Federal Budget 2022-23 | October
Business hit by cuts despite heavy economic lifting
On 25 October 2022, Treasurer Jim Chalmers delivered the Federal Budget October 2022-23.
The first Labor budget, and second for Australia in 2022, offers few new incentives or impediments to business, focusing instead on delivering election promises, addressing inflation and paving the way for fiscal repair.
While some measures support middle market businesses, broader measures to encourage innovation and growth across the economy and a vision for long-term structural reform are lacking. This points to the likelihood of more substantial changes in the May 2023 Budget.
Access our comprehensive analysis below to understand the impacts of this year’s Federal Budget on individuals and middle market businesses.
The majority of the announced initiatives are focused on support for families through childcare and parental leave, affordable housing, education and improving aged care. The Budget was light on structural change for the Australian economy or the tax and compliance regimes, and there is little in the Budget for the businesses that have weathered financial storms across the last two years.
The lack of any structural changes leads us to expect more substantial changes in the next Budget. We would hope and expect that in May 2023 there is some clearer support for Australian business, international investment and a continued focus on growth and employment.
Fast facts
Deficit
The underlying cash deficit is forecast to be $36.9 billion in 2022-23.
Business investment
Non-mining investment is expected to fall from 6.5% in 2022-23 to 3.4% in 2023-24.
Wage growth
Forecast to increase, with wages rising 3.75% in both 2022–23 and 2023–24.
Inflation
Forecast to reach a peak of 7.75% in December 2022.
Share buybacks
$550 million will be saved through changes to share buyback measures.
Tax compliance
Extended tax compliance programs will net the Government $4.7 billion over four years.As expected, the Federal Government is proceeding with the previous government’s personal income tax changes, which include the Stage 3 tax cuts and cessation of the Low and Middle Income Tax Offset.
The Federal Government has announced an increase to the Road User Charge that will impact operators of heavy vehicles travelling on public roads.
The Government has left the superannuation system broadly unchanged with no new announcements made, but some changes in eligibility concerning downsizer superannuation contributions and minimal commentary around measures enacted by previous governments.
The Federal Government continues its focus on tax integrity and compliance programs by committing significant additional funding aimed at raising further revenue from audit and review activity.
The Federal Government announced proposed changes to the income tax treatment of off-market share buy-backs, which will align the tax treatment with on-market share buy-backs, a measure effectively removing access to refundable franking credits.
The Federal Government has focused on integrity measures to restrict deductions, increase penalties and enhance tax transparency for large multinationals, but refrained from providing certainty on key outstanding tax residency measures.
Leading into the most recent Budget there were approximately 70 previously announced measures that had not yet been enacted. The Federal Government has provided clarity in respect to only 12 of these measures on the recently announced October Budget.
The Federal Government has announced that it will pursue its reform of the thin capitalisation rules to limit interest deductions based on an earnings test rather than a balance sheet test.
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