There was nothing released in the 2022-23 Budget 2.0 that would create a UK style crisis. The stage 3 tax cuts legislated to commence on 1 July 2024 are not mentioned, and most funding initiatives appear to be a reallocation of previous government initiatives, and the commodity driven $54.4 billion improvement in tax receipts has largely been banked, not spent.
With seven months before the 2023-24 Budget is released in May 2023, this Budget is a shuffling of the deck not a new set of cards. And to continue the pun, we need to play the hand we have been dealt, buffeted by externalities – war, floods, and global uncertainty.
2022-23 Budget 2.0 – Key budget measures include:
- Childcare subsidy increase
- Added flexibility and an expansion of Paid Parental Leave
- Aged care reforms
- Change to the taxation of off-market share buy-back by listed companies
- The scrapping of the initiative to self-assess the effective life of intangible assets
- Scrapping of the announced but not legislated 3-year audit cycle for SMSFs
- Energy grants for SMEs (but no detail yet)
- Tightening of the thin cap rules and the denial of deductions for intangible assets between related parties in certain circumstances
- More cash to the ATO to pursue personal income tax non-compliance and multi-nationals
- More funding for the Tax Practitioners board to pursue dodgy tax agents
Cost of living pressures will continue
Whilst some initiatives such as the increase to childcare subsidies will help, the cost-of-living pressures are set to continue.
The Budget flags some fairly bracing economic expectations:
- Inflation expected to peak at 7.75% in the December quarter and will persist at higher rates for longer than expected before easing to 3.5% by June 2024.
- Real GDP is forecast to grow to 3.25% in 2022-23 then retract to 1.5% in 2023-24.
- Electricity prices are expected to increase nationally by an average of 20% in late 2022, with retail electricity prices expected to rise by a further 30% in 2023-24.
- The deficit sits at $36.9bn, while this is better than originally estimated, the deficit expands to $49.5bn by 2025-26.
Annual wage growth will be eaten away by increasing cost of living
Tight labour market conditions are expected to see annual wage growth pick up to 3.75% by June 2023. Even so, high inflation is expected to see real wages fall over 2022-23 before rising slightly over 2023-24. That is, your wages might increase but the gains will be eaten away by the increasing cost of living.
ATO targets personal ITR compliance and multi-nationals
The ATO gets an extra $80m to extend its personal income tax compliance program, with $674m anticipated in increased receipts and over $80m in increased payments as a result. Tax deductions will be looked at closely.
As expected, multi-nationals are a target. New measures will limit opportunities to shift taxable profits offshore. The ATO’s Tax Avoidance Taskforce is expected to deliver a whopping $2.8bn in additional tax receipts and $1.1bn in payments over the 4-year period.
How can Walsh Accountants help?
If we can assist you to take advantage of any of the Budget measures, or to risk-protect your position, please let us know. Contact our office for a discussion based on your personal circumstances.
As always, we’re here if you need us!