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This is a safe, ballot box friendly Budget, as expected, focusing on jobs, cost of living, homeownership, and health.

Key initiatives include:

• A 6 month, 50% reduction in fuel excise with effect from midnight Budget night
• A $420 cost of living tax offset for low and middle-income earners from 1 July 2022
• A one-off $250 economic support payment to some social security payment recipients

Beyond compliance, there is an opportunity to capitalise on the benefits of the Government’s push toward innovation and investment in new technology. Not just the $120 tax deduction for every $100 spent on training employees and digital adoption, but also the expansion of the patent box tax concessions. There are opportunities for those pushing boundaries.

For you and your family - temporary reduction in fuel excise

There are a few jokes going around social media about the price of fuel.

As widely predicted, the Government will temporarily reduce the excise and excise-equivalent customs duty rate that applies to petrol and diesel by 50% for 6 months from Budget night. That is, the current 44.2 cents per litre excise rate will reduce to 22.1 cents per litre from Budget night. However, the measure is subject to the passage of the enabling legislation, so don’t expect to see a change right away.

The reduction extends to all other fuel and petroleum-based products except aviation fuels.

$250 cost of living payment

A one-off $250 'cost of living payment' will be provided to Australian resident recipients of the following payments and concession cardholders:

• Age Pension
• Disability Support Pension
• Parenting Payment
• Carer Payment
• Carer Allowance (if not in receipt of a primary income support payment)
• Jobseeker Payment
• Youth Allowance
• Austudy and Abstudy Living Allowance
• Double Orphan Pension
• Special Benefit
• Farm Household Allowance
• Pensioner Concession Card (PCC) holders
• Commonwealth Seniors Health Cardholders
• Eligible Veterans' Affairs payment recipients and Veteran Gold card holders.

The payments are exempt from taxation and will not count as income support for the purposes of any income support payment. An individual can only receive one payment.

Your Superannuation - reduction in minimum superannuation drawdown rates extended again

The temporary 50% reduction in superannuation minimum drawdown requirements for account-based pensions and similar products has been extended to 30 June 2023.   

Minimum superannuation drawdown rates 2019-2023

For Business and Employers - $120 deduction for every $100 spent on technology

The Government intends to provide a 120% tax deduction for expenditure incurred by small businesses on business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud-based services.

The technology boost will be available to small business with an aggregated annual turnover of less than $50 million.

An annual expenditure cap of $100,000 will apply to the boost.

The boost for eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year. The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2023 will be included in the income year in which the expenditure is incurred. That is, the additional deduction available under this measure is expected to be claimed in the 2023 tax return.

Expanding access to employee share schemes

In broad terms, an Employee Share Scheme (ESS) is a scheme under which shares in a company, or rights to acquire shares in a company, are issued to an employee or their associate in respect of their employment.

At a commercial level, ESS arrangements are often used to better align the interests of employers and employees, as employees are provided with an opportunity to share in the profitability and growth of the business. The arrangements can also be useful in situations where a business is in start-up mode and does not have significant cash flow or reserves to attract top-quality employees with high salaries.   

The Government has flagged changes to the ESS rules to expand access to schemes so that employees at all levels can directly share in the growth of the business.

Where employers make larger offers in connection with employee share schemes in unlisted companies, participants can invest up to:

• $30,000 per participant per year, accruable for unexercised options for up to 5 years, plus 70 per cent of dividends and cash bonuses; or
• Any amount, if it would allow them to immediately take advantage of a planned sale or listing of the company to sell their purchased interests at a profit.

The Government will also remove regulatory requirements for offers to independent contractors, where they do not have to pay for interests.

While these changes might expand access to employee share schemes, it is important to consider the tax implications that can arise for employees when they receive shares or options at a discount to their market value. There are a number of different ways that employees can be taxed in this area and the treatment will often depend on how the ESS arrangement has been structured by the company.

‘Patent Box’ tax regime extended to agriculture and emissions

The Patent Box tax regime was announced in the 2021-22 Budget for the medial and biotech industries and provides a concessional effective corporate tax rate of 17% on income derived from patents, to the extent that the taxpayer undertakes the R&D of that patent in Australia.

The Government has announced an extension of the regime to:

• Technology-focused innovations to reduce emissions in line with the Government’s target to achieve net-zero emissions by 2050, and
• Practical, technology-focused innovations in the Australian agricultural sector.

Note that the legislation enabling the original 2021-22 Budget measure has not been enacted and is currently before Parliament – see Treasury Laws Amendment (Tax Concession for Australian Medical Innovations) Bill 2022.

Emissions reduction

Applies to patents relating to low emissions technology, as set out in the 140 technology areas listed in the Government’s 2020 Technology and Investment Roadmap Discussion Paper or included as priority technologies in the Government’s 2021 and future annual Low Emissions Technology Statements, provided the patented technology is considered to reduce emissions.

Streamlining fuel and alcohol excise compliance

From 1 July 2023, fuel and alcohol businesses with an annual turnover of less than $50 million will be able to lodge and pay excise and excise equivalent customs duty on a quarterly basis, rather than weekly or monthly. These businesses will lodge returns and pay excise by the 28th day of the month after the end of each quarter.

In addition, businesses that import fuel and alcohol products for further manufacture or distribution, and want to defer payment of excise or excise-equivalent customs duty, will be able to transfer the fuel or alcohol straight into a warehouse administered by the ATO once the products have gone through Australian Border Force (ABF) customs clearance. The ABF will still collect tax on direct imports.

Linking PAYG instalments to financial performance

As announced prior to the Budget, companies will be able to choose to have their pay as you go (PAYG) instalments calculated using current financial performance, extracted from business accounting software, with some tax adjustments.

The move is intended to ensure that instalment liabilities align with the business's cash flow. In addition, the digitisation of PAYG instalments will improve transparency and provide more accurate data on performance.

Education, skills and training - $120 deduction for every $100 spent on skills and training

The Government intends to provide a 120% tax deduction for expenditure incurred by small businesses on external training courses provided to employees. The deduction will be available to small business with an aggregated annual turnover of less than $50 million. External training courses will need to be provided to employees in Australia or online, and delivered by entities registered in Australia.

Some exclusions will apply, such as for in-house or on-the-job training and expenditure on external training courses for persons other than employees. 

We assume there will need to be a nexus between the employee’s employment and the training program undertaken for the boost, although we are waiting on further details of this initiative to be released.

The boost for eligible expenditure incurred by 30 June 2022 will be claimed in the tax return for the following income year (that is, the 2023 tax return). The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2024, will be included in the income year in which the expenditure is incurred.

The government and regulators - extension of the ATO’s tax avoidance taskforce

An additional $652.6m has been set aside to extend the ATO’s Tax Avoidance Taskforce by 2 years to 30 June 2025.

In that time, the taskforce is expected to increase receipts by $2.1bn and increase payments by $652.6m.

Energy and emissions reduction

$446.1 million over 5 years has been provided to increase energy security, maintain affordable and reliable power for households and businesses and reduce the cost of deploying low emissions technologies. $247m of that is to support increased private sector investment in low emissions technologies including hydrogen, the continued development of a hydrogen Guarantee of Origin scheme, and the development of a Biodiversity Stewardship Trading Platform to support farmers to undertake biodiversity activities ahead of the introduction of a voluntary biodiversity stewardship market.

Another $148.6m is for the development of community microgrids and just over $50m to develop gas infrastructure projects.

An Australian Space Industry

The Government will provide $1.3 billion from 2021-22 to grow the Australian space sector and space manufacturing industry. This includes $1.2bn to establish a National Space Mission for Earth Observation to secure access to key earth observation data streams, build Australia’s sovereign capability and enter agreements with international partners including for the procurement and operation of Australian Satellite Cross Calibration Radiometer satellites. And, $65.7m to fast track the launch of space assets.

Australia’s position in the Asia Pacific

For those of you who have been watching the reaction to the Solomon Islands security agreement with China, the appearance in the Budget of infrastructure investment in the Pacific will come as no surprise.

The Government will increase the Australian Infrastructure Financing Facility for the Pacific to $3.5 billion, supporting additional infrastructure investment in the Pacific. This includes projects in Papua New Guinea to improve roads and power. An additional $650m will be provided as a loan for PNG’s COVID-19 recovery.

$245.5m will be spent over 5 years on the partnership with India. A new Chancery for the Australian High Commission in Honiara. And, $324.4m to Pacific Island countries and Timor Leste to support their COVID-19 recovery.

Infrastructure projects

Just prior to the Budget’s release, the Government announced $17.9bn in new and additional funding for existing infrastructure projects. Full details of infrastructure funding are on the Infrastructure Investment Program website.

WLM can help

If we can assist you in taking advantage of any of the Budget measures or risk protecting your position, please contact us.