Treasurer Josh Frydenberg recently delivered the 2022-23 Federal Budget. This was earlier than usual, as a federal election is due to be called within days of this blog being written. With this in mind, the focus of the budget was on short-term incentives for individuals and businesses and easing the increasing cost of living pressures.
There was other welcomed healthcare funding announced in the budget which goes towards supporting our community pharmacy family, which continues to feel the effects of COVID-19. Some wins include additional funding of the NDIS, mental health, reduction of the PBS safety net thresholds, women’s health initiatives and improving medication management services for the elderly.
Economic Overview
• The 2022-23 Federal Budget deficit is estimated to be $78 billion, falling to $43.1 billion in 2025-26.
• Unemployment rate forecast to reach 3.75% in the September 2022 quarter, the lowest rate in close to 50 years.
• Net debt predicted to increase to $865 billion by June 2026.
• GDP growth forecast of 3.5% for 2022-23.
2022-23 Budget Snapshot
Key Health Investments
$525.3 million has been committed over four years to reduce the Pharmaceutical Benefits Scheme (PBS) Safety Net thresholds and expand access to medications.
From 1 July 2022, the Safety Net thresholds will be reduced, from $1,542.10 to $1,457.10 for general patients and from $326.40 to $244.80 for concessional patients. These changes are expected to benefit around 2.4 million people by lowering the out-of-pocket costs for medicines. As a result of these changes, concessional patients will reach the PBS Safety Net with approximately 12 fewer scripts per year, and two fewer scripts for general patients.
$2.4 billion additional new and amended PBS listings including:
• Zolgensma® for spinal muscular atrophy, about 20 patients per year, resulting in a $2.5m savings for the treatment.
• Ofev® for progressive fibrosing interstitial lung disease. 1,400 patients, saving $40,000 a year.
• Trikafta® for cystic fibrosis. 1,900 patients per year, saving $250,000 per patient.
• Trodelvy® for triple negative breast cancer. Around 580 patients per year, saving $80,000 per course of treatment.
$333 million over four years has been committed for improving health outcomes for women. These include:
• Endometriosis and pelvic pain GP clinics.
• Ongoing reporting against the Women’s Health Strategy
• Measures to increase stillbirth autopsies or address stillbirth.
• Women’s Safety – strengthening health system responses.
To improve medication management services for the elderly, the Government is providing $345.7 million for residential aged care facilities for pharmacy services. A commitment of $20.1 million will progress implementation of the Australian National Aged Care Classification (AN-ACC) in residential aged care and support the transition of facilities to the new funding model over a 2-year period. The implementation of this is to assist older Australians’ care needs from 1 October 2022.
Other investments in health include:
• An additional $13.2 billion committed to the NDIS over four years to 2023-24.
• $2.3 billion for improved and expanded mental health care and suicide prevention.
• $11.5 million to extend the Home Medicines Service and continued dispensing arrangements to support access to medicines on the PBS and Repatriation Pharmaceutical Benefits Scheme.
• $35.8 million for a temporary community pharmacy program for the COVID-19 vaccine rollout, to administer both vaccine doses to patients throughout Phase 2 and Phase 3 of the national roll-out.
Investment in Vaccine Development & Health
Establishment of a mRNA vaccine manufacturing capability in collaboration with Moderna, located in Victoria. This will provide Australians with priority access to mRNA vaccines, support research and development and domestic preparedness for possible future pandemics.
Commitment of a further $1.3 billion towards the Medical Research Future Fund (MRFF) Ten Year Investment Plan. The updated $6.3 billion MRFF Plan provides research funding for:
• $604.8 million towards translating medical discoveries into medical practice.
• $114.9 million to assist researchers tackle significant challenges through investment, leadership and collaboration.
• $117.4 million to assist patients through the funding of innovative treatments, supporting clinical trials and developing more advanced medical technology.
• $495.4 million to assist medical researchers make breakthrough discoveries and progress their careers in Australia.
The government has announced the extension of the Biomedical Translation Fund’s (BFT) initial investment period by 3 years to assist in the commercialisation of biomedical discoveries.
Individuals
Fuel Savings!
The government announced a temporary reduction to fuel taxes for 6 months only. This should reduce the price of fuel for consumers by an average 24.31 cents per litre.
This measure is aimed at reducing the rising cost of living pressures and is expected to cost the government $2.975 billion.
Low-and-Middle-Income Tax Offset (LMITO)
Low to middle income earners will receive some relief at tax time. For the 2021 & 2022 financial year, the LMITO will increase by $420, from the maximum of $1,080 to $1,500. The LMITO is a non-refundable tax offset, meaning this offset can only reduce a tax payable to nil.
The impact of this offset can be summarised below:
Cost of living payment
A one-off tax-exempt economic support payment of $250 will be made in April 2022 to eligible recipients of certain payments and to concession card holders. These potentially include recipients of the Age Pension, Disability Support Pension and the Parenting Payment.
Small Businesses
Skills, Training & Technology Boost
An additional 20% taxable deduction is available for small businesses on external training courses expenditure provided to their employees. This includes online courses provided to employees in Australia.
Small businesses will be able to deduct an additional 20% of expenditure incurred to support digital adoption, including on the purchase of depreciable assets. Eligible expenses include; cyber security systems, portable payments devices, and subscriptions to cloud-based services such as accounting software and web-page design. This is limited to an annual cap of $100,000 for each income year.
No further information has been given as to what is deemed ‘digital adoption’, so this measure is somewhat arbitrary.
Pay As You Go (PAYG) Instalments Improvements
Businesses can now choose to have their pay as you go (PAYG) instalments calculated based on current financial performance, extracted from the business’s live accounting software, subject to tax adjustments. Currently the PAYG instalments are based on the taxpayer’s previous tax return. Advantages to this new system include the following:
• Instalments reflect current performance and should more accurately reflect the end of year tax amount due.
• Supports businesses manage cash flows.
• Reduce compliance burdens.
Subject to software providers, 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.
The Gross Domestic Product (GDP) uplift factor, which is used to adjust PAYG instalments from year to year, has been set at a flat 2% for the 2022-2023 tax year. This 2% flat rate is lower than the statutory default rate of 10% which would have otherwise applied, resulting in lower PAYG instalments for taxpayers. The lower 2% rate will be available to small businesses that have an aggregate turnover of less than $50 million for PAYG instalments and $10 million for GST instalments.
Temporary Full Expensing
Under the current law, an immediate deduction for the cost of depreciating assets purchased after 7.30pm (AEDT) on 6 October 2020, and first used, or installed ready for use, by 30 June 2023 is available for businesses with an aggregated turnover of less than $5 billion.
Unfortunately, the government have decided not to extend this COVID-19 support measure beyond 30 June 2023, however this measure will still be highly beneficial for small businesses for the full 2022 and 2023 financial years.
Loss Carry Back Tax Offset
Under the current law, companies may carry back losses incurred in the 2020 to 2022 income years to the 2019 income year onwards, with some limitations. This COVID-19 relief measure allowed companies to receive a tax refund in the loss-making year equal to the amount which has been offset by the losses carried back.
The government decided not to extend this relief measure after 30 June 2023.
COVID-19 Measures
From 1 July 2021, the costs of taking Covid tests to attend work are tax deductible. Note, it is only deductible if it is taken to attend work.
No fringe benefits tax applies where employers have paid for the tests, or reimbursed the employee to conduct the test.
Enhanced Single Touch Payroll Data
Currently, the ATO requires each business to report wages, PAYG Withholding and superannuation information directly to the ATO through the accounting software.
The Government is committing $6.6 million in developing IT infrastructure to allow STP data to be shared on a continuing basis between the ATO and State and Territory Revenue Offices.
Although this automation will provide efficiencies for business compliance, the funding from the Government will be dependent on each state and territory’s willingness to streamline their current systems and payroll tax compliance processes, questioning the immediate benefit of this investment.
ABN Compliance
The so called ‘Black economy measures’ to strengthen the ABN system measures has been deferred by a further 12 months.
• From 1 July 2022, ABN holders are required to comply with income tax obligations to maintain their ABN, or risk having it stripped.
• From 1 July 2023, ABN holders must confirm the accuracy of their details on the Australian Business Register annually.
Tax Records Education Direction
Under a new proposed law, the commissioner of tax can offer a ‘tax records education direction’ for those who have inadvertently failed to comply with the record keeping requirement of 5 years. This measure seeks to address instances of non-compliance and knowledge gaps with record-keeping obligations, by assisting businesses to better understand their obligations under the taxation law.
This a welcome change as education is often better than an administrative penalty.
Investment for Infrastructure Projects
$17.9 billion is committed to road, rail and community infrastructure projects across Australia, which is expected to produce 40,000 jobs nationwide. In Western Australia, some projects include:
• $441.2 million for the METRONET, including the Thornlie-Cockburn link and the Yanchep Line Extension.
• $320 million for the Bunbury Outer Ring Road
• $140 million for the Regional Road Safety Upgrades.
I hope you enjoyed this snapshot of the recent federal budget announcement. If you would like to read more on the topic, check out my references below.
Budget Papers 1
https://budget.gov.au/2022-23/content/bp1/download/bp1_2022-23.pdf
Budget Papers 2
https://budget.gov.au/2022-23/content/bp2/download/bp2_2022-23.pdf
Department of Health, Budget at a Glance.
https://www.health.gov.au/resources/publications/budget-2022-23-budget-at-a-glance
The Pharmacy Guild of Australia
https://www.guild.org.au/news-events/news/forefront/v11n08/budget-2021-2022-headline-items
Chartered Accountants Australia and New Zealand
https://www.charteredaccountantsanz.com/news-and-analysis/news/federal-budget-2022-23-overview
BDO 2022 Federal Budget Summary
https://www.bdo.com.au/en-au/federalbudget2022
Deloitte 2022 Federal Budget Report
