Federal Budget 2022-2023

The Federal Budget for 2022-23 handed down on 29 March 2022 is focussed on alleviating cost of living pressures, enhancing the nation’s economic capacity through training and skills packages, and bolstering our defence capability.

With an improved budgetary position compared to the December mid-year economic and fiscal outlook, there is an emphasis on the steady reduction in deficits and ensuring there is continued support to what has been a remarkably resilient economy, albeit one supported by highly expansionary fiscal and monetary policy settings.

However, reforms concerning the overall efficiency and sustainability of the tax base, as called for in recent years, are for a later Budget.

Below is a summary of select tax-related measures relevant to SMEs and corporates announced in the Budget. 

The date from which the measure is proposed to start is noted.

Start dates at a glance

The measures in brief

Small business – skills and training boost

• Small businesses (with aggregated annual turnover of less than $50 million) will be able to deduct an additional 20% of expenditure incurred on external training courses provided to their employees. The 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.
• The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 (Budget night) until 30 June 2024.

Small Business – technology investment boost

• Small businesses (with aggregated annual turnover of less than $50 million) will be able to deduct an additional 20% of the cost incurred on business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud-based services.
• An annual expenditure cap of $100,000 will apply in each qualifying income year.
• The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022  until 30 June 2023. This measure is intended to increase cash flow for businesses in future years and support companies that were profitable and paying tax but find themselves in a loss position as a result of the COVID-19 pandemic.

Employee Share Schemes – expanding access and further reducing red tape

• The Corporations Act 2001 (Cth) requires a company that makes an ESS offer to provide the employee a disclosure document, unless an exemption in that Act applies or class order relief applies. Practically, this requirement resulted in constraints and compliance costs when unlisted companies have sought to offer meaningful equity incentives to anyone other than sophisticated investors, senior managers and a clutch of other participants.
• The Budget announcement means that employees at all levels will be able to directly share in the business growth they help to generate.
• Where employers make larger offers in connection with employee share schemes in unlisted companies, participants will be able to invest up to:    
  • $30,000 per participant per year, accruable for unexercised options for up to five years, plus 70% of dividends and cash bonuses; or
  • any amount, if it would allow them to immediately take advantage of a planned sale or listing of the company to sell their purchased interests at a profit.
• The government has announced it will also remove regulatory requirements for offers to independent contractors, where they do not have to pay for interests.

Patent box tax concession expanded to the agricultural sector and low emissions technology innovations

• Legislation currently before parliament seeks to introduce a patent box regime for medical and biotech patents granted or issued from 11 May 2021. From 1 July 2022, the income from these patents will be subject to a reduced corporate income tax rate of 17%.
• The patent box encourages businesses to undertake their R&D in Australia and keep patents in Australia. 
• The government will expand the regime to cover the agricultural sector and low emissions technology innovations, the latter being foreshadowed as a possibility in last year’s Budget. 
• In the case of agricultural patents, the regime will apply to corporate taxpayers that commercialise their eligible patents linked to certain listed agricultural and veterinary chemical products.    

Tax integrity – extension of the ATO Tax Avoidance Taskforce on multinationals, large corporates and high wealth individuals

• The government will provide $325.0 million in 2023-24 and $327.6 million in 2024-25 to the ATO to extend the operation of the Tax Avoidance Taskforce by two years to 30 June 2025.
• This measure is estimated to increase revenue receipts by $2.1 billion.
• The Taskforce was established in 2016 to undertake compliance activities targeting multinationals, large public and private groups, trusts and high wealth individuals. It also scrutinises specialist tax advisors and intermediaries that promote tax avoidance schemes and strategies. Since 2016, the Taskforce has raised around $22.9 billion, around six times its projected revenue of $3.7billion. Not a bad return!
• The government is also providing funding to the ATO to increase the speed and efficiency of exchange of information with other government departments and state and territory revenue offices.