There is nothing in this Budget that would create a UK style crisis. The stage 3 tax cuts legislated to commence on 1 July 2024 are not mentioned, and most funding initiatives appear to be a reallocation of previous Government initiatives. And, the commodity driven $54.4 billion improvement in tax receipts has largely been banked, not spent.
With seven months before the 2023-24 Budget released in May 2023, this Budget is a shuffling of the deck not a new set of cards. And to continue the pun, we need to play the hand we have been dealt, buffeted by externalities – war, floods, and global uncertainty.
Cost of living pressures will continue. While some initiatives such as the increase to child care subsidies will help, the Budget flags some fairly bracing economic expectations:
- Inflation expected to peak at 7.75% in the December quarter and will persist at higher rates for longer than expected before easing to 3.5% by June 2024.
- Real GDP is forecast to grow to 3.25% in 2022-23 then retract to 1.5% in 2023-24.
- Electricity prices are expected to increase nationally by an average of 20% in late 2022, with retail electricity prices expected to rise by a further 30% in 2023-24.
- The deficit sits at $36.9bn, while this is better than originally estimated, the deficit expands to $49.5bn by 2025-26.
Tight labour market conditions are expected to see annual wage growth pick up to 3.75% by June 2023. Even so, high inflation is expected to see real wages fall over 2022-23 before rising slightly over 2023-24. That is, your wages might increase but the gains will be eaten away by the increasing cost of living.
The ATO gets an extra $80m to extend its personal income tax compliance program, with $674m anticipated in increased receipts and over $80m in increased payments as a result. Tax deductions will be looked at closely.
As expected, multi-nationals are a target. New measures will limit opportunities to shift taxable profits offshore. And, the ATO’s Tax Avoidance Taskforce is expected to deliver a whopping $2.8bn in additional tax receipts and $1.1bn in payments over the 4 year period.
If we can assist you to take advantage of any of the Budget measures, or to risk protect your position, please let us know.
As always, we’re here if you need us!
Fortis Accounting Partners
info@fortisap.com.au
+61 2 9267 0108
The Team
The Fortis AP team are available to assist you with any of the Budget measures or economic risks
Henry Zhao, Partner
02 9267 0108
henry@fortisap.com.au
John Kalachian, Partner
02 9267 0108
john@fortisap.com.au
Individuals & Families
Child Care Subsidy increase
From | 2022-23 |
Paid parental leave reforms
From | 1 July 2023 – 1 July 2024 |
Encouraging pensioners back into the workforce
From | 2022 – 23 |
Current ($ per annum) | New ($ per annum) | |
Single | $61,284 | $90,000 |
Couples combined | $98,054 | $144,000 |
- Extending the assets test exemption for principal home sale proceeds from 12 months to 24 months for income support recipients, and
- Changing the income test, to apply only the lower deeming rate (0.25%) to principal home sale proceeds when calculating deemed income for 24 months after the sale of the principal home.
From | 2022 – 23 |
From | 2022 – 23 |
Superannuation & Investors
Change to taxation of off-market share buy-backs by listed companies
From | 7:30pm AEDT, 25 October 2022 |
From | First quarter after Royal Assent |
- Treasury Clarifying crypto not taxed as a foreign currency
- Media Release Crypto not taxed as foreign currency
Business & Employers
Removed Self-assessment of intangible assets
Announced in the 2021-22 Budget and due to commence on 1 July 2023, the measure enabling taxpayers to self-assess the effective life of certain intangible assets, rather than being required to use the effective life currently prescribed by statute, has been removed.
The measure was to apply to assets acquired from 1 July 2023 including patents, registered designs, copyrights and in-house software.
From | 2022 – 23 financial year |
From | 2022 – 23 financial year |
- 1 July 2022 to 1 July 2023 for transactions relating to the supply of ride sourcing and short-term accommodation, and
- 1 July 2023 to 1 July 2024 for all other reportable transactions (including but not limited to asset sharing, food delivery and tasking-based services).
From | 1 July 2023 |
- Limit an entity’s debt-related deductions to 30 per cent of profits (using EBITDA as the measure of profit). This new earnings-based test will replace the safe harbour test.
- Allow deductions denied under the entity-level EBITDA test (interest expense amounts exceeding the 3% EBITDA ratio) to be carried forward and claimed in a subsequent income year (up to 15 years).
- Allow an entity in a group to claim debt-related deductions up to the level of the worldwide group’s net interest expense as a share of earnings (which may exceed the 30% EBITDA ratio). This new earnings-based group ratio will replace the worldwide gearing ratio.
- Retain an arm’s length debt test as a substitute test which will apply only to an entity’s external (third party) debt, disallowing deductions for related party debt under this test.
- A safe harbour (debt to asset ratio) test;
- An arm’s length debt test; and
- A worldwide gearing (debt to equity ratio) test.
From | 1 July 2023 |
- Australian public companies (listed and unlisted) to disclose information on the number of subsidiaries and their country of tax domicile;
- Tenderers for Australian Government contracts worth more than $200,000 to disclose their country of tax domicile (by supplying their ultimate head entity’s country of tax residence); and
- Large multinationals, defined as significant global entities, to prepare for public release of certain tax information on a country by country (CbC) basis and a statement on their approach to taxation, for disclosure by the ATO.
From | Payment made on or after 1 July 2023 |
- A tax rate of less than 15%, or
- A tax preferential patent box regime without significant substance.
Government & Regulators
ATO targets in sharp focus
Personal income tax deductions and incorrect reporting
The ATO will receive an additional $80.3 to crackdown on non-compliance including:
- Overclaiming deductions; and
- Incorrect reporting of income
The spend is expected to increase tax receipts by $674.4m and payment by $80.3m over 4 years.
Cash payments and tax evasion by business
The ‘shadow economy’, cash-in-hand payments including underpayment of wages, visa fraud, and other nefarious activity that deprives the economy of the income from tax receipts, will come under scrutiny with the extension of the ATO’s Shadow Economy Program for a further 3 years from 1 July 2023. Over this period, the program is estimated to increase tax receipts by $2.1bn and payments by $685.2m over the 4 years from 2022-23.
Multinational business and the Tax Avoidance Taskforce
The ATO’s Tax Avoidance Taskforce will receive an additional $200m over 4 years from 1 July 2022 primarily to pursue multinational enterprises and large public and private businesses. This taskforce is expected to deliver a whopping $2.8bn in additional tax receipts and $1.1bn in payments over the 4 year period.
$3.6bn cut from external labour, advertising, travel and legal expenses
The Government has committed to saving $3.6bn by cutting what it spends on external labour, advertising, travel and legal expenses.
Others
- Additional infrastructure investment of $500m over 10 years in the Pacific and Timor-Leste will be provided through the Australian Infrastructure Financing Facility for the Pacific including an additional $50m for the establishment of a Pacific Climate Infrastructure Financing Partnership Facility.
- As previously announced, the Pacific Australia Labour Mobility scheme will be expanded to improve the benefits of the program for employers and workers including:
- underwriting employers’ investment in upfront travel costs for seasonal workers by covering costs that cannot be recouped from workers
- improvements to workplace standards for PALM visa holders, including increased workplace compliance activities
- allowing primary visa holders on long-term placements to bring partners and children to Australia, where sponsored by employers, with additional social support including providing relevant minimum family assistance payments, with an initial rollout of 200 families
- the expansion of the existing aged care skills pilot programs for aged care workers.
- A new Pacific Engagement Visa for nationals of Pacific Island countries and Timor-Leste. Up to 3,000 additional places will be made available in addition to those provided through the existing permanent Migration Program.
- $146.1m over 5 years from 2023-24 for the Australian Renewable Energy Agency to co-invest in projects to reduce emissions from Australia’s road transport sector
- $89.5m over 6 years from 2022-23 for the Hydrogen Highways initiative to fund the creation of hydrogen refuelling stations on Australia’s busiest freight routes, in partnership with states and territories, including $5.5m to LINE Hydrogen Pty Ltd for its George Town green hydrogen heavy transport project
- $39.8m over 5 years from 2022-23 to establish a National Electric Vehicle Charging Network to deliver 117 fast charging stations on highways across Australia, in partnership with the NRMA.
- $85.9m for the Canberra Light Rail Stage 2A project
- $1.4bn including $500m for planning, corridor acquisition and early works for the Sydney to Newcastle High Speed Rail, $268.8m for the New England Highway – Muswellbrook Bypass and $110m for the Epping Bridge
- $550m including $350m to seal the Tanami Road and Central Arnhem Road
- $2.1bn including $866.4m for the Bruce Highway, $400.0m for the Inland Freight Route (Mungindi to Charters Towers) upgrades, $400.0m for Beef Corridors and $210.0m for the Kuranda Range Road upgrade
- $460m including $400m for the South Australian component of the Freight Highway Upgrade Program.
- $78m for projects in Tasmania, including $48.0 million for the Tasmanian Roads Package
- $2.6bn including $2.2bn for the Suburban Rail Loop East
- $634.8m including $400.0 million for the Alice Springs to Halls Creek Corridor upgrade and $125m for electric bus charging infrastructure in Perth
- $18m to establish the High Speed Rail Authority to plan, develop, coordinate, oversee and monitor the construction and operation of the high speed rail network.