Federal Budget October 2022

What it means for your business

A Responsible Reasonable and Targeted Budget.

Treasurer Jim Chalmers has handed down his first budget – one that is set in the midst of a pandemic, natural disasters, global volatility, and a rising cost of living.

The challenges facing Australia and growing – are unprecedented floods, substantial global economic slowdown, high inflation, low wage growth, rising interest rates and inherited debt. The Treasurer talked of restraint within the budget and taking hard decisions for hard times – but that this is a first step budget.

This budget primarily focuses on developing a platform for more substantial changes in the economy over the next few years, as opposed to any major reforms in the near term. Given the elevated cost of living, most policies presented in this budget aim to provide relief for households with the intention of limiting any additional momentum to inflationary pressures.

The budget position has improved compared to Treasury’s forecast in March. A combination of a tight labour market, high commodity prices, and a strong rebound in economic activity compared to last year sees the budget deficit declining to $37 billion in 2023 before a modest uptick over the next few years.

Below is a summary of the changes;

Superannuation

• The Government is proposing to lower the age for downsizer contributions from 60 to 55. This means that if you sell your residence to downsize your can make a contribution to the super fund for that amount without that contribution counting towards your non-concessional contribution (after-tax) cap.  So, if eligible and under 75, a couple could potentially contribute an additional $600,000 of after-tax contributions upon the sale of their home.
• Self-Managed Super Fund (SMSF) members will have greater flexibility to retain and contribute to their fund while being temporarily overseas.

Taxation

• No extension of the low- and middle-income tax offset that ceased from 30 June 2022. This means that anyone with a taxable income below $126,000 will receive up to $1,500 less in their tax refund than last year.
• No extension of the previous cuts made to fuel excise tariffs that ceased to apply on 29 September 2022.
• Stage three tax cuts are still set to go ahead as previously announced. For instance, someone with a taxable income of $140,000, would benefit from a tax saving of $3,275.
• Electric car concessions; The environment remains a focus of this government and electric cars are part of the environment plan. An FBT concession is in place to make fringe benefits provided on electric cars exempt. There is also an import tariff exemption for certain battery hydrogen fuel cells and plug-in hybrid vehicles. This applies to benefits provided after 1 July 2022.
• The budget has funded a ramping up of multinational tax reform and set aside additional funding to the ATO for its Tax Avoidance Taskforce – which is forecast to create a further $3 billion in extra revenue. Details of this program will be expected over the months ahead
• Treatment of Crypto Currency: Legislation will be brought in to clarify that digital currency (e.g. Bitcoin) will not be treated as foreign currency. This stance will also be applied to GST where Crypto currency is used as legal tender.
• Instant asset write-off finishes (from previous budgets); Will not extend past 30 June 2023 – this means that assets need to be installed and ready for use by 30 June 2023

Business:

• The government is provided $15 million to extend/continue small business health and financial counselling programs, NewAccess for Small Business Owners and the Small Business Debt Helpline.

Cost of living increases – a 5 point plan:

• The government is proposing to give family access to more parental leave and to ease the cost of living for families through increased child-care subsidies. Child Care costs
  • The child-care subsidy will be increased from July 2023 from 85cents to 90 cents for families for the first child and increase the rate for all families with a combined income of less than $530,000.
  • The subsidy rate for families with multiple children 5 year or under is staying the same and will cease either 26 weeks after the first child’s last session or when they turn 6 years.

Paid Parental Leave

• • The paid parental leave is increasing from 20 weeks up to 26 weeks by 1 July 2026, the increase will be 2 weeks every year from 1 July 2024 until it reaches 26 weeks.
    The paid parental leave will be split amongst both parents to encourage caring from both parents for the newborn through providing a portion of the leave will be assigned to both parents, which will create a use it or lose it function to the total paid parental leave.
  • Parents will be able to receive their portion of paid parental leave concurrently to be able to be on leave together.

Medication

• The general patient co-payment for medications on the Pharmaceutical Benefits Scheme (PBS) will be reduced by $12.50 to $30 from 1 January 2023

Wages

• The minimum wage has been increased

Housing

• Investing in building more affordable housing

Social Security

• The income threshold for the commonwealth seniors health card has been increased for both individuals ($61,284 to $90,000) and couples ($98,054 to $144,000)
• Pensioners are encouraged to continue participating in the workforce by
  • temporarily increasing the Work Bonus income bank (by $4,000);
  • Extending the qualification period for Pensioner Concession Cards;
  • Suspending, instead of cancelling, benefits and entitlements for up to two years;
• The Government has a raft of measures aimed at reducing the financial impact on pensioners looking to downsize their homes
• The Government will freeze social security deeming rates at their current levels until 30 June 2024 to provide some certainty on how investment income is assessed

What does the Federal Budget mean for the agricultural industry and regional areas?

With last night’s budget announcement, the following areas were the main focuses for the Agribusiness sector:

Climate Change & Environment

• $1.1B funding over the next 6 years to support sustainable management of our natural resources
• Allocating $1.9B to establishing a ‘Powering the Regions Fund’ to assist with regional transition to net zero emissions
• $20.3M over the next 4 years to establish an outreach program to encourage farmers to participate in carbon markets
• $134M to bolster Australia’s biosecurity system, including $46M to enable contract tracing of livestock from paddock to plate
• $1B available for future projects that increase Australia’s water security reliability and sustainability

Regional Infrastructure

• $757.7M over the next 5 years to improve mobile and broadband connectivity in rural and regional Australia
• $500M over the next 7 years dedicated to the farming sector as part of the National Reconstruction Fund to help support and transform Australian industry and the economy

Export & Trade

• $204.8M over the next 5 years to support industries to improve innovation and sustainable growth for Australia’s timber production

Emergency Response

• $630.4M allocated to Disaster Ready Fund over the next 4 years to support resilience efforts via Home Affairs

We will await further announcements for specific eligibility requirements to enable you to access this funding.

Unfortunately, there were some disappointing things announced including:

• Undisclosed amounts set aside to buy water entitlements from farmers living in Murray-Darling Basin
• Funding from round 2 of the Agricultural Shows Development Grant not proceeding
• Uncommitted funding from round 2 of the Agricultural Shows and Field Days being redirected

Summary

This is a budget that lays out the current status of the economy and funds some areas of the government’s election promises. However, this is a “first-step” budget – it is setting the scene for what happens in March.

The biggest winner in this budget is the federal purse – the windfall commodities $150B has gone straight off the bottom line deficit. As for losers – cost of living increases with no real increase in wages for 18 months will affect everyone.

Businesses will need to brace for ongoing wage growth, further inflationary pressures, a slowing economy, and for interest rate increases.
It’s a complex balancing act.

Get in touch

Get in touch with us to learn more about how we can help your business take advantage of these measures.