been announced by the Government beyond 2021-22.
  • Personal tax rates: No changes were made to the personal tax rates for 2022-23.
  • Employee share schemes: Individuals offered an employee share scheme may invest up to $30,000 in unlisted companies per year (accruable for unexercised options for up to 5 years), plus 70% of dividends and cash bonuses. Participants are able to invest any amount if it would allow them to immediately take advantage of a planned sale or listing of the company.

Business Taxation

  • Small business 20% deduction boost: skills training and digital adoption: Businesses (up to $50m turnover) will receive a 20% uplift on deductions for eligible expenditure on external training courses and digital technology. The 20% boost will apply to eligible expenditure incurred from 7:30 pm on 29 March 2022 until 30 June 2024 (for skills training) and 30 June 2023 (for digital adoption). An annual cap will be applied in each qualifying income year so that expenditures up to $100,000 will be eligible for the boost. 
  • Patent box income extended: The concessional tax treatment for eligible corporate income associated with new patents in the medical and biotechnology sectors will be extended to corporate taxpayers who commercialise their: (i) eligible patents linked to agricultural and veterinary chemical products; and (ii) patented technologies which have the potential to lower emissions. In both cases, income will be taxed at 17% in relation to rights and patents granted or issued after 29 March 2022, for income years starting on or after 1 July 2023.
  • PAYG Instalments: From 1 January 2024, companies will be allowed to choose to have their PAYG instalments calculated based on current financial performance, extracted from business accounting software (with some tax adjustments). For Small and Medium Businesses, the GDP uplift factors will be limited to 2% in respect of instalments that relate to the 2022-23 income year. The measure applies to businesses with up to $10 million annual aggregated turnover for GST instalments and $50 million annual aggregated turnover for PAYG instalments.
  • Digitalising trust income: The Government intends to allow all trust tax return filers to be given the option of lodging income tax returns electronically, increasing pre-filling and automating ATO assurance processes. If enacted, this measure will apply from 1 July 2024. 
  • Taxable payments data reporting: From 1 January 2024, businesses will be provided with the option to report Taxable Payments Reporting System data on the same lodgment cycle as their activity statements via accounting software.

Superannuation Highlights

  • Super pension drawdowns: 50% reduction extended to 2022-23: The 50% reduction of the minimum superannuation pension drawdown requirements will be extended for the 2022-23 income year.
  • Super Guarantee rate: The Budget did not contain any change to the legislated Super Guarantee rate rise from 10% to 10.5% for 2022-23.

Other Measures:

  • Fuel excise temporary reduction: the fuel excise will be reduced by 50% for 6 months, starting from midnight on Budget night.  
  • $250 cost of living payment: the Government will make a $250 one-off cost of living payment in April 2022 to eligible pensioners, welfare recipients, veterans and concession cardholders.  
  • Apprentice wage subsidy extension:the Budget confirmed the extension of the Boosting Apprenticeship Commencement (BAC) and Completing Apprenticeship Commencements (CAC) wage subsidies by 3 months to 30 June 2022. 

2021 Federal Budget Report Summary: Tax Compliance & Superannuation

Source: Tax & Super Australia

On Tuesday, 11 May 2021, Treasurer Josh Frydenberg handed down the 2021-22 Federal Budget, his 3rd Budget.

1. Tax-related measures announced:

  • Personal tax rates - no changes were made to personal tax rates, the Government has already brought forward the Stage 2 tax rates to 1 July 2020. The Stage 3 personal income tax cuts remain unchanged and will commence in 2024-25 as already legislated.
  • LMITO retained for 2021-22 - the Government will retain the low and middle-income tax offset for the 2021-22 income year. The LMITO provides a reduction in tax of up to $1,080.
  • Temporary full expensing extended - the Government will extend the 2020-21 temporary full expensing measures for 12 months until 30 June 2023. This will allow eligible businesses with aggregated annual turnover or a total income of less than $5 billion to deduct the full cost of eligible depreciable assets of any value, acquired from 7:30 pm AEDT on 6 October 2020 and first used or installed ready for use by 30 June 2023.
  • Loss carry-back extended - the loss years in respect of which an eligible company (aggregated annual turnover of up to $5 billion) can currently carry back a tax loss (2019-20, 2020-21 and 2021-22) will be extended to include the 2022-23 income year.
  • Individual residency test reformed - the Government will replace the existing tests for the tax residency of individuals with a primary "bright line" test under which a person who is physically present in Australia for 183 days or more in any income year will be an Australian tax resident.
  • Employee share schemes - the Government will remove the cessation of employment as a taxing point for the tax-deferred employee share schemes.
  • ATO debt recovery - the AAT will be given the power to pause or modify ATO debt recovery action in relation to disputed debts of small businesses.
  • Self-education expenses - $250 threshold to be removed.

2. Superannuation and related measures:

The key superannuation and related measures announced in the Budget include:

  • Superannuation contributions work test - to be repealed from 1 July 2022 for voluntary non-concessional and salary sacrificed contributions for those under age 75. However, the work test will still apply for personal deductible contributions by those aged 67-74.
  • SMSF residency rules - to be relaxed by extending the central management and control test safe harbour from 2 to 5 years, and removing the active member test for both SMSFs and small APRA funds.
  • Conversions of legacy income streams - individuals will be permitted to exit certain legacy retirement income stream products (excluding flexi-pensions or lifetime products in APRA-funds or public sector schemes), together with any associated reserves, for a 2-year period. Any commuted reserves will not be counted towards an individual's concessional contribution cap. Instead, they will be taxed as an assessable contribution to the fund.
  • Super Guarantee $450 per month threshold - to be removed from 1 July 2022.
  • Downsizer contributions - eligibility age to be lowered from 65 to 60.
  • First Home Super Scheme - to be extended for withdrawals up to $50,000, plus some technical changes for tax and administration errors in applications.
  • Victims of domestic violence - the Government will not proceed with its previous proposal to extend the early release of super to victims of family and domestic violence.
  • Pension Loans Scheme - will be expanded to allow access up to 2 lump sums in any 12-month period (up to a total of 50% of the maximum annual Age Pension); together with a Government guarantee that "No Negative Equity" will apply.

At the same time, the Budget did not contain any change to the legislated Super Guarantee rate increase from 9.5% to 10% for 2021-22.


Australian Capital Territory Budget 2020–21 Summary

Source: ACT Government - Budget 2020-21

The budget outlook highlights:

  • The 2020-21 Budget has been framed in the context of the evolving challenges posed by the COVID-19 pandemic.
  • The ACT has positive net worth in 2020-21 equivalent to 38.7 per cent of Gross State Product.
  • Job vacancies have also grown strongly, supporting the expected 4 per cent increase in employment in 2020-21.
  • For 2020-21, the Headline Net Operating Balance deficit will be $603 million, while net debt will be $4.665 billion. The Headline Net Operating Balance deficit is $432.5 million higher, and net debt is $884.5 million higher, than forecast at the time of the 2019-20 Budget Review, which was released prior to the pandemic.

The ACT economy:

  • More than 10,000 jobs were lost in the ACT when necessary health restrictions in response to the pandemic were first put in place, with the services sector most affected. As restrictions have eased and private sector economic activity has picked up, employment has now recovered to around pre-COVID levels, although the recovery has been uneven across industries.
  • The ACT’s unemployment rate of 3.7 per cent and our underemployment rate of 6.0 per cent in December 2020 are the lowest in the country, while our participation rate of 72.2 per cent is the second highest. Job vacancies have also grown strongly, supporting the expected 4 per cent increase in employment in 2020-21.
  • While the ACT’s population grew by 4,800 people, or 1.1 per cent, in 2019-20, restrictions and disruption to international travel are expected to have significant implications for net overseas migration in the short and medium term, slowing our population growth to an average of fewer than 3,000 people per year over the next four years.

The 2020-21 Business recovery efforts:

  • The cost of supporting the ACT to continue to recover from the impacts of the COVID-19 pandemic is anticipated to be $603 million in 2020-21, reducing to deficits of $475 million in 2021-22, $406 million in 2022-23, and $369 million in 2023-24.
  • Businesses are supported with payroll tax waivers and deferrals, waivers of licence fees, residential and commercial rates rebates, and utilities bill rebates.
  • 15 month waiver for food business registration and outdoor dining fees; and reducing liquor licensing fees by 50 per cent for an additional 12 months
  • Recovery programs including $150 million for the Sustainable Household Scheme, $100 million for the Big Canberra Battery and $50 million for the Vulnerable Household Energy Support scheme to encourage the shift to zero-emissions vehicles, and increased funding to strengthen housing and homelessness services.
  • The Government will extend the food business registration fee waiver provided as part of the COVID-19 Economic Survival Package for a further year until 31 March 2022. The outdoor dining permit fee waiver will also be extended for a further year until 30 June 2022.
  • Commercial property owners who operate businesses from premises they own will also be eligible for assistance if they have been negatively affected by COVID-19, until 31 January 2021.
  • The Government will establish a Better Regulation Taskforce to review the current business environment in the ACT and begin pursuing reforms to support Canberra’s recovery from the COVID-19 pandemic and long-term economic growth. The Taskforce will also lead the ACT’s contribution to nation-wide regulatory reforms.
  • The Government will provide direct finance to businesses to help develop COVID-safe tourism in the ACT. Matched funding will be provided to applicants who can demonstrate they will undertake new investments that will result in a positive return to the Territory.

Continue reading the full Budget 2020-21


End of Financial Year Preparation: Magical touch on your books!

With end of financial year (EOFY) fast approaching, the Tailored Accounts team is counting down to the last day of the financial year! Offices of accountants and bookkeepers will be filled with the hustle and bustle of time-critical challenges. You may wonder why EOFY often becomes such a hectic time for us. I hope this article can shed light on the inner processes of EOFY preparation.

Having worked in the accounting industry for more than a decade, I consider EOFY preparation as a chance to place extra effort to ensure accurate, up-to-date numbers as well as presentable reporting. These outputs are the results of, what I call, a magical touch on your books.

The following list articulates the main examples of magical touches that we exert to ensure your books are in the best order:

1.      The year-end payroll

During the financial year, we process 12 – 52 payrolls for our clients subject to their pay cycles. At the end of each month or quarter, our team reported the payroll information to Australian Taxation Office (ATO), including Gross Wage and Tax details. In addition to the accurate reports regularly lodged to the ATO, payroll reconciliations at year-end takes care and attention to ensure all requirements are met. Here are the core tasks that our team has been undertaking in the process of EOFY preparation:

  • Final super payment runs must be done before 25th June each year to ensure the last super payment is eligible for a tax deduction in the current financial year. Final salary sacrifice payment runs must happen on or before the same date to ensure all salary sacrifice arrangements are captured in the current year’s payment summary for employees. These particular tasks will require a few extra hours of work during the EOFY period.
  • Payment summaries are to be communicated to employees via email/post before 14th July. We ought to undertake a full year payroll reconciliation to ensure the accuracy of the information in payslips, Business Activity Statements (BAS), and payment summaries. This significant task requires half a day at a minimum, depending on the number of employees and complexity of the payroll structure.
  • Payment summary reports must be submitted to the ATO before 14th August in the following year. The task usually takes an hour to complete. To illustrate, 300 clients at Tailored Accounts are interpreted into a budget of minimum 300 hours for all payment summaries with no mistakes allowed.

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