The Hon Dr Jim Chalmers MP last night delivered in effect the first Labour Federal Budget for some time.

That is, the first iteration of the 2022-23 Budget released earlier this year (in the lead up to the federal election) was ‘updated’ with much of Scott Morrison’s and the Liberal’s pronouncements moved aside.

So here’s all the key things the CapitalQ Community need to know about the Updated, Final Federal Budget for 2022-23 and the impacts on tax and business…

Personal Taxes

Tax Rates… No changes! Well, No Changes to the Planned Changes

That wouldn’t normally be news, but many were predicting that the Albanese Government would look to reverse the tax rate changes (or tax cuts if you prefer) previously legislated under the Morrison Government.

We have already seen Stages 1 and 2 of the changes implemented, and as things stand, Stage 3 will come into effect on 1 July 2024.

This means from the 2024-25 Financial Year, the 32.5% marginal tax rate will be reduced to 30% for the income bracket between $45,000 and $200,000, and the 37% tax bracket will be completely removed.

For direct comparison, here are the current amounts of tax payable at each income threshold (excluding Medicare Levy) for 2022-23 (unchanged from 2021-22) –


Taxable income ($)                Tax payable ($)

0 – 18,200                                Nil

18,201 – 45,000                       Nil + 19% of excess over 18,200

45,001 – 120,000                     5,092 + 32.5% of excess over 45,000

120,001 – 180,000                   29,467 + 37% of excess over 120,000

180,001+                                 51,667 + 45% of excess over 180,000


But for the 2024-25 Financial Year, the amounts of tax payable at the revised income thresholds (excluding Medicare Levy) will be as follows –


Taxable income ($)                Tax payable ($)

0 – 18,200                                Nil

18,201 – 45,000                       Nil + 19% of excess over 18,200

45,001 – 200,000                     5,092 + 30% of excess over 45,000

200,001+                                 51,592 + 45% of excess over 200,000


Having said all that, eagle-eyed readers will already have assessed that between now and the 1st of July 2024, when the changes are due to come into effect, there will be two further Federal Budgets and zero Federal Elections.  Who wants to take bets on whether the changes will survivor to see the light of day?

On another note, who remembers the last time the tax free threshold was increased?  I can guarantee the price of petrol, and average incomes, were a lot lower then than they are now.  Bracket creep?

Low-and-middle-income tax offset (“LMITO”) Comes to an End

First introduced in the 2019 Federal Budget, the LMITO was designed to put cash back into the pockets of taxpayers earning under $126,000 a year to help stimulate spending.  Most will recall the online, clickbait headlines regarding the cash coming everyones’ way each tax time (though funnily enough, it was a ’non-refundable’ offset so you had to have paid tax first to get anything back causing confusion each year).

Originally intended as a one off, it continued through to the 2022 year where the offset increased to $1,500.

But there was no further extension announced last night, so hereon we revert back to the old Low Income Tax Offset which applies as follows –


Taxable income ($)                Offset ($)

$0 – $37,500                            $700

$37,501 – $45,000                   $700 – ([TI – $37,500] x 5%)

$45,001 – $66,667                   $325 – ([TI – $45,000] x 1.5%)

$66,668 +                                Nil


Business Taxes

FBT (and Tariffs) Exemption for Electric Cars

From 1 July 2022, the Government proposes to exempt electric cars from Fringe Benefits Tax.

The exemption will apply (including an exemption from import tariffs) if the car’s first retail price is below the luxury car tax threshold for fuel-efficient cars, being $84,916 (incl GST) for the 2022-23 financial year.

This will no doubt see demand for such vehicles substantially increase, that is of course if the manufacturers can actually deliver them (supply appears to be the biggest issue at present, not demand).

WARNING, the vehicle must NOT have been held or used BEFORE 1 July 2022!

And further, despite the exemption from fringe benefits tax, employers must still calculate and report the value of the exempt benefit in their employees earnings (as Reportable Fringe Benefits Amounts).  So business owners save on tax, but not admin and paperwork.



Downsizer Expansion

Eligibility for the downsizer measures (which allows older Australians to sell their home and place some of the proceeds into superannuation) has been expanded with the age threshold reduced from 60 to 55. This measure will take effect from the first quarter after passing into law, which is expected to be 1 January 2023.

I don’t believe we have seen a CapitalQ Community member utilise these measures to-date, and anecdotally its use across the country has been less than expected.  But if you are considering such a move, the key elements are –

  • You must sell your main residence,
  • You or your spouse must have owned it for at least 10 years,
  • You may contribute up to $300,000 ($600,000 for a couple),
  • The contribution must be made within 90 days of settlement!


Business Boosters

Child Care Subsidy Changes – Incentivising Return to Work

As part of a package of reforms to encourage parents to return to the workforce, helping to alleviate the workforce shortages faced by businesses of all sizes, the maximum child care subsidy will increase from 85% to 90% for families earning less than $80,000 as of 1 July 2023.

For every $5,000 earned over this threshold, the subsidy will reduce by 1%.

This now means families can earn as much as $530,000 and still receive some child care support.

Business wise the clear winners here are of course child care operators, but hopefully the changes will genuinely make it easier and more attractive for parents to return to work and help fill the staffing shortages throughout the economy.

Work Bonus Boost for Older Australians

Age pensioners and veterans over service pension age will receive a one-off boost of $4,000 to their Work Bonus meaning they may earn additional income without their pension being affected.

But they will have to get to it… that extra income must be earned before 30 June 2023, as the annual limit will revert back to the standard amount from 1 July 2023!


Further Business Challenges

Expansion of Paid Parental Leave

At a time when staffing has never been more challenging, the Paid Parental Leave Scheme will be expanded.

This is great for families, but there can be no denying this increases the difficulties small and medium businesses face in managing employee absences when getting them to work is already more difficult than ever.

From 1 July 2023 both parents will be able to access leave at the same time or enter into more flexible arrangements than currently available under the existing partner pay limits and requirements to take 12 weeks as a continuous period.

Further, from 1 July 2024 the Paid Parental Leave Scheme will increase the maximum period of leave by two weeks each year – reaching a maximum of 26 weeks by 1 July 2026.

The paid parental leave income test will also be extended to include a $350,000 family income test, which can be used to help families who do not meet the individual income test.

Increased ATO Compliance Activity & Penalties

The Government has announced that the Australian Taxation Office (ATO) will extend compliance programs to further target non-compliance in three key areas:

  • Personal income taxation, overclaiming of deductions and incorrect reporting of income;
  • Businesses that operate in the Shadow Economy; and
  • Tax avoidance by Multinationals, large public and private enterprises.

Penalties for tax offences will also increase from $222 to $275 per penalty unit.

That’s an increase of 23.88%.

I wondered if tax office penalties are included in the ‘basket of goods’ used to assess and calculate inflation?  But I guess not, because while its been very high of late, it isn’t that high!

In case there were any lingering doubts, the message is clear – failing to comply with your tax obligations comes at a real cost.


Liberal Legacies on the Scrap Heap (or at least up for review)

A number of proposals from the former government, or governments before that, were also scrapped last night (having sat in limbo in some cases for a rather long time) including those relevant to the CapitalQ Community as follows –

  • The 2013–14 measure that proposed to amend the debt/equity tax rules.
  • The 2018–19 measure that proposed to change the annual audit requirement for self-managed superannuation funds (SMSFs) to a three- yearly requirement.
  • The 2018–19 measure that proposed to introduce a limit of $10,000 for cash payments made to businesses for goods and services.

And some more were put on hold for further assessment –

  • The 2019–20 measure proposed to introduce a sharing economy reporting regime for ride sharing and other gig economy elements, specifically food delivery.
  • The 2021–22 measure that proposed to relax the residency requirements for SMSFs where members are unable to return to Australia as a result of circumstances beyond their control.


Keep in Mind

Federal Budget announcements are often just that, an announcement of a plan.  While in some cases legislation already has, or shortly will be introduced into Parliament, generally they still need to be passed into law (and things can change along the way).

The Stage 3 tax changes are already law, but as mentioned, the law can be changed.