Federal Budget 2022-23 for Education, Economy & Other

This is a safe, ballot box friendly Budget as expected with a focus on jobs, cost of living, home ownership, and health. Key initiatives include: 

• A 6 month, 50% reduction in fuel excise with effect from midnight Budget night
• A $420 cost of living tax offset for low and middle income earners from 1 July 2022
• A one-off $250 economic support payment to some social security payment recipients 

We've summarised the budget in a few different articles:  

• Your business & employers 
• For individuals and superannuation
• Other updates (you are here!)

Education, skills & training 

$120 deduction for every $100 spent on skills and training 

From: 7:30pm AEDT, 29 March 2022 until 30 June 2024 

The Government intends to provide a 120% tax deduction for expenditure incurred by small businesses on external training courses provided to employees. The deduction will be available to small business with an aggregated annual turnover of less than $50 million. External training courses will need to be provided to employees in Australia or online, and delivered by entities registered in Australia. 

 Some exclusions will apply, such as for in-house or on-the-job training and expenditure on external training courses for persons other than employees. 

 We assume there will need to be a nexus between the employee’s employment and the training program undertaken for the boost, although we are waiting on further details of this initiative to be released. 

 The boost for eligible expenditure incurred by 30 June 2022 will be claimed in the tax return for the following income year (that is, the 2023 tax return). The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2024, will be included in the income year in which the expenditure is incurred. 

Resources:

Media release: Digital and skills tax boost for small businesses 

Apprentice wage subsidy support extended 

Just prior to the Federal Budget, the Government announced the extension of the: 

• Boosting Apprenticeship Commencements wage subsidy, and
• Completing Apprenticeship Commencement wage subsidy. 

 Any employer (or Group Training Organisation) who takes on an apprentice or trainee up until 30 June 2022 can gain access to:

• 50% of the eligible Australian Apprentice’s wages in the first year, capped at a maximum payment value of $7,000 per quarter per Australian Apprentice,
• 10% of the eligible Australian Apprentice’s wages in the second year, capped at a maximum payment value of $1,500 per quarter per Australian Apprentice, and
• 5% of the eligible Australian Apprentice’s wages in the third year, capped at a maximum payment value of $750 per quarter per Australian Apprentice. 

Resources:

• Media release: Extending support to get more Australian apprentices on the job
• Boosting Apprenticeship Commencements wage subsidy and Completing Apprenticeship Commencements wage subsidy
• Applications are through the Australian Apprenticeships Support Network  

The government & regulators 

Visa rule changes 

The pandemic has created a scarcity of labour. As a result, the Government is relaxing certain work restrictions for a range of visas including eligible Student and Working Holiday Maker (WHM) visa holders, and extended visas for certain engineering graduates negatively affected by COVID-19 travel restrictions. 

 International students and WHM visa holders who bring forward their arrival to Australia will be refunded the Visa Application Charge for Student visa holders who arrive in Australia between 19 January 2022 and 19 March 2022, and for WHM visa holders who arrive in Australia between 19 January 2022 and 19 April 2022, inclusive.

 And, the Government will also increase country caps for Work and Holiday visas by 30% in 2022-23, increasing overall places available by around 11,000. 

 The Government has stated that it will also “clarify the tax treatment for income earned by workers under the Australian Agriculture Visa scheme established in MYEFO 2021-22 to respond to workforce shortages in the agriculture and primary industry sectors.” At this stage, we don’t know what this clarity means! 

Extension of the ATO’s Tax Avoidance Taskforce 

An additional $652.6m has been set aside to extend the ATO’s Tax Avoidance Taskforce by 2 years to 30 June 2025. In that time, the task force is expected to increase receipts by $2.1bn and increase payments by $652.6m. 

ABS to work with accounting software 

Buried under the wildly exciting headline of Commonwealth’s Deregulation Agenda, is the $19.9 million spent by the Australian Bureau of Statistics to develop a new reporting application to enable businesses to submit surveys on business indicators directly through their accounting software. Excellent. Real-time reporting utilising verified data on the state of Australian business.  

Other Updates

Energy and emissions reduction 

$446.1 million over 5 years has been provided to increase energy security, maintain affordable and reliable power for households and businesses and reduce the cost of deploying low emissions technologies. $247m of that is to support increased private sector investment in low emissions technologies including hydrogen, the continued development of a hydrogen Guarantee of Origin scheme, and the development of a Biodiversity Stewardship Trading Platform to support farmers to undertake biodiversity activities ahead of the introduction of a voluntary biodiversity stewardship market. Another $148.6m is for the development of community microgrids and just over $50m to develop gas infrastructure projects. 

Resources:

• Media release: 2022-23 Budget backs Australian industry, energy security, and net zero emissions

An Australian Space Industry

The Government will provide $1.3 billion from 2021-22 to grow the Australian space sector and space manufacturing industry. This includes $1.2bn to establish a National Space Mission for Earth Observation to secure access to key earth observation data streams, build Australia’s sovereign capability and enter agreements with international partners including for the procurement and operation of the Australian Satellite Cross Calibration Radiometer satellites. And, $65.7m to fast-track the launch of space assets.

Resources:

• Media release: Fast-tracking jobs and technologies for space

Australia’s position in the Asia Pacific 

For those of you who have been watching the reaction to the Solomon Islands security agreement with China, the appearance in the Budget of infrastructure investment in the Pacific will come as no surprise. The Government will increase the Australian Infrastructure Financing Facility for the Pacific to $3.5 billion, supporting additional infrastructure investment in the Pacific. This includes projects in Papua New Guinea to improve roads and power. An additional $650m will be provided as a loan for PNG’s COVID-19 recovery. 

$245.5m will be spent over 5 years on the partnership with India. A new Chancery for the Australian High Commission in Honiara. And, $324.4m to Pacific Island countries and Timor Leste to support their COVID-19 recovery. 

Infrastructure projects 

Just prior to the Budget’s release, the Government announced $17.9bn in new and additional funding for existing infrastructure projects. Full details of infrastructure funding are on the Infrastructure Investment Program website.  

Australian Capital Territory

New projects:

• $46.7 million for the Athllon Drive Duplication
• $2.8 million for the Kent Street and Novar Street Intersection Upgrades
• $1.5 million for the Inner Canberra Corridor Planning Package

New South Wales

New projects:

• $1 billion for the Sydney to Newcastle – (Tuggerah to Wyong) faster rail upgrade
• $336 million for the Pacific Highway – Wyong Town Centre
• $264 million for the Newell Highway Upgrade – Heavy Duty Pavement Upgrades – North Moree
• $232.5 million for Mulgoa Road Stage 2 – Glenmore Parkway to Jeanette Street, Stage 5A Blaikie Road to Jamison Road and Stage 5B Jamison Road to Union Road
• $100 million for the Southern Connector Road, Jindabyne
• $95.6 million for the Picton Bypass and Picton Road – Planning
• $77.5 million for a business case for Stage 2 of the Sydney Metro – Western Sydney Airport line

Additional funding for existing projects:

• $352 million for the Milton Ulladulla Bypass
• $300 million for the Grade Separating Road Interfaces
• $65 million for the M5 Motorway – Moorebank Avenue – Hume Highway Intersection Upgrade

Northern Territory

New projects:

• $132 million for Central Australian Tourism Roads
• $55 million for the Tiger Brennan Drive/Berrimah Road Intersection Upgrade

Queensland

New projects:

• $1.6 billion for the Brisbane to the Sunshine Coast (Beerwah-Maroochydore) rail extension
• $1.121 billion for the Brisbane to the Gold Coast (Kuraby – Beenleigh) Faster Rail Upgrade
• $150 million for the Brisbane Metro – Woolloongabba Station
• $396 million for the South East Queensland City Deal
• $27.2 million for three business cases for upgrades on the Bruce Highway between Anzac Avenue and Caboolture Bribie Island Road
• $22.5 million for Brisbane Olympic and Paralympic Games 2032 business case development
• $20 million for safety upgrades on the Brisbane Valley Highway

Additional funding for existing projects:

• $68.5 million for the Cooktown to Weipa Corridor Upgrade bringing the total Australian Government funding to the corridor to $258.5 million
• $11.5 million for the Tennant Creek to Townsville Corridor Upgrade bringing the total Australian Government funding to the corridor to $211.5 million

Tasmania

New projects:

• $336 million for the Tasmanian Roads Package – Northern Roads Package – Stage 2
• $100 million for the Great Eastern Drive Tourism Support – additional packages
• $96 million for the Tasmanian Freight Rail Revitalisation Program – Tranche 4
• $56 million for the Tasmanian Roads Package – Tasman Highway Sideling Upgrade – Stage 2
• $24 million for the Bell Bay Line – Reconnection to the Bell Bay Wharf
• $14.4 million for the Melba Line Bulk Minerals Rail Hub
• $13.5 million for the Hobart – Northern Transit Corridor Solution

Victoria

New projects:

• $3.1 billion in new commitments to deliver the $3.6 billion Melbourne Intermodal Terminal Package:
• $1.2 billion for the Beveridge Interstate Freight Terminal in Beveridge, taking the total investment to $1.62 billion
• $280 million for Road Connections, including Camerons Lane Interchange, to the Beveridge Interstate Freight Terminal
• $740 million for the Western Interstate Freight Terminal in Truganina
• $920 million for the Outer Metropolitan Ring – South Rail connection to the Western Interstate Freight Terminal
• $109.5 million for the Mickleham Road Upgrade

Additional funding for existing projects:

• $45 million for the Ballarat to Ouyen – Future Priorities
• $23.1 million for the Canterbury Road Upgrade

Western Australia

New projects:

• $145 million for the Thomas Road – Dual Carriageway – South Western Highway to Tonkin Highway and interchange at Tonkin Highway
• $140 million for Regional Road Safety Upgrades
• $100 million for the METRONET: Morrison Road Level Crossing Removal
• $50 million for the Tonkin Highway – North Ellenbrook Interchange
• $48 million for the Moorine Rock to Mt Holland Road Upgrades
• $40 million for the Newman to Katherine Corridor Upgrade ‑ Great Northern Highway Upgrade ‑ Newman to Port Hedland Overtaking Lanes

Additional funding for existing projects:

• $320 million for the Bunbury Outer Ring Road (Stages 2 and 3)
• $200 million for the Tonkin Highway Stage 3 Extension
• $178 million for the Pinjarra Heavy Haulage Deviation – Stages 1 and 2
• $135 million for the METRONET: Thornlie‑Cockburn Link
• $116 million for the METRONET: High Capacity Signalling
• $90 million for the METRONET: Yanchep Rail Extension

The Economy

Australia’s unemployment rate is at 4%: the lowest rate in 48 years.

Amid the ongoing COVID 19 pandemic and natural disasters, the Australian economy has outperformed all major advanced economies, experiencing a stronger recovery in output and employment from pre-pandemic levels. The recovery is expected to continue with the unemployment rate forecast to reach 3.75% in the September quarter of 2022, nearly 3% below the forecast 2 years ago.

The Wage Price Index (WPI) is forecast to increase from 2.75% through the year to the June quarter of 2022 to 3.25% through the year to the June quarter of 2023. But, there is “significant uncertainty around the pace at which wages growth will accelerate.”

Real GDP is forecast to grow by 4.25% in 2021‑22. And, by 3.5% in 2022‑23 and 2.5 percent in 2023‑24.

The deficit for 2022‑23 is expected to be $78 billion or 3.4% of GDP.

Since the Mid Year Economic and Fiscal Outlook (MYEFO), the underlying cash balance has improved by $103.6 billion over the 5 years to 2025-26. The Budget shows the deficit more than halving to 1.6% of GDP by 2025-26 before falling to 0.7% of GDP by the end of the medium term. Gross debt as a share of the economy is expected to peak at 44.9% of GDP on 30 June 2025, 5.4% lower, and 4 years earlier than projected at MYEFO. Gross debt is projected to fall to 40.3% of GDP by the end of the medium term, 9.6% or $236 billion lower than at the end of the medium term in MYEFO.

The Budget projects a halving in the deficit to 1.6% of GDP by 2025‑26 before falling to 0.7% of GDP by the end of the medium term.

 Commodity prices are near record high levels, in part due to the Russian invasion of Ukraine. Metallurgical and thermal coal spot prices have recently reached highs that are 62%  and 53% above previous peaks.

Inflation is expected to rise to 4.25% through the year to the June quarter of 2022. This reflects higher global oil prices and ongoing supply chain pressures as well as price pressures in the housing construction sector. Then moderate to 3% in 2022‑23 and 2.75%  in 2023‑24.

The recent floods in Queensland and New South Wales have had a devastating impact on many communities. The Government expects to spend over $6 billion in total on disaster relief and recovery (in addition to the $3.6 billion already allocated to households, businesses, and communities).

On COVID-19, the Budget assumes:

• Community transmission of COVID‑19 will continue to occur.
• A further Omicron wave is assumed to occur over winter 2022, which may again see elevated rates of absenteeism and pressure on supply chains.
•  Beyond winter, it is assumed that Australia will continue to experience intermittent, localised waves of Omicron, or other new COVID‑19 variants. However, it is assumed that high vaccination rates and improved medical treatments, together with continued community adaptation to COVID‑19, will see the economic impact of future outbreaks continue to moderate. Box 2.4 considers a scenario where a new COVID‑19 variant of concern poses greater downside risks to the economic forecasts.
• It is assumed that public health measures such as physical distancing and density restrictions are phased down but reimposed in a targeted way in response to future COVID‑19 outbreaks. These public health measures are not expected to materially affect the economic forecasts.
• Australia’s international borders are assumed to be open to migrants and fully vaccinated tourists.

Remember to check out the other Federal Budget Articles!

Keep reading:

• Individuals and Superannuation
• Business and employers

If we can assist you to take advantage of any of the Budget measures, or risk protecting your position, please let us know. As always, we’re here if you need us!