- 46th session of Parliament is about to be dissolved leaving some of the 2022-23 Federal Budget announcements outstanding
- CA ANZ Tax Team looks at what 2022-23 Budget announcements are certain and what remains outstanding
With the Prime Minister on the verge of calling the 2022 Federal Election and thereby dissolving the 46th session of Parliament, what is the status of the key 2022 Federal Budget tax-related measures just announced? The CA ANZ Tax Team looks at what key measures will become law before the Federal Election is called and what taxpayer and tax professionals do with the other measures.
The legislation containing the cost of living support measures, Treasury Laws Amendment (Cost of Living Support and Other Measures) Bill 2022, Customs Tariff Amendment (Cost of Living Support) Bill 2022 and Excise Tariff Amendment (Cost of Living Support) Bill 2022 have received Royal Assent.
Therefore, people can look forward to the following tax-related measures:
- claiming tax deductions for expenses incurred from 1 July 2021 in taking COVID-19 tests for the purposes of attending their workplace or in the course of carrying on their business
- the increase of the low and middle income tax offset for the 2021-22 income year by $420
- the 2022 cost of living payment of $250 to Social Security and Veterans’ income support and compensation recipients, Farm Household Allowance recipients, and holders of a Pensioner
- Concession Card, Commonwealth Seniors Health Card or Veteran Gold Card
- regulatory relief for employee share schemes
- the reduction of the GDP adjustment factor for the 2022-23 to 2% which is applied to work out the amount of PAYG and GST instalments payable by a taxpayer
- a 50% reduction for six months in fuel excise and excise-equivalent customs duty
- the increase in the Medicare levy low-income thresholds for individuals and families and those eligible for the senior and pensioner tax offset, as well as an increase in the Medicare levy surcharge low-income threshold in line with movements in the CPI (for 2021-22 income year and beyond).
Deduction boosts for small business
The legislation for the popular small business measures, the Skills and Training Boost and the Technology Investment Boost has not been introduced into Parliament yet. As the Federal Election is likely to be called in the coming days, it is unlikely that these measures will be enacted before the dissolution of Parliament.
To recap, the Skills and Training Boost allows small businesses with aggregated annual turnover of less than $50 million to access a new bonus 20 per cent deduction for the cost of external training courses delivered to their employees by providers registered in Australia. This boost is to apply to eligible expenditure incurred from Budget night until 30 June 2024. Eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year.
Even though both of these measures are said to apply from 29 March 2022, taxpayers should not rush out to purchase training courses or cloud computing software yet in anticipation of these announcements. Knowing the Government is about to call an election, the Australian Labor Party (ALP)’s position on these measures will be important. However, if taxpayers prefer certainty they should hold off on making the expenditures until after the outcome of the Federal Election is known and the incoming government’s position on these measures are known.
The Technology Investment Boost allows small businesses with aggregated annual turnover of less than $50 million to access a new bonus 20 per cent deduction for the cost of expenses and depreciating assets that support digital uptake, up to $100,000 of expenditure per year. Eligible costs include online sales platform, cyber security enhancements, cloud computing and digital tracking for livestock. This boost is to apply from Budget night until 30 June 2023. Eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year.
As both of these measures are said to apply from 29 March 2022, can the taxpayer rely on these announcements and anticipate the proposed change? The Australian Taxation Office (ATO) is only authorised to administer the existing tax laws so if the measures are not enacted, the ATO may act to stop incorrect refunds.
In considering action to prevent incorrect refunds from being made in such circumstances, the ATO will take into account whether:
- there are likely to be long delays in passing the relevant legislation, which, for instance, might mean that if the legislation is ultimately not passed it would become difficult to recover any incorrect refunds that are made
- there is known opposition to the proposal in the Parliament, especially if the makeup of the Senate could allow the proposal to be defeated
- the announced change is not clear, which may lead to incorrect assessments that need to be amended
- current taxpayer behaviour is consistent with the proposed change
- delays in assessments could have adverse effects on business activities, including cash flow.
Knowing the Government is about to call an election, the Australian Labor Party (ALP)’s position on these measures will be important. If the ALP supports these measures, then even if there is a new Government voted in, the likelihood that these measures will become law is high.
Extension of the patent box income concessional tax treatment
Treasury Laws Amendment (Tax Concession for Australian Medical Innovations) Bill 2022 is currently before the House of Representatives. The Bill introduces the patent box regime for the exploitation of a medical or biotechnology patent which provides that income directly attributable to the eligible patent will be subject to an effective income tax rate of 17 per cent. The legislation is set to apply to patents granted or issued after 11 May 2021 in respect of income years starting from 1 July 2022.
One of the 2022-23 Budget announcements is the extension of the patent box regime to support practical, technology-focused innovations in the Australian agricultural sector and technology-focused innovations that have the potential to lower emissions. The concessional tax treatment will be provided to corporate taxpayers who commercialise:
- their eligible patents linked to agricultural and veterinary (agvet) chemical products listed on the Australian Pesticides and Veterinary Medicines Authority (APVMA), PubCRIS (Public Chemicals Registration Information System) register, or eligible Plant Breeder’s Rights (PBRs)
- their patented technologies which have the potential to lower emissions.
This measure is set to apply for patents granted after 29 March 2022 and for income years starting from 1 July 2023.
The Government will consult with industry before settling the detailed design of the patent box expansion to agriculture. It is not known yet whether this will result in amendments being proposed to the current Bill before the House of Representatives to implement the extension, or a new consultation process for the extension (i.e. the release of consultation paper and exposure draft legislation). Either way, it is unlikely that the patent box regime will be enacted before the dissolution of Parliament. Again, the ALP’s position on the patent box regime and extension will be important as to whether these measures can be anticipated.
Concessional tax treatment for carbon abatement and biodiversity stewardship income
The Government will allow the proceeds from the sale of Australian Carbon Credit Units (ACCUs) and biodiversity certificates generated from on-farm activities is to be treated as primary production income for the purposes of the Farm Management Deposits scheme and tax averaging from 1 July 2022. Legislation implementing this measure has not been introduced into Parliament.
Announced but unenacted measures from previous years
The Federal Government still has a number of announced but unenacted measures from previous years. With the uncertainty around announced but unenacted measures, the Australian Taxation Office (ATO) has published useful guidance on the administrative treatment of retrospective legislation which should help guide taxpayers and tax professionals as to whether any of the retrospective measures should be anticipated or not. It is important to note that the ATO is only authorised to administer the existing tax laws so if the measures are not enacted, the ATO may act to stop incorrect refunds.
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