The Treasurer delivered the Federal Budget on Tuesday 29 March 2022. According to the Government’s official Budget 2022-23 website the Government’s economic plan has helped Australia weather the biggest economic shock since the Great Depression, outperforming the performance of all major advanced economies. Their statement goes on to say: the economy has rebounded strongly, the labour market is robust, and Australia’s health outcomes are among the best in the world.
Please read the budget overview and summary of the key budget initiatives, prepared by the inhouse economic, tax and superannuation experts at Wolters Kluwer CCH.
Budget outcome
The Budget shows that since MYEFO, the estimated underlying cash balance has improved by $103.6 billion over the 5 years to 2025-26. According to the Budget Papers the Underlying Cash Balance for 2021-22 (current year) is forecast at $79.8 billion and $78 billion in 2022-23. This compares with the forecasts in the Mid-Year Economic and Fiscal Outlook (MYEFO) of $99.2 billion and $98.8 billion.
Economic growth
The outlook for real GDP has strengthened, with growth forecast to be 4¼ per cent in 2021-22 and 3½ per cent in 2022-23, before moderating to 2½ per cent in 2023-24. MYEFO had forecast economic growth of 3 ¾ per cent in 2021-22, revised down from the 2021 Budget forecast of 4 ¼ per cent.
Employment and unemployment
The Budget says the unemployment rate is expected to continue to fall over the next few quarters.
Tax collections
The Budget estimates that total tax collections in 2021-22 will be $512.5 billion, an increase of 8.2 per cent of its revised estimate of tax collections in 2021-22.
Aged care
The Budget announced a further $468.3 million to continue implementing the Government’s response to the Royal Commission into Aged Care Quality and Safety. This builds on the record $17.7 billion investment in aged care announced in the 2021-22 Budget.
One-off cost of living tax offset
From 1 July this year, over 10 million low and middle-income earners will receive a one-off $420 cost of living tax offset. Combined with the Low and Middle Income Tax Offset (LMITO), eligible low- and middle-income earners will receive up to $1,500 for a single income household, or up to $3,000 for a dual-income household.
For eligible pensioners, welfare recipients, veterans and eligible concession card holders the payment will be $250 and made in April 2022. This payment will help 6 million people, at a cost of $1.5 billion.
More than half of those who will benefit are pensioners. The Budget says this is on top of the higher income support payments from existing indexation arrangements. Income support payments increased by 2.1 per cent in March 2022, benefiting almost 5 million Australians. The Age Pension, Disability Support Pension and Carer Payment rates increased by more than $20 a fortnight for singles and $30 a fortnight for couples.
Temporary fuel excise relief
The Budget announced the Government will reduce fuel excise by 50 per cent for 6 months. This will see excise on petrol and diesel cut from 44.2 cents per litre to 22.1 cents per litre.
Investment
The Budget says outlook for business investment is strong.
“In 2021-22 and 2022-23, investment will be supported by further recovery in the domestic economy, temporary business tax incentives and strong business balance sheets. New business investment is forecast to grow by 5½ per cent in 2021-22, 9 per cent in 2022-23 and one per cent in 2023-24.
“Non-mining business investment is expected to drive growth in overall business investment over the next 2 years. Non-mining business investment is forecast to rise by7 per cent in 2021-22 and 9 per cent in 2022-23, to reach its highest quarterly share of the economy since 2011 in the June quarter of 2023. Growth is then expected to slow to around one per cent in 2023-24 with investment activity remaining at elevated levels.”
Mining investment is forecast to rise by ½ per cent in 2021-22, 9½ per cent in 2022-23 and by 1½ per cent in 2023-24. Iron ore investment is continuing, largely reflecting investments to maintain production capacity. Liquefied Natural Gas (LNG) investment is expected to lift over coming quarters as construction work on recently announced projects commences.
$17.9 billion infrastructure spend
Ahead of the Budget the Treasurer and Prime Minister jointly announced a $17.9 billion investment in infrastructure across Australia.
In a joint announcement also with Deputy Prime Minister Barnaby Joyce and the Minister for Communications, Urban Infrastructure, Cities and the Arts Paul Fletcher, the Prime Minister and Treasurer announced there would be $17.9 billion committed towards new and existing infrastructure projects in the infrastructure pipeline the Budget.
“With investments in new and existing infrastructure projects in every state and territory, the Government’s rolling 10‑year infrastructure investment pipeline will increase from $110 billion to over $120 billion, a new record,” the joint statement said.
“As part of our plan for a stronger future, our Government is continuing to invest in projects that create jobs, keep commuters and freight safe and moving, and drive economic growth.
“Key new commitments funded in the 2022–23 Budget include:
- $3.1 billion in new commitments to deliver the $3.6 billion Melbourne Intermodal Terminal Package (VIC), including:
- $1.2 billion for the Beveridge Interstate Freight Terminal in Beveridge, taking the total investment to $1.62 billion;
- $280 million for Road Connections, including Camerons Lane Interchange, to the Beveridge Interstate Freight Terminal;
- $740 million for the Western Interstate Freight Terminal in Truganina; and
- $920 million for the Outer Metropolitan Ring - South Rail connection to the Western Interstate Freight Terminal.
- $1.6 billion for the Brisbane to the Sunshine Coast (Beerwah‑Maroochydore) rail extension (QLD)
- $1.121 billion for the Brisbane to the Gold Coast (Kuraby – Beenleigh) faster rail upgrade (QLD)
- $1 billion for the Sydney to Newcastle – (Tuggerah to Wyong) faster rail upgrade (NSW)
- $678 million for Outback Way (NT, WA, QLD)
- $336 million for the Pacific Highway - Wyong Town Centre (NSW)
- $336 million for the Tasmanian Roads Package – Northern Roads Package – Stage 2 (TAS)
- $200 million for the Marion Road – Anzac Highway to Cross Road (SA)
- $145 million for the Thomas Road – Dual Carriageway – South Western Highway to Tonkin Highway and interchange at Tonkin Highway (WA)
- $140 million for Regional Road Safety upgrades (WA)
- $132 million for Central Australian Tourism Roads (NT)
- $120 million for the Adelaide Hills Productivity and Road Safety Package (SA)
- $46.7 million towards the Athllon Drive Duplication (ACT)
The Budget also includes additional funding for existing projects and Roads of Strategic Importance corridors, including:
- $2.264 billion for the North South Corridor - Torrens to Darlington (SA)
- $352 million for the Milton Ulladulla Bypass (NSW)
- $320 million for the Bunbury Outer Ring Road (Stages 2 and 3) (WA)
- $200 million for the Tonkin Highway Stage 3 Extension (WA)
- $45 million for the Ballarat to Ouyen – Future Priorities (VIC)
- $68.5 million for the Cooktown to Weipa Corridor Upgrade bringing the total Australian Government funding to the corridor to $258.5 million (QLD)
Creating a pipeline of skilled workers
- The Government will invest a further $2.8 billion over 5 years from 2021-22 to upskill apprentices, including by introducing a new streamlined Australian Apprenticeships Incentive System. This investment establishes a pathway that backs and develops apprentices in priority trades and moves away from a complex system with over 30 different payments for employers and apprentices.
Jobs and skills for Indigenous Australians
- Funding of $636.4 million over 6 years will expand the Indigenous Rangers Program. This measure will fund up to 1,089 new rangers who will undertake land and sea management. The Government is also providing $37.5 million to support native title holders to gain greater economic benefit from their land and $21.9 million for leadership initiatives.
Commercialising ideas
- The Government is investing in future Australian companies and products through a $2.2 billion University Research Commercialisation Action Plan. The action plan includes $1.6 billion to drive Australia’s Economic Accelerator devoted to research in clean energy, medical products, defence and other high-priority manufacturing areas. It also includes $242.7 million for the Trailblazer Universities Program which will support select universities to boost prioritised research and development, foster stronger connections with the CSIRO and drive commercialisation outcomes with industry partners.
Supporting trade and tourism
- The Government’s THRIVE 2030 strategy and action plan will support the recovery and sustainable growth of the tourism sector, with a $60.0 million Tourism Marketing Recovery Plan to attract international tourists. The Government is also committing $75.5 million for a third round of the Consumer Travel Support Program for travel agents and tour arrangement service providers. This will ensure these businesses can respond to the rising demand for international travel.
Transforming manufacturing capability
- The Government is investing a further $328.3 million in the Strategy. This includes $250.0 million for the Integration and Translation Streams of the Modern Manufacturing Initiative to assist manufacturers to translate good ideas into commercial outcomes. It also includes $53.9 million to fund a third round of the Manufacturing Modernisation Fund to enable small to medium manufacturers to innovate and adopt new technologies. In addition, $500.0 million will support manufacturers in regions through a new Regional Accelerator Stream of the Modern Manufacturing Initiative. The Government is also strengthening supply chain resilience in critical products, including through a new dedicated $200.0 million Regional Accelerator Stream of the Supply Chain Resilience Initiative that will assist regional businesses to address supply chain vulnerabilities and additional funding for the CSIRO.
Safeguarding critical resources and technology
- The Government is providing $200.0 million over 5 years for the Critical Mineral Accelerator Initiative to support strategically significant critical mineral projects in their planning, design, pilot and demonstration phases. This will deliver a steady pipeline of projects to be considered for financing by private sector or government, including through the Government’s $2 billion Critical Minerals Facility established in 2021.
Other measures include:
Business
- Additional state and territory COVID-19 business support grant programs will be eligible for tax treatment as non-assessable non-exempt income until 30 June 2022.
- Small and medium businesses will be able to deduct an additional 20% of expenditure incurred on external training courses provided to their employees.
- Small and medium businesses will be able to deduct an additional 20% of eligible expenditure supporting digital adoption.
- Concessional tax treatment will apply from 1 July 2022 for primary producers selling Australian Carbon Credit Units and biodiversity certificates.
- Access to employee share schemes in unlisted companies will be expanded.
- The PAYG instalment system is set for a structural overhaul with a set GDP uplift of 2% to apply for the 2022–23 income year.
- Additional funding will be provided to further reform insolvency arrangements, including the insolvent trading “safe harbour”.
- Business registry fees will be streamlined over 3 years from 2023–24.
- Wholly owned Australian incorporated subsidiaries of the Future Fund Board of Guardians will be exempt from corporate income tax.
Excise and customs duty
- The temporary tariff concession for COVID-19 related medical and hygiene products will be made permanent.
- Administration of fuel and alcohol excise, and excise-equivalent customs duty will be streamlined.
Innovation
- Corporate income from the commercialisation of patents, issued from 29 March 2022, in respect to agricultural and veterinary (agvet) chemical products will be taxed at an effective rate of 17% for income years starting from 1 July 2023.
- The effective tax rate of 17% for the “patent box” regime will also be expanded to include patents that have the potential to lower emissions.
- Following on from the 2021 Federal Budget announcement of the “patent box” regime for medical and biotechnology innovations, the concessional tax treatment will be expanded to include certain overseas jurisdictions with equivalent patent regimes.
Tax administration
- IT infrastructure will be developed to allow the ATO to share single touch payroll data with state and territory revenue offices.
- The ATO will be given funding to extend the operation of the Tax Avoidance Taskforce by 2 years.
- The start date of the 2019–20 Budget measure for holders of Australian Business Numbers will be deferred by 12 months.
Not-for-profits
- Melbourne Business School Ltd, Advance Global Australians Ltd, Leaders Institute South Australia Inc, St Patrick’s Cathedral Melbourne Restoration Fund, and various entities related to Community
- Foundations Australia, have been added to the list of specifically DGRs for a period beginning 1 July 2022.
Indirect tax
- The Indirect Tax Concession Scheme (ITCS) has been granted or extended to various diplomatic and consular representations.
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