What medicos need to know about Labor’s Federal Budget

This week’s Federal Budget was Labor’s first Federal budget in nine years.

The key announcements which could impact medicos are as follows.

Removing FBT on electric vehicles

From 1 July 2022, the Government will exempt new battery, hydrogen fuel cell and plug-in hybrid electric vehicles (EVs) from Fringe Benefits Tax (FBT) and import tariffs, provided the cars have a retail price below the luxury car tax threshold for fuel efficient cars (currently $84,916).  However, the administrative burden isn’t completely erased, as employers will need to include the exempt electric vehicle fringe benefits in the employees’ reportable fringe benefits summary.

Tax & Audit focus

The Government continues to value spending money to protect revenue and to recover taxes from non-compliant activity.  Over the next 4 years, almost $2 billion is estimated to be spent on various compliance programs to increase tax receipts of approximately $5.5 billion.  This increased spending will fund more ATO staff to spend more time on audits. Further, they are tasked with raising $5.5 billion over the next 4 years.

With the increase of data matching and data sharing, the ATO are focusing their audits and reviews to maximise their returns.  With the relaxed pandemic ATO behaviour being a thing of the past, we are seeing more audits and reviews, particularly during the 2022 financial year. As such, having appropriate advisers and keeping up to date with your tax compliance is key.

To assist with tax law compliance, the Government has proposed to increase the Commonwealth penalty unit from $222 to $275, from 1 January 2023. These increases are relevant to offences committed under Commonwealth laws, including in relation to communication, financial, tax and fraud offences.  With this increase, failure to lodge penalties movements are:

No changes to personal income tax rates….yet

The Government did not announce any personal tax rates changes. The Stage 3 tax changes are proposed to commence from 1 July 2024, as previously legislated. These changes will replace the 32.5% and 37% marginal tax rates with a 30% marginal tax rate for earnings between $45,000 and $200,000.

This does not include the Medicare Levy (which remains unchanged at 2% of taxable income), as well as any applicable tax offsets.

Child Care

Delivering on the “biggest on-budget commitment”, this Budget proposes to increase the maximum Child Care Subsidy rate to 90% (from 85%) for families earning less than $80,000.  Subsidies will then taper down one percentage point for each additional $5,000 in income until it reaches 0% for families earning $530,000.  This is proposed to start on 1 July 2023.

Parental Leave

In another win for parents, the Government is proposing to expand the Paid Parent Leave Scheme from 1 July 2023, allowing both parents to receive payment if they meet eligibility criteria.  Further, from 1 July 2024 an additional two weeks per year will be added until the scheme reaches a full 26 weeks from 1 July 2026, suggesting a potential benefit to over 180,000 families each year.

Both parents will be able to share the leave entitlement, with a proportion maintained on a “use it or lose it” basis, to encourage and facilitate both parents to access the scheme and to share the caring responsibilities more equally, while single parents are able to access the entire 26 weeks.  Eligibility is also proposed to be expanded through the introduction of a $350,000 family income test, which families can be assessed under if they do not meet the individual income test.

Digital Assets

The Government will introduce legislation to clarify that digital assets (such as Bitcoin) are not treated as foreign currencies for taxation purposes in Australia.  This maintains the current tax treatment of digital assets, including the capital gains tax treatment where they are held as an investment and taxation as ordinary income where not held as an investment. Digital currencies issued by, or under the authority of, a government agency, continue to be taxed as foreign currency.

Bidding farewell to COVID concessions

This Budget has not lengthened the lifespan of the following Covid-19 concessions that were introduced by the previous Government:

• Temporary full expensing (i.e. the limitless instant asset write off) will end on 30 June 2023. From 1 July 2023, the general small business pool rules will apply, giving a 30% deduction on the opening pool balance and a 15% deduction on any assets purchased during the year.
• Further to the above, the suspension to ‘lock out’ rules ends on 30 June 2023. If small businesses choose to stop using simplified depreciation rules, the lock out prevents re-entry to be able to use the rules for five years.
• There was no extension to the low and middle income tax offset (LMITO) for the 2023 financial year, which we often see benefit junior doctors.

Other measures

Other measures in the budget include:

• A crackdown on multinational tax avoidance, with expected returns of more than $950 million.
• Decreasing the maximum co-payment for scripts under the Pharmaceutical Benefits Scheme (PBS) from $42.50 to $30.00 from 1 January 2023.
• $2.9 billion to revamp the primary health care system, including strengthening Medicare. This includes the establishment of 50 Medicare Urgent Care Clinics, Comprehensive Cancer Centres and suicide prevention.
• Also included in the above is the Strengthening Medicare GP Grants program, to provide one-off grants up to $50,000 for innovation, training, equipment and minor capital works.
• $183.5 million Rural Workforce package to attract, support and retain more doctors and allied health professionals to regional and rural communities.

Learn more

If you have any questions about how the Federal Budget might impact you or your medical business, please contact Kristy Baxter or Angela Stavropoulos from the Pilot Medical Services team on taxmed@pilotpartners.com.au or 07 3023 1300.