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The Government will increase the low and middle-income tax offset (LMITO) for the 2021-22 income year. LMITO is targeted at low and middle-income earners that are most susceptible to cost of living pressures.
The Government is responding in a temporary, targeted and responsible way to reduce the cost of living pressures experienced by Australian households.
The LMITO for the 202122 income year will be paid from 1 July 2022 when Australians submit their tax returns for the 202122 income year. This proposal will increase the LMITO by $420 for the 202122 income year. This increases the maximum LMITO benefit in 202122 to $1,500 for individuals and $3,000 for couples.
Other than those that do not require the full offset to reduce their tax liability to zero, all LMITO recipients will benefit from the full $420 increase. All other features of the current LMITO remain unchanged. Consistent with the current LMITO, taxpayers with incomes of $126,000 or more will not receive the additional $420.
This measure is estimated to decrease receipts by $4.1 billion over the forward estimates period. This measure builds on the 2021-22 Budget measure titled Retaining the low and middle-income tax offset for the 2021-22 income year.
COVID19 Response Package
The Government has extended the measure which enables payments from certain state and territory COVID19 business support programs to be made nonassessable nonexempt (NANE) for income tax purposes until 30 June 2022. This measure was originally announced on 13 September 2020.
In recognition that NANE tax treatment is only to be provided in exceptional circumstances, eligibility is limited to COVID19 grant programs directed at supporting businesses that are the subject of a public health directive applying to a geographical area in which the businesses operate and whose operations have been significantly disrupted as a result of the public health directive. Consistent with this, the Government has made the following state and territory grant programs eligible for this treatment since 2021-22 MYEFO:
- 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 COVID19 Business Support Grant
- South Australia COVID19 Tourism and Hospitality Support Grant
- South Australia COVID19 Business Hardship Grant.
This measure is estimated to result in an unquantifiable decrease in receipts over the forward estimates period.
Digitalising trust income reporting
The Government will digitalise trust and beneficiary income reporting and processing, by allowing all trust tax return filers the option to lodge income tax returns electronically, increasing prefilling and automating ATO assurance processes.
The measure will commence from 1 July 2024, subject to advise from software providers about their capacity to deliver.
Trust income reporting and assessment calculation processes have not been automated to the same extent as individual or company tax returns, resulting in longer processing times and limited prefilling opportunities. This measure will reduce the compliance burdens on taxpayers, reduce processing times and enhance ATO processes.
The Government will consult with affected stakeholders, tax practitioners and digital service providers to finalise the policy scope, design and specifications.
This measure is estimated to result in an unquantifiable impact on receipts over the forward estimates period.
Employee Share Schemes – expanding access and further reducing red tape
The Government will expand access to employee share schemes and further reduce red tape so that employees at all levels can 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 can invest up to:
- $30,000 per participant per year, accruable for unexercised options for up to 5 years, plus 70 per cent 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 will also remove regulatory requirements for offers to independent contractors, where they do not have to pay for interests.
This measure is estimated to result in an unquantifiable impact on receipts over the forward estimates period.
Modernisation of pay as you go (PAYG) instalment systems
The Government will enable companies to choose to have their pay as you go (PAYG) instalments calculated based on current financial performance, extracted from business accounting software, with some tax adjustments. This will support business cash flow by ensuring instalments reflect current performance.
The Government will consult with affected stakeholders, tax practitioners and digital service providers to finalise the policy scope, design and specifications of this measure.
Subject to advise from software providers about their capacity to deliver, it is anticipated that systems will be in place by 31 December 2023, with the measure to commence on 1 January 2024, for application to periods starting on or after that date.
This measure will improve alignment between PAYG instalment liabilities and profitability, and support companies in managing cash flows. This measure is estimated to result in an unquantifiable impact on receipts over the forward estimates period.
Smarter reporting of Taxable Payments Reporting System data
The Government will allow businesses the option to report Taxable Payments Reporting System data (via accounting software) on the same lodgment cycle as their activity statements.
Subject to advise from software providers about their capacity to deliver, it is anticipated that systems will be in place by 31 December 2023, with the measure to commence on 1 January 2024, for application to periods starting on or after that date.
This measure will increase the accuracy and timeliness of reporting while lowering compliance costs for taxpayers.
The Government will consult with affected stakeholders, tax practitioners and digital service providers to finalise the policy scope, design and specifications of the measure.
This measure is estimated to result in an unquantifiable impact on receipts over the forward estimates period.
Boosting the Tax Avoidance Taskforce
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 2 years to 30 June 2025.
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. The ATO’s total resourcing requirement, including for the delivery of the extension of the Tax Avoidance Taskforce, will be settled as part of the independent review of the ATO’s ongoing resourcing requirement announced as part of the 202122 MYEFO measure titled Australian Taxation Office – continuation of compliance programs and independent resourcing review.
This measure is estimated to increase receipts by $2.1 billion, and increase payments by $652.6 million over the forward estimates period.
Varying the GDP uplift factor for tax instalments
The Government has decided to set the GDP uplift factor for pay as you go (PAYG) and GST instalments at 2 per cent for the 2022-23 income year. This uplift factor is lower than the 10 per cent that would have applied under the statutory formula.
The lower uplift rate will provide cash flow support to small businesses, including sole traders, and other individuals with investment income, helping them to invest and grow. Around 2.3 million taxpayers are expected to benefit from this measure.
The 2 per cent GDP uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods (up to $10 million annual aggregated turnover for GST instalments and $50 million annual aggregated turnover for PAYG instalments) in respect of instalments that relate to the 2022-23 income year and fall due after the enabling legislation receives Royal Assent. This measure is estimated to have no net impact on receipts, and no net impact on GST payments to the States and Territories over the forward estimates period.
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