Tax Changes for 2022/2023

It was announced that starting the 2018/2019 income year, singles, pensioners, families, and seniors in the low-income thresholds would stay exempted from paying Medicare. 

To know your Medicare levy, use this online calculator.

For 2022/23, low-income and other partial or full Medicare exemptions are available. It should be noted that a Medicare Levy Surcharge may also be applied on a progressive basis. That is if citizens do not maintain their private health insurance coverage. 

But what is a Medicare Levy Surcharge (MLS)? It is a type of federal government tax collected to pay for public healthcare. Everyone benefits from Medicare, which allows even those who cannot afford to obtain services from hospitals and medical professionals. However, Medical Levy Surcharge only applies to Australians taking out private companies’ health insurance.

Almost all people with a full-time job are required to pay the Medicare Levy, which is at two per cent. As stated above, the exception is for those who do not meet the income threshold. People whose income is more than $90,000 and $180,000 for singles and couples, respectively, will have to pay the Medicare Levy Surcharge. However, they should not have any private health insurance.

Thin capitalisation rules put a strict limit on the interest deductions that multinationals can claim with reference to the “maximum allowable debt.” At the current time, Australia has three methods for working out the maximum allowable debt for the mentioned entities. Out of the three, the most common involves the “safe harbour debt amount.” In this method, an entity is allowed to gear up to 60% of the total book value of a business’ assets. This can be simplified by a debt-to-equity ratio of 1:5:1.

The Labor Government has proposed replacing the current safe harbour debt amount. Although no significant changes to thin capitalisation rules have been imposed, taxpayers may want to keep an eye on this subject. The measure will most likely take effect to financial years on or after 1 July 2023. The amendments, however, are expected to immediately affect highly-leveraged sectors, including real estate, infrastructure, private equity, and construction.

The Tax Office shows its intent to ensure taxes are correctly lodged. New policies governing the risk assessment and tax profit treatment will take effect starting 1 July 2022. The released policy documents outline a methodology for professional service firms on how and when it is best for risk assessments. These documents include PCG 2021/4 pertaining to the allocation of professional firm profits, as well as TA 2013/3 for the purported alienation of income through discretionary trust partners.

The Government previously expressed interest in expanding eligibility, specifically for downsizer contributions. It pertains to making a one-off post-tax contribution to superannuation of up to $300,000 per individual. This contribution comes from the proceeds of selling their residential home.

A proposal was put forward during the 2022/23 Federal Budget to reduce the minimum eligibility age to 55, which is currently at 60. Ahead of this, an earlier reduction recently took effect starting 1 July 2022, which reduced the eligibility from 65 to 60.

Claiming self-education expenses gives more tax deductions. This was first announced as part of the 2021/22 Federal Budget to cover the exclusion of the first $250 of deductions. It was previously non-deductible. Thanks to the removal of the threshold, there is an additional reduction in compliance costs for people claiming such a deduction.

Make sure to claim your self-education expenses for the 2022/23 fiscal year as a work-related expense. This law will apply to the Fringe Benefits Tax year from 1 April 2023.

In an employee share scheme, employees can purchase shares in the company where they work at a discounted rate. Several schemes are available to attract and retain employees. Eligibility may depend on the employer’s conditions and the employee’s performance. For example, shares may be offered as remuneration in place of raising the salary. Paying for shares may vary, including options like salary sacrifice, shares dividends, and upfront payment.

Starting 1 July 2022, the removal of cessation of employment as a taxing point for deferred tax applies. Some adjustments are made to the obligations of the employer to report to the ATO in order to reflect the change.

Taxpayers who have reached 65 years old may want to move to a smaller home. Some retirees are willing not to sell their family home, which will help release equity that may have built up over the years. The amount they get can be added to their super account. It is what this change is all about.

The downsizer contribution rules can boost super accounts. This reform is not entirely new since it was announced in the 2017/2018 Budget. It became law in December 2017.

The superannuation guarantee is a compulsory type of super that benefits employees. Employers should make contributions in the form of a percentage of the employee’s ordinary time earnings rather than as a deduction. 

From 1 July 2022, the previous superannuation guarantee rate increases from 10% to 10.5% of eligible salary or wages. It will progressively increase to 12% by the 2025/26 financial year. Employers should note that this rate is imposed on the day of payment. For instance, wages starting 1 July 2022 will build up for a superannuation guarantee payment at a 10.5% rate, in spite of paying work performed in earlier weeks or months.

It should also be noted that the $450 minimum monthly wage has been removed as a requirement for super guarantee eligibility. This change applies from 1 July 2022. This means employees whose salary/wages are less than $450 can qualify for the superannuation guarantee.

The Digital Games Tax Offset is part of the Budget 2021 and the Mid-Year Economic and Fiscal Outlook 2021/22. The Government announced this additional tax offset to help firms attract digital talent to the country. A 30% refundable tax offset works for eligible businesses spending at least $500,000 per annum on qualified games expenditures. This rate immediately applies from 1 July 2022.

The Labor government picked up an unlegislated LNP Coalition Budget 2022 measure to be implemented on eligible expenditure from 29 March 2022. This measure will add a 20% deduction on taxes applied to expenses for skills, training, and digital technology. However, requirements should be met, including small businesses having an aggregated annual turnover of less than $50 million. 

The small business technology investment boost includes expenditure incurred for either digitising operations or in support of existing digital operations. For example, a business buys depreciating assets like portable payment devices and cyber security systems. These tax-deductible expenses are capped at $100,000 per financial year. However, companies can deduct over $100,000 in small business expenditures under the current law.

The digital technology deduction applies to purchases from 29 March 2022 to 30 June 2023. As for the skills and training tax boost, the measure applies to expenditures incurred from 29 March 2022 to 30 June 2024.