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:
We've summarised the budget in a few different articles:
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.
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Media release: Digital and skills tax boost for small businesses
Just prior to the Federal Budget, the Government announced the extension of the:
Any employer (or Group Training Organisation) who takes on an apprentice or trainee up until 30 June 2022 can gain access to:
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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!
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.
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.
$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.
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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.
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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.
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.
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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:
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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!