Federal Budget October 2022: What it means for financial services professionals

The Federal Treasurer, the Hon Dr Jim Chalmers MP, delivered the second Federal Budget of 2022 on 25 October 2022.

The Albanese Government did not make any changes to the stage three tax cuts however announced some significant and wide ranging proposals.

The Treasurer highlighted the Budget’s five-point plan:

1. Cheaper child care
2. Cheaper medicines
3. Expanded paid parental leave
4. More affordable housing
5. Getting wages moving again

This summary provides coverage of the key issues of interest to financial services professionals.

Highlights

Personal income tax

• No changes to the currently legislated personal income tax arrangements
• Digital currencies will not be taxed like foreign currencies
• Extend ATO Personal Income Taxation Compliance Program

Business owners

• Depreciation – allowing taxpayers to self-assess effective life of intangible depreciating assets
• Powering Australia – Electric Car Discount
• Extend ATO Compliance Programs – Shadow Economy Program
• Extend ATO Compliance Programs – Tax Avoidance Taskforce
• Improving the integrity of off-market share buy-backs
• New Energy Apprenticeships
• New Energy Skills Program
• Paid Family and Domestic Violence Leave – small business assistance
• Secure Australian Jobs
• Buy Australian Plan
• Supporting Small Business Owners
• Unlegislated tax measures announced by the previous Government

Superannuation

• Commissioner of Taxation v Douglas
• Expanding eligibility for downsizer contributions
• Unlegislated superannuation measures announced by the previous Government

Social security

• Child Care Subsidy Reforms Integrity Package
• Plan for Cheaper Child Care
• Boosting Parental Leave to Enhance Economic Security, Support and Flexibility for Australia’s Families
• Incentivising Pensioners to Downsize
• Incentivise pensioners into the workforce
• Lifting the Income Threshold for the Commonwealth Seniors Health Card
• Plan for Cheaper Medicines

Aged care

• COVID-19 Package – aged care
• Fixing the Aged Care Crisis
• Implementing Aged Care Reform

Other

• Philanthropy – updates to specifically listed deductible gift recipients
• Housing Accord
• Safer and More Affordable Housing
• New cyber security measures

Personal income tax

Digital Currency – clarifying that digital currencies are not taxed as foreign currency

The Government will introduce legislation to clarify that digital currencies (such as Bitcoin) continue to be excluded from the Australian income tax treatment of foreign currency. This maintains the current tax treatment of digital currencies, including the capital gains tax treatment where they are held as an investment. This measure removes uncertainty following the decision of the Government of El Salvador to adopt Bitcoin as legal tender and will be backdated to income years that include 1 July 2021.

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

Extend ATO Compliance Programs – Personal Income Taxation Compliance Program

The Government will provide $80.3 million to the ATO to extend the Personal Income Taxation Compliance Program for 2 years from 1 July 2023.

This extension will enable the ATO to continue to deliver a combination of proactive, preventative and corrective activities in key areas of non-compliance, including overclaiming of deductions and incorrect reporting of income. The funding will enable the ATO to modernise its guidance products, engage earlier with taxpayers and tax agents and target its compliance activity.

Business owners

Depreciation – reverse taxpayers to self-assess the effective life of intangible depreciating assets

The Government will not proceed with the measure to allow taxpayers to self-assess the effective life of intangible depreciating assets, announced in the 2021–22 Budget.

Reversing this decision will maintain the status quo – effective lives of intangible depreciating assets will continue to be set by statute. This will avoid the potential integrity concerns with the previously announced measure and contribute to budget repair.

Powering Australia – Electric Car Discount (previously announced)

The Government will cut taxes on electric cars so that more Australians can afford them.

From 1 July 2022, the measure will exempt battery, hydrogen fuel cell and plug-in hybrid electric cars from fringe benefits tax and import tariffs if they have a first retail price below the luxury car tax threshold for fuel-efficient cars. The car must not have been held or used before 1 July 2022.

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

Extend ATO Compliance Programs – Shadow Economy Program

The Government will extend the existing ATO Shadow Economy Program for a further 3 years from 1 July 2023.

The extension of the Shadow Economy Program will enable the ATO to continue a strong and co-ordinated response to target shadow economy activity, protect revenue and level the playing field for those businesses that are following the rules.

Extend ATO Compliance Programs – Tax Avoidance Taskforce

The Government has boosted funding for the ATO Tax Avoidance Taskforce by around $200 million per year over 4 years from 1 July 2022, in addition to extending this Taskforce for a further year from 1 July 2025.

The boosting and extension of the Tax Avoidance Taskforce will support the ATO to pursue new priority areas of observed business tax risks, complementing the ongoing focus on multinational enterprises and large public and private businesses.

Improving the integrity of off-market share buy-backs

The Government will improve the integrity of the tax system by aligning the tax treatment of off-market share buy-backs undertaken by listed public companies with the treatment of on-market share buy-backs. This measure will apply from announcement on Budget night (7:30pm AEDT, 25 October 2022).

New Energy Apprenticeships

The Government will provide $95.6 million over 9 years from 2022–23 to support 10,000 people to complete a New Energy Apprenticeship.

Eligible apprentices will be able to claim a New Energy Apprentice Support Payment of up to $10,000 over the duration of the apprenticeship, comprising $2,000 on commencement, $2,000 per year for up to 3 years, and $2,000 on completion. Additional in-training support places will be made available for all New Energy Apprentices, with extra support for targeted groups including First Nations peoples, mature age apprentices, regional and remote Australians, and people from culturally and linguistically diverse backgrounds. This measure complements existing investment to support women in trades.

New Energy Skills Program

The Government will provide $9.6 million over 5 years from 2022–23 to support Australia’s workforce to transition to a clean energy economy. This funding will support a new mentoring program to help train and support new energy apprentices, the development of fit-for-purpose training pathways, and a capacity study by Jobs and Skills Australia to evaluate Australia’s workforce needs to transition to a clean energy economy.

Paid Family and Domestic Violence Leave – small business assistance

The Government will provide $3.4 million over 4 years from 2022–23 to support the development and delivery of education, technical advice and support services targeting the needs of small business employers to support the implementation of the Government’s election commitment to legislate 10 days of paid family and domestic violence leave.

Secure Australian Jobs

The Government will provide $43.2 million over 4 years from 2022–23 (and $11.1 million per year ongoing) to update workplace laws to get wages moving, boost job security, address gender inequity and create more opportunities for Australians. Funding includes:

• $20.2 million over 4 years from 2022–23 (and $5.3 million per year ongoing) for the Fair Work Commission to establish the Pay Equity and Care and Community Sector expert panels, and a specialised research unit
• $15.1 million over 4 years from 2022–23 (and $3.8 million per year ongoing) to include an explicit prohibition on sexual harassment in the Fair Work Act 2009
• $7.9 million over 4 years from 2022–23 (and $1.9 million per year ongoing) to implement changes to the small claims process in the Fair Work Act 2009.

The Government will also:

• Automatically sunset agreement-related instruments made prior to the commencement of the Fair Work Act 2009 and during the ‘bridging period’ (1 July to 31 December 2009), commonly referred to as ‘zombie agreements’, to ensure employees can access entitlements available under modern awards.
• Remove unnecessary complexity and make the Better off Overall Test simple, flexible and fair by streamlining the enterprise agreement approval process and consideration by the Fair Work Commission of whether an employee is better off under the proposed award.
• Increase the capacity of the Fair Work Commission to proactively help workers and businesses reach agreements by reducing the level of disputation required in order to access arbitration.

Buy Australian Plan

The Government has committed to the 10-point Buy Australian Plan to support Australian businesses to compete more effectively, increase employment and build resilience in supply chains. The Government has established the Future Made in Australia Office to coordinate delivery of commitments under the Buy Australian Plan.

Supporting Small Business Owners

The Government will provide $15.1 million over two calendar years from 1 January 2023 until 31 December 2024 to extend the Small Business Debt Helpline and the NewAccess for Small Business Owners programs to support the financial and mental wellbeing of small business owners.

This measure will redirect partial funding from the Australian Small Business and Family Enterprise Ombudsman component of the 2022–23 March Budget measure titled Small Business Support Package, and savings identified as part of the Spending Audit.

Unlegislated tax measures announced by the previous Government

The Government has reviewed and will not proceed with the following legacy tax measures that were announced but not legislated by the previous Government:

• The 2013-14 MYEFO measure that proposed to amend the debt/equity tax rules.
• The 2016–17 Budget measure that proposed changes to the taxation of financial arrangements (TOFA) rules (a delayed start date was announced in 2018–19 Budget).
• The 2016–17 Budget measure that proposed changes to the taxation of asset-backed financing arrangements.
• The 2016–17 Budget measure that proposed introducing a new tax and regulatory framework for limited partnership collective investment vehicles.
• The 2018–19 Budget measure that proposed introducing a limit of $10,000 for cash payments made to businesses for goods and services (a delayed start date was announced in 2018–19 MYEFO).
• The 2021–22 MYEFO measure that proposed establishing a deductible gift recipient category for providers of pastoral care and analogous well-being services in schools.

Further, the Government will defer the start dates of the following legacy tax measures to allow sufficient time for policies to be legislated and implemented:

• The 2019–20 MYEFO measure that proposed introducing a sharing economy reporting regime, from:
  • 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).
• The 2021–22 Budget measure that proposed making technical amendments to the TOFA rules, from 1 July 2022 to the income year commencing on or after the date of Royal Assent of the enabling legislation.

Superannuation

Commissioner of Taxation v Douglas

The Government will provide $31.4 million over 4 years from 2022–23 (and $1.1 million per year ongoing) to remediate child support debts raised as a result of the Commissioner of Taxation v Douglas decision. This decision changed the tax treatment for superannuation invalidity pensions paid under the Defence Force Retirement and Death Benefits Scheme and the Military Superannuation and Benefits Scheme, which has flow on impacts to child support debts.

Superannuation – expanding eligibility for downsizer contributions (previously announced)

The Government will allow more people to make downsizer contributions to their superannuation, by reducing the minimum eligibility age from 60 to 55 years of age. The measure will have effect from the start of the first quarter after Royal Assent of the enabling legislation.

The downsizer contribution allows people to make a one-off post-tax contribution to their superannuation 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.

This measure provides greater flexibility to contribute to superannuation and aims to encourage older Australians to downsize sooner to a home that better suits their needs, thereby increasing the availability of suitable housing for Australian families.

Unlegislated superannuation measures announced by the previous Government

The Government has reviewed and will not proceed with the following legacy superannuation measures that were announced but not legislated by the previous Government:

• The 2018–19 Budget measure that proposed changing the annual audit requirement for certain self-managed superannuation funds (SMSFs).
• The 2018–19 Budget measure that proposed introducing a requirement for retirement income product providers to report standardised metrics in product disclosure statements.

Further, the Government will defer the start date of the following legacy superannuation measure to allow sufficient time for policies to be legislated and implemented:

• The 2021–22 Budget measure that proposed relaxing residency requirements for SMSFs, from 1 July 2022 to the income year commencing on or after the date of Royal Assent of the enabling legislation.

Social security

Child Care Subsidy Reforms Integrity Package

The Government will achieve savings of $173.0 million over 4 years from 2022–23 by strengthening payment integrity and accuracy of the Child Care Subsidy program.

Under changes to the family assistance legislation, electronic payment of early childhood education and care gap fees will be required. This aims to reduce fraudulent claims of Child Care Subsidy for care that is not occurring. Exceptions from electronic payments can be sought in some circumstances.

Funding of $47.7 million over 4 years from 2022–23 will be provided to the Department of Education to support a range of activities to help reduce fraud and non-compliance, such as helping early childhood education and care providers to better understand their regulatory obligations and commencing work on a digital attendance validation solution to provide real time validation and reporting of child attendance at care.

Plan for Cheaper Child Care

The Government will provide $4.7 billion over 4 years from 2022–23 (and $1.7 billion per year ongoing) to deliver cheaper child care, easing the cost of living for families and reducing barriers to greater workforce participation. This includes $4.6 billion over 4 years from 2022–23 to:

• increase the maximum Child Care Subsidy (CCS) rate from 85 per cent to 90 per cent for families for the first child in care and increase the CCS rate for all families earning less than $530,000 in household income
• maintain current higher CCS rates for families with multiple children aged 5 or under in child care, with higher CCS rates to cease 26 weeks after the older child’s last session of care, or when the child turns 6 years old
• task the Australian Competition and Consumer Commission to undertake a 12 month inquiry into the cost of child care and the Productivity Commission to conduct a comprehensive review of the child care sector
• improve the transparency of the child care sector by requiring large providers to publicly report CCS-related revenue and profits.

The Government will also provide $43.9 million over 4 years from 2022–23 for measures that support the National Agreement on Closing the Gap targets and improve early childhood outcomes for First Nations children. Funding includes:

• $33.7 million over 4 years from 2022–23 to introduce a base entitlement to 36 hours per fortnight of subsidised early childhood education and care for families with First Nations children, regardless of activity hours or income level
• $10.2 million over 3 years from 2022–23 to establish the Early Childhood Care and Development Policy Partnership with Coalition of Peaks partners and First Nations representatives to develop policies on First Nations early childhood education and care.

The Government will also provide $9.5 million over two years from 2022–23 to communicate the changes to the CCS system to families and child care providers.

Boosting Parental Leave to Enhance Economic Security, Support and Flexibility for Australia’s Families

The Government will enhance economic security, improve gender equality, and enhance and provide more flexibility for shared care arrangements at a cost to the budget of $531.6 million over 4 years from 2022–23 (and $619.3 million per year ongoing).

The Government will introduce reforms from 1 July 2023 to make the Paid Parental Leave Scheme flexible for families so that either parent is able to claim the payment and both birth parents and non-birth parents are allowed to receive the payment if they meet the eligibility criteria. Parents will also be able to claim weeks of the payment concurrently so they can take leave at the same time.

From 1 July 2024, the Government will start expanding the scheme by two additional weeks a year until it reaches a full 26 weeks from 1 July 2026.

Both parents will be able to share the leave entitlement, with a proportion maintained on a “use it or lose it” basis, to encourage and facilitate both parents to access the scheme and to share the caring responsibilities more equally. Sole parents will be able to access the full 26 weeks.

The Women’s Economic Equality Taskforce will assist in the finalisation of the changes to the scheme to ensure that the final model supports women’s economic participation and gender equality, including the period of concurrence and the most appropriate proportion of “use it or lose it” weeks.

Incentivising Pensioners to Downsize

The Government will provide $73.2 million over 4 years from 2022–23 (and $0.4 million per year ongoing), including:

• extending the assets test exemption for principal home sale proceeds from 12 months to 24 months for income support recipients
• changing the income test, to apply only the lower deeming rate (0.25 per cent) to principal home sale proceeds when calculating deemed income for 24 months after the sale of the principal home.

This measure will reduce the financial impact on pensioners looking to downsize their homes in an effort to minimise the burden on older Australians and free up housing stock for younger families.

Plan for Cheaper Medicines

The Government will provide $787.1 million over 4 years from 2022–23 (and $233.4 million per year ongoing) to decrease the general patient co-payment for treatments on the Pharmaceutical Benefits Scheme from $42.50 to $30.00 on 1 January 2023.

Incentivise pensioners into the workforce

The Government will provide $61.9 million over two years from 2022–23 to provide age and veterans pensioners a once off credit of $4,000 to their Work Bonus income bank.

The temporary income bank top up will increase the amount pensioners can earn in 2022–23 from $7,800 to $11,800, before their pension is reduced, supporting pensioners who want to work or work more hours to do so without losing their pension.

Lifting the Income Threshold for the Commonwealth Seniors Health Card

The Government will provide $69.6 million over 4 years from 2022–23 to increase the income threshold for the Commonwealth Seniors Health Card from $61,284 to $90,000 for singles and from $98,054 to $144,000 (combined) for couples.

The Government will also freeze social security deeming rates at their current levels for a further two years until 30 June 2024, to support older Australians who rely on income from deemed financial investments, as well as the pension, to deal with the rising cost of living.

Aged care

COVID-19 Package – aged care

The Government will provide additional funding of $845.4 million in 2022–23 to support older Australians and the aged care sector with managing the impacts of the COVID-19 pandemic. Funding will support:

• claims made by aged care providers for additional costs incurred due to COVID-19 outbreaks that occur until 31 December 2022
• extending the current in-reach testing arrangements in Residential Aged Care Facilities to 31 December 2022
• extend the operation of the Victorian Aged Care Response Centre to enable the continued support of residential aged care facilities to manage COVID-19 outbreaks in Victoria during Winter 2022.

Fixing the Aged Care Crisis

The Government will provide $2.5 billion over 4 years from 2022–23 to reform the aged care system. Funding will support:

• the quality of care in residential aged care facilities by requiring all facilities to have a registered nurse onsite 24 hours per day, 7 days a week from 1 July 2023 and increasing care minutes to 215 minutes per resident per day from 1 October 2024
• aged care infrastructure and services that provide additional support to older First Nations peoples, and older Australians from diverse communities and regional areas
• establishing the Aged Care Complaints Commissioner within the Aged Care Quality and Safety Commission
• financial transparency through the introduction of new financial reporting requirements for residential aged care providers
• providing better food for residential aged care and home care recipients
• establishment of a national registration scheme and code of conduct for personal care workers in the aged care sector.

The Government will also:

• improve continuity of care by requiring aged care providers to preference direct employment for their staff
• improve governance in the aged care sector by strengthening regulation of aged care providers
• cap administration and management fees charged by providers in the Home Care Packages Program.

Implementing Aged Care Reform

The Government will provide $540.3 million over 4 years from 2022–23 to improve the delivery of aged care services and respond to the Final Report of the Royal Commission into Aged Care Quality and Safety. Funding supports:

• essential aged care information and communication technologies system maintenance and enhancements, and to enable aged care sector reform
• extending and expanding the Regional Stewardship of the Aged Care outreach model to strengthen governance and to support the implementation of aged care reforms in regional areas
• extending the Disability Support for Older Australians Program to 31 December 2023
• expanding eligibility for the Australian National Aged Care Classification Transition Fund by including the Basic Daily Fee supplement in the calculation that determines the amount of financial support for facilities
• establishing the Inspector-General of Aged Care and the Office of the Inspector-General of Aged Care as a Statutory Agency
• implementation of the Support at Home Program from July 2024.

The Government will also extend existing grant arrangements for the Commonwealth Home Support Programme for a further 12 months to 30 June 2024 to reflect the new start date of 1 July 2024 for the Support at Home Program.

Other

Philanthropy – updates to specifically listed deductible gift recipients

The Government will amend the tax law to specifically list Australians for Indigenous Constitutional Recognition as a deductible gift recipient (DGR) for donations made from 1 July 2022 to 30 June 2025.

The Government will also extend the listing of Australian Women Donors Network as a DGR for 5 years, for gifts made from 9 March 2023 to 8 March 2028.

Taxpayers may claim an income tax deduction for donations of $2 or more to DGRs.

Housing Accord

The Australian Government will provide $350.0 million over 5 years from 2024–25 to support funding of an additional 10,000 affordable homes under a Housing Accord with state and territory governments and other key stakeholders.

The Commonwealth support will include availability payments over the longer term to facilitate institutional investment, including by superannuation funds, in affordable homes.

This measure complements the Government’s investment in the Housing Australia Future Fund, which will provide a further 30,000 social and affordable homes over 5 years.

See also the related payments measures titled Safer and More Affordable Housing in the Treasury Portfolio and National Housing and Homelessness Plan in the Social Services Portfolio.

Safer and More Affordable Housing

The Government will invest $10 billion in the newly created Housing Australia Future Fund, to be managed by the Future Fund Management Agency, to generate returns to fund the delivery of 30,000 social and affordable homes over 5 years and allocate $330 million for acute housing needs.

In the first 5 years these investment returns will fund:

• $200 million for the repair, maintenance and improvements of housing in remote Indigenous communities, where some of the worst housing standards in the world are endured by our First Nations people
• $100 million for crisis and transitional housing options for women and children fleeing domestic and family violence and older women on low incomes who are at risk of homelessness
• $30 million to build more housing and fund specialist services for veterans who are experiencing homelessness or are at-risk of homelessness.

The Government remains committed to ensuring that of the $10 billion fund, the returns from $1.6 billion will be directed to long-term housing for women and children fleeing domestic and family violence, and older women on low incomes who are at risk of homelessness.

In addition, the Government will provide $348.6 million over 4 years from 2022–23 for a number of further initiatives to deliver more social and affordable housing. Funding includes:

• $324.6 million over 4 years from 2022–23 to establish the Help to Buy scheme to assist people on low to moderate incomes to purchase a new or existing home with an equity contribution from the Government
• $15.2 million over 4 years from 2022–23 (and $4.4 million per year ongoing) to establish a National Housing Supply and Affordability Council to support the Australian Government to develop housing supply and affordability policy through research and advice
• $0.5 million over 4 years from 2022–23 (and $0.1 million per year ongoing) to establish Housing Australia, by renaming and expanding the remit of the National Housing Finance and Investment Corporation, to deliver the Australian Government’s social and affordable housing programs
• $8.3 million over 4 years from 2022–23 to the Treasury and Housing Australia to administer the Housing Australia Future Fund.

The Government will also:

• establish the Regional First Home Buyers Guarantee to support eligible citizens and permanent residents who have lived in a regional location for more than 12 months to purchase their first home in that location with a minimum 5 per cent deposit, with 10,000 places per year to 30 June 2026, by redirecting funding from the Regional Home Guarantee component of the 2022–23 March Budget measure titled Affordable Housing and Home Ownership, with no financial impact
• broaden the remit of the National Housing Infrastructure Facility to directly support new social and affordable housing in addition to financing critical housing infrastructure, with no financial impact, as announced at the Jobs and Skills Summit.

New cyber security measures

The October 2022-23 Budget will provide $31.3 million in additional funding in 2022-23, providing cyber security services to agencies with fewer resources as part of its whole-of-Government Cyber Hub program uplift package.

The Government will also provide $12.6 million over 4 years from 2022–23 to combat scams and online fraud to protect Australians from financial harm. Funding includes:

• $9.9 million over 4 years from 2022–23 to the Australian Competition and Consumer Commission for initial work on the establishment of a National Anti-Scam Centre
• $2.0 million in 2022–23 to the Department of Home Affairs to expand its arrangement with IDCARE to provide specialist identity support services, including counselling and identity recovery services for victims of identity theft
• $0.7 million in 2022–23 to the Treasury to raise public awareness of the risk of scams.

The Government will provide additional funding of $2 million in 2022-23 to assist scam victims to recover their identity.