2022/23 October Federal Budget

On Tuesday, 25 October 2022, Treasurer Jim Chalmers handed down the 2022-23 October Federal Budget, his 1st Budget.

While a Budget was handed down on 29 March 2022, this second Budget for 2022-23 updates economic forecasts and outlines the new Labor Government’s priorities following the May 2022 Federal election.

The Budget estimates an underlying cash deficit of $36.9 billion for 2022-23 (and $44bn for 2023-24). While the economy is expected to grow by 3.25% in 2022-23, it is predicted to slow to 1.5% for 2023-24, a full percentage point lower than forecast in March 2022. Inflation is expected to peak at 7.75% later in 2022, but is projected to moderate to 3.5% through 2023-24, and return to the Reserve Bank’s target range in 2024-25.

Against this backdrop, the Treasurer has sought to exercise fiscal “restraint” so as not to put more pressure on prices and make the Reserve Bank’s job even harder. Rather, the Budget sets out a 5-point plan for cost-of-living relief in the areas of (i) childcare; (ii) expanding paid parental leave; (iii) medicines; (iv) housing; (v) getting wages moving.

While the Budget does not contain major tax changes it does seek to begin some “Budget repair work” via tax integrity measures. “By making sure multinationals pay a fairer share of tax in Australia, by extending successful tax compliance programs, and by giving the ATO the resources they need to crack down on tax dodging. Together, these initiatives save a further $4.7 billion over four years”, Dr Chalmers said.

Tax-related measures announced

  • Intangible assets depreciation – reversal of previously announced option to self-assess effective life for certain intangible assets (e.g., intellectual property and in-house software). The effective lives of such assets will continue to be set by statute.
  • Previously announced measures – the Government has announced that it will abandon 8 measures announced by the previous Government and defer the start date of 3 others. While most of the measures relate to the heading of “Business Taxation” (and are finance related), note that the proposals include superannuation and personal tax measures.
  • Digital currencies not a foreign currency – the Budget Papers confirm that the Government is to introduce legislation to clarify that digital currencies (such as Bitcoin) continue to be excluded from the Australian income tax treatment of foreign currency.
  • Off-market share buy-backs – the Government intends to align the tax treatment of off-market share buy-backs undertaken by listed public companies with the treatment of on-market share buy-backs.
  • COVID grants treated as NANE – the Budget Papers contain a listing of further State and Territory COVID-19 grant programs eligible for non-assessable, non-exempt treatment.
  • Penalty unit increase – the Government will increase the amount of the Commonwealth penalty unit from $222 to $275 from 1 January 2023.
  • Tax Practitioners Board funding – the TPB will get increased funding to investigate high-risk tax practitioners and unregistered preparers.

Superannuation measures announced

  • SMSF residency changes – the proposal to extend the CM&C test safe harbour from 2 to 5 years, and remove the active member test, will now start from the income year commencing on or after assent to the enabling legislation (previously 1 July 2022).
  • SMSF audits every 3 years – the Government will not proceed with the former government’s proposal to allow a 3- yearly audit cycle for SMSFs with a good compliance history.
  • Retirement income products – the Government will not proceed with the proposal to report standardised metrics in product disclosure statements.

Other measures announced

  • Affordable housing measures – the Government will establish a Regional First Home Buyers Guarantee Scheme and a Housing Australia Future Fund.
  • Housing Accord – struck between State and Territory governments and investors, including super funds, targeting 1 million new homes over 5 years from 2024. The Government will commit $350m over 5 years to deliver 10,000 affordable dwellings.
  • Paid Parental Leave (PPL) scheme – to be expanded from 1 July 2023 so that either parent can claim the payment. From 1 July 2024, the scheme will be expanded by 2 additional weeks a year until it reaches a full 26 weeks from 1 July 2026. 
  • Child care subsidy – maximum CCS rate to be increased from 85% to 90% for families for the first child in care and increase the CCS rate for all families earning less than $530,000 in household income

Read our summary of the 2022-23 October Federal Budget here.

If you have any questions about how the new budget affects you, your family, or your business, get in touch with Avance today by email at avance@avance.com.au or call us on 1300 620 345.