2022/23 Federal Budget Update

On 25 October 2022, Treasurer Jim Chalmers handed down an updated 2022/23 Federal Budget, the first for the Albanese Labour Government.

Here are the key tax updates that were announced.

1.      Provided certainty for unlegislated tax and super measures announced by the prior Government, such as:

Changing of audit requirements for SMSFs

In the 2018/19 Budget, the previous Government announced that SMSFs that had a history of good record-keeping and compliance would only need to be audited every three years. This budget has confirmed that the new Government will not be proceeding with this measure, maintaining the annual audit requirement.

Limit of $10,000 cash payments made to businesses

Also announced in the 2018/19 Budget was the proposal of introducing a limit of $10,000 for cash payments made to businesses for goods & services, requiring transactions over the threshold to be made via electronic payment system or cheque. This measure is similarly not proceeding under the new Government.

New reporting requirements for Uber, Air BnB

A new reporting regime for companies in the sharing economy (ie. Uber, AirBnB) was scheduled to commence on 1 July 2022, however, has now been pushed back to July 2023. Under the regime, operators will need to report all payments made to platform users, directly to the ATO.

It is worth noting that any income earned through these platforms is already classified as declarable income, and must be included in individual income tax returns.

Relaxation of residency requirements for SMSFs  

The previous Government announced that it would relax residency requirements for SMSFs by extending the ‘central control and management test’ safe harbour from two years to five years and removing the ‘active member’ test. The measure is intended to allow SMSF members to continue contributing to their super whilst temporarily overseas.

Originally scheduled to commence 1 July 2022,this has been deferred to allow practical time to be legislated and implemented.

2.      Clarification that digital currencies (such as Bitcoin) are not to be taxed as foreign currency

This announcement has clarified any confusion arising from the decision of El Salvador to adopt Bitcoin as a legal tender in their country.

This however does not apply to digital currencies which are issued by, or under the authority of, a foreign government agency, which will continue to be taxed as foreign currency.

3.      Reversal of decision to allow self-assessment of the effective life of intangible assets

The previous Government announced it would allow taxpayers to self-assess the tax-effective lives of eligible intangible depreciating assets, such as patents, registered designs, copyrights & in-house software. This has now been reversed, maintaining the status quo of effective lives of depreciating intangible assets being set by statute.

4.      Increase in Commonwealth penalty units (ie. ATO penalties/fines)

From 1 January 2023, the Government will increase penalty units from $222 to $275 for tax offences.

5.      Expanding the eligibility for downsizer contributions to super

The downsizer contribution allows people to make a one-off post-tax contribution to their super of up to $300,000 per person from the proceeds of selling their home. Both members of a couple can contribute, and contributions do not count towards non-concessional contribution caps.

The Government have announced that more people will be eligible to make downsizer contributions, by reducing the minimum eligibility age from 60 to 55.

It is worth noting that this will not come into effect until after it has been fully legislated.

6.      FBT exemption for electric cars

From July 1 2022, battery, hydrogen fuel cell or plug-in hybrid electric cars will be exempt from FBT – provided they have a first retail price below the luxury car tax threshold for fuel-efficient cars, and the car has not been held or used before 1 July 2022.

Employers will still need to include exempt electric car fringe benefits in an employee’s reportable fringe benefits amount.

7.      Expanding the list of Covid-19 state/territory business grants which may be eligible for tax-free status

The Government has announced the following Covid-19 grants may be made tax-free for eligible recipients:

• Victoria Business Costs Assistance Program Four – Construction.

• Victoria Licenced Hospitality Venue Fund 2021 – July Extension.

• Victoria Licenced Hospitality Venue Fund2021 – Top Up Payments.

• Victoria Business Costs Assistance Program (Round Two Top Up, Round Three, Round Four, Round Five).

• Victoria Impacted Public Events Support Program Round Two.

• Victoria Live Performance Support Program (Presenters) Round Two.

• Victoria Live Performance Support Program (Suppliers) Round Two.

• Victoria Commercial Landlord Hardship Fund 3.

• Australian Capital Territory HOMEFRONT 3.

• Australian Capital Territory Small Business Hardship Scheme.

This measure will only apply to eligible recipients in exceptional circumstances, such as the severe economic consequences facing businesses during the Covid-19 pandemic.

8.      Energy Efficiency Grants for small-medium business entities

This announcement involves funding for small-medium businesses to support studies, planning, equipment and facility upgrade projects that will improve energy efficiency, reduce emissions or improve the management of power demand.

Further details and information on this grant are yet to be announced.

9.      Paid Parental Leave Boost

This Budget has announced significant changes to Paid Parental Leave, announcing much more flexibility for families.

From 1 July 2023, either parent will be able to claim the payment, and both birth and non-birth parents will be able to receive the payment if they meet the eligibility criteria.

The scheme will also be expanding by an additional two weeks per year until it reaches a full 26 weeks from 1 July 2026.

10.  ATO compliance activity boost

The following ATO compliance programs have been extended, and provided substantial additional funding:

- Personal Income Tax Compliance Program

Responsible for proactive, preventative & corrective activities in key areas of non-compliance, including overclaiming deductions and incorrect reporting of income.

- Shadow Economy Program

Targets shadow economy activity, to protect revenue & level the playing field for businesses that are following the rules.

- Tax Avoidance Taskforce

Focuses on multinational enterprises and large public and private businesses.

11.  Tax Practitioners Board (TPB) compliance activity boost

The TPB, which is the regulatory body for the accounting profession, has also been provided with further resources to ramp up compliance activity. The Government will be investing $30.4 million to assist the TPB in going after high-risk, dodgy, and unregistered tax practitioners.

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