Personal Income Tax
No changes to the currently legislated personal income tax arrangements. Stage three tax cuts for 2024 will still come into effect, the 37% marginal rate for those earning over $120,000 will be eliminated. For those earning between $45,000 and $200,000, the 32.5% tax rate will decline to 30%. The top tax bracket (45%) will now apply at $200,000, not $180,000.
The $1,500 LMITO (Low and Middle income tax offset) has been allowed to lapse. This was a $1,500 tax rebate for those on incomes up to $126,000 and was introduced back in 2018.
Superannuation – Expanded eligibility for Downsizer contributions
The Government will allow more people to make downsizer contributions to their superannuation, by reducing the minimum eligibility age from 60 to 55 years of age. The measure will have effect from the start of the first quarter after Royal Assent of the enabling legislation. This was a pre-election announcement.
The downsizer contribution allows people to make a one-off post-tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home. Both members of a couple can contribute, and contributions do not count towards non-concessional contribution caps.
Social Security
Lifting the income threshold for the Commonwealth Seniors Health card from $61,284 to $90,000 for singles and from $98,054 to $144,000 (combined) for couples.
Cheaper childcare.
Paid parental scheme to have greater flexibility for families from 1 July 2023.
Infrastructure
$9.6 billion toward several nationally significant infrastructure projects including:
Freight highway upgrades: $1.5 billion allocated for upgrading important highways that facilitate freight including the Tanami, Dukes, and Augusta highways, among others.
Suburban Rail Link in Victoria: $2.2 billion for the rail system that will connect every major rail line (and the airport) together in Victoria.
Electrification of public transport in WA: $670 million to manufacture more electric powered buses and battery charging technology in WA.
Western Sydney roads: $300 million for the development of road linkages in Western Sydney to foster efficient travel of passengers and freight before the new airport opens in 2026.
NBN: A $2.4 billion investment into the NBN to extend the network to 1.5 million more homes.
Electric cars
The Government will cut taxes on electric cars so that more Australians are able to afford them.
From 1 July 2022, the measure will exempt battery, hydrogen fuel cell and plug-in hybrid electric cars from fringe benefits tax and import tariffs if they have a first retail price below the luxury car tax threshold for fuel-efficient cars ($84,916 in 2022‑23). The car must not have been held or used before 1 July 2022.
Employers will need to include exempt electric car fringe benefits in an employee’s reportable fringe benefits amount.
Share buybacks
The decision to scrap the off-market buyback is not all that surprising.
Large companies that possess significant surplus franking credits would offer to buy back investors’ stock. The breakdown of the off-market buybacks were of the total amount paid to the shareholder, an artificially low capital component (which was well and truly picked up by the tax department and modified accordingly) and an inflated dividend component which enabled the distribution of the excess franking credits.
Well, no more.
It was a smart strategy when originally devised some years back, but much of the juice was squeezed out by the ATO when they tinkered with it, rendering it attractive to non-tax paying and low tax paying entities, at best.
It will impact Whitehaven’s (WHC) current capital management initiatives who were conducting both an on market and an off market buyback and will see them most likely paying large special dividends instead of the off market component.