This year’s budget falls short of providing material change to the tax system and with the Federal Election to be called in the coming weeks, it is not surprising the Government held back on making any radical changes to the current tax landscape.

In a bid to address a number of concerns from taxpayers about the rising cost of living, last night’s budget provided a number of cost of living measures to help businesses and families offset rising costs. They did also make some announcements to incentivise and encourage business owners to invest in the long term.

To help save you the pain of reading the budget documents or tuning into the political media commentary [sigh], we have summarised for you the main bits relevant to business owners.

Business Measures

120% Deduction for skills + training costs

To support small businesses in upskilling and training their employees, the Government has announced a skills and training boost. Small businesses with a turnover of less than $50 million will be entitled to an additional 20% tax deduction for eligible training expenditure [i.e. for every $100 spent by businesses, they will receive a $120 tax deduction].

The expenditure must be on external training courses provided to employees, meaning in-house training and on the job training will not be eligible. The training courses will need to be provided to employees in Australia or online and must be delivered by training organisations registered in Australia.

The boost will apply for expenditure incurred from budget night [7:30pm AEDT on 29 March 2022] until 30 June 2022 and from 1 July 2022 to 30 June 2024. Important note for businesses: expenditure incurred during the 30 June 2022 year, will be eligible for the 120% deduction in the 30 June 2023 income year. For 30 June 2023 and 30 June 2024 expenditure, the 120% deduction will be available for the year in which the expenditure is incurred.

So what does this mean for businesses? Any expenditure on external training for employees between now and 30 June 2022 will not receive the 120% deduction until 30 June 2023 year. The type of training expenditure that will be eligible for the 120% deduction has not been released yet, so stay tuned for more details.

120% Deduction for Digital Adoption

Similar to the skills + training boost, the Government will introduce an investment boost to support digital adoption by small businesses. Businesses who incur costs on business expenses and depreciating assets to support digital adoption such as portable payment devices, cyber security systems and subscriptions to cloud-based services will be entitled to an additional 20% tax deduction.

Again, the technology investment boost will be available to small businesses with a turnover of less than $50 million and expenditure will be capped at $100,000 annually.

The boost will be for expenditure incurred from budget night [7:30pm AEDT on 29 March 2022] until 30 June 2022 and from 1 July 2022 to 30 June 2023. Important note for businesses: expenditure incurred during 30 June 2022 year will be eligible for the 120% deduction in the 30 June 2023 income year. For 30 June 2023 expenditure, the 120% deduction will be available for the year in which the expenditure is incurred.

So what does this mean for businesses? Any eligible expenditure on technology/digital adoption between now and 30 June 2022 will not receive the 120% deduction until the 30 June 2023 year. As with the skills + training boost above, the devil will be in the detail as to the type of expenditure that will be eligible for the 120% deduction, so stay tuned for more details once it’s released.

Patent box [17% tax rate]

In the 2021-2022 Budget, the Government introduced a new ‘Patent Box’ measure that is seeking to encourage patents be developed in biotech and medical technologies. The existing regime for biotech and medical technologies has been modified to allow income from patents granted from 11 May 2021 to be eligible for the reduced tax rate.

The Government has also announced that patents granted under IP Australia, United States Patent and Trade Mark Office and European Patent Convention will be eligible for the patent box regime. This measure expands the availability for Australian companies who have developed technology and patented that technology in those jurisdictions, with equivalent patent regimes. Notably, Australian taxpayers will only benefit from the concessional tax rate for income from eligible patents where the research + development occurred in Australia.

In last night’s budget, the Government announced that the patent box regime will be expanded to include the agriculture sector innovations and low emissions technology innovations.

So what does this mean for businesses in these sectors?

  • Income generated from eligible patents will be taxed at a concessional rate of 17% [compared to the company tax rate of 30% for large businesses; and 25% for small and medium businesses]
  • The concessional tax rate is only available for company taxpayers
  • The regime will apply to income generated from eligible patents granted after 29 March 2022
  • The concessional tax rate will be available for income years starting on or after 1 July 2023

Note: we inadvertently mentioned this grant was only available for company taxpayers with an annual turnover of less than $50 million in our video last night. However, this measure is available for all corporate taxpayers, regardless of turnover level, pending the patent meets the eligibility requirements.

Employee share schemes

In recent years the Government has made a number of changes to the Employee Share Scheme [ESS] rules to encourage greater participation from unlisted companies and start-ups in employee share schemes. These measures have assisted employees in sharing in the upside benefits of growing companies, which may not be able to remunerate employees through cash bonuses or other incentives.

The Government announced changes to the ESS rules to enable more employees to participate in the growth of businesses by reducing red tape and removing regulatory requirements for independent contractors where they do not have to pay for ESS interests.

Currently, unlisted companies will be eligible for regulatory relief relating to disclosure rules for offers of ESS interests where the value of the ESS interests are less than $5,000 per eligible participant [See ASIC Class Order CO 14/1001].

The proposed amendments will see this cap lifted to $30,000 per participant per year, which will be able to be accrued for unexercised options for up to 5 years, plus 70% of dividends and cash bonuses. The cap will also be removed entirely if it allows for participants in the ESS to immediately take advantage of a planned sale or listing of a company to sell their purchased interests for a profit.

Temporary full expensing of Assets coming to an end

Whilst an extension to the temporary full expensing rules were absent from the 2022-2023 budget, remember these measures will end on 30 June 2023.

The temporary full expensing measures allow businesses with an aggregated turnover of up to $5 billion to deduct the full cost of eligible assets.

So, what does this mean for business? You have until 30 June 2023 to invest in assets and get an immediate full write-off of pretty much all eligible new assets [remember capital works such as building improvements, assets located outside of Australia or pre-existing commitments are excluded].

The good news for businesses with turnover of less than $50 million is certain secondhand assets are also eligible for the temporary full expensing.

Remember to ensure the asset is installed ready for use by 30 June 2023 and you need to be carrying on a business to be eligible.

Loss carry back rules coming to an end

For companies with a turnover of less than $5 billion, the temporary loss carry-back rules apply until the 2022-23 financial year. This measure allows entities with tax losses from 2019-2020, 2020-2021, 2021-2022 and 2022-2023 financial years to carry back those losses and apply to previously taxed profits from as far back as the 2018-2019 financial year.

The offset is first available when companies lodge their 2020-2021 tax returns and will offset any tax payable for the 2020-2021 financial year.

However, this measure is only available for corporate entities, compared to the temporary full expensing of assets so this measure does not apply to businesses who operate through a trust structure.

Extended apprenticeship scheme

The boosting apprenticeships wage subsidy was due to end on 31 March 2022 but as part of the budget, this subsidy will be extended to the end of the financial year. The scheme offers employers who take on apprentices or trainees before June 30 a wage subsidy of 50% for the first year – up to a maximum of $28,000. The subsidy is paid in quarterly instalments of $7,000.

New apprenticeships incentive system

In a change designed to assist the cost of living for those undertaking apprenticeships, the government has announced a payment to go directly to apprentices.

Priority apprentices will receive up to $5,000 in cash payments for the first two years of their apprenticeships commencing from July 2022. The $5,000 will be split over a 2 year period with $1,250 paid every 6 months from July.

Employers can access a 10% wage subsidy that will drop to 5% in the third year and employers taking on non-priority apprentices can receive a $3,500 hiring incentive. The government will provide guidance on priority versus non-priority apprenticeships via a new Australian Apprenticeships Priority List.

The new apprentice incentive system is designed to replace the current apprenticeship scheme covering 50% of wages in the first year and instead, spreading the incentives over an extended period with the aim to see more apprenticeships through to completion.

Cost of living measures

Temporary reduction in fuel excise

With rising fuel prices a hot topic for both Australian households and businesses, the Government has announced a temporary reduction in fuel excise. From midnight last night [29 March 2022] the excise will be halved until 28 September 2022.

This should reflect 22.1 cents saving per litre from 30 March 2022. Surprisingly this measure is targeted at Australian households and small businesses, however, it doesn’t limit the businesses to which this will apply. It is simply a halving to the fuel excise for 6 months.

For businesses with a heavy reliance on motor vehicles, this will be a welcome saving directly at the pump, and we expect to see this reduction flow through to consumers in the coming weeks.

The Australian Competition and Consumer Commission will be tasked with monitoring retailers to ensure this excise reduction is passed on to end consumers.

Cost of living tax offset

The Low and Middle Income Tax Offset [LMITO] will be increased from $1,080 per individual to $1,500 per individual [an increase of $420] for 30 June 2022. The existing features of the LMITO will remain unchanged, including the offset end date of 30 June 2022. Importantly we want to emphasise that the entire LMITO is proposed to finish after 30 June 2022.

The LMITO is a non-refundable offset, which means for taxpayers who do not have an income tax liability, they are not entitled to the LMITO. The increase to the LMITO is designed to help single people and families with the increased cost of living pressures.

This offset is available for taxpayers when they complete their 30 June 2022 tax returns.

Taxable income LMITO
$0 to $37,000 Up to $675
$37,001 to $48,000 $675 to $1,500
$48,001 to $90,000 $1,500
$90,001 to $126,000 $420 to $1,500
$126,001 and over Nil

Cost of living payment

To assist with the rising cost of living, the Government has announced a one-off payment of $250. This payment will be made in April 2022 to the following eligible concession card holders:

  • Age Pension
  • Disability Support Pension
  • Parenting Payment
  • Carer Payment
  • Carer Allowance [if not in receipt of a primary income support payment]
  • Jobseeker Payment
  • Youth Allowance
  • Austudy and Abstudy Living Allowance
  • Double Orphan Pension
  • Special Benefit
  • Farm Household Allowance
  • Pensioner Concession Card [PCC] holders
  • Commonwealth Seniors Health Card holders
  • Eligible Veterans’ Affairs payment recipients and Veteran Gold card holders

Increase to Medicare levy low-income threshold

Thresholds for the low-income medicare levy reduction will be increased from 1 July 2021:

  • From $23,226 to $23,365 for singles [an increase of $139]
  • From $39,167 to $39,402 for families [an increase of $235]

For seniors and pensioners:

  • From $36,705 to $36,925 for singles [an increase of $220]
  • From $51,094 to 51,401 for families [an increase of $307]

Note: for each dependent child or student, the family income threshold increases by $3,619.

Affordable housing

To increase affordable housing, the Government announced budget measures aimed at making homes more accessible for first home buyers, regional Australians and single parents.

The Home Guarantee Scheme is set to increase to 50,000 places per year for 3 years from 2022-23 then 35,000 places a year on an ongoing basis. The scheme will enable potential homeowners to enter the market with deposits as low as 5% for first home buyers and 2% for single parents. The Regional Home Guarantee will support eligible homebuyers [who have not owned a home for 5 years] to purchase a new regional home with only a 5% deposit.

The Finance and Investment Corporation will also receive $2.0 billion to support increased loans for affordable housing.

Other tax measures

PAYG instalments

This measure is a tweak to the current PAYG instalment system which allows taxpayers to vary their instalments where they estimate their taxable income to be less than the previous year.

It will allow companies to calculate PAYG instalments based on current financial performance, with the aim of helping businesses with their cash flow based on the business’ profitability.

STP + payroll tax

There will be additional spending for the development of IT infrastructure to enable the ATO to share single touch payroll data with State and Territory revenue authorities on an ongoing basis.

This is a timely reminder for businesses to ensure the payroll data they are providing to State and Territory revenue authorities is accurate, as this data sharing from the ATO may create Payroll Tax reviews.

Covid grants – non-assessable, non-exempt income

During the COVID-19 pandemic, to support businesses impacted by lockdowns, the State Governments and territories provided business support programs.

The Government has announced the following state and territory business support grants are non-assessable, non-exempt income for 30 June 2022:

  • New South Wales Accommodation Support Grant
  • New South Wales Commercial Landlord Hardship Grant
  • New South Wales Performing Arts Relaunch Package
  • New South Wales Festival Relaunch Package
  • New South Wales 2022 Small Business Support Program
  • Queensland 2021 COVID-19 Business Support Grant
  • South Australia COVID-19 Tourism and Hospitality Support Grant
  • South Australia COVID-19 Business Hardship Grant

Covid test expenses

As previously announced by the Government on 8 February 2022, employees who are required to purchase and take rapid tests to attend their workplace will be tax-deductible where the expense is paid for by the employee

Where the employer makes these tests available to employees, to enable employees to attend their workplace, the Government will ensure the costs of these rapid tests will be exempt from fringe benefits tax

ATO taskforce

  • The Government has committed additional funding to support the extension of the Australian Taxation Office [ATO] Tax Avoidance Taskforce for another 2 years until 30 June 2025
  • The Taskforce was established to undertake compliance activities targeting multinationals, large public and private groups, trusts and high net worth individuals.
  • The Taskforce will also use its resources to scrutinise specialist tax advisors and intermediaries that promote tax avoidance schemes and strategies.

Want more of the Budget?

If you need help understanding what the budget means for you or you’d just prefer to know exactly how it will affect your affairs, please reach out to our team at 1300BDEPOT or email us at and our team of accounting consultants will be happy to help.

Originally authored by Jacquii Reeves.


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