2022 Federal Budget | Brian Richards Tax Summary

There are varied viewpoints generated by this year’s Federal Budget, putting aside the potential political context and any discussion concerning the economic and social impact will be dependent on the status of the reviewer.

In simplistic terms, the highlights of the 2022 Budget are:

• The present economic snapshot is significantly better than what was anticipated 12 months ago. Improved deficit and debt projections, low unemployment rates, positive trade positions, strong tax revenue growth, and enhanced commodity pricing;
• Measures have been introduced to react to present economic and social conditions by offering concessions and payments that address increased cost of living pressures, the need to supplement some important social measures – NDIS, mental health, pharmaceutical costs and women’s issues;
• Substantial expenditure measures to address international political uncertainty and unrest and defence and cyber threats;
• Recognition of the infrastructure needs for regional Australia;
• Programs to financially assist with the “skilling” of Australia by supplementing training costs for employers and subsidised apprentice employment; and
• Programs that address certain environment concerns including employment of indigenous rangers

Not unexpectedly, the Budget did not contain any significant new business measures, other than the extension of the prior year’s patent box for agricultural innovations. What the Government has provided, says the Treasurer, is the delivery of the economic promises made over the last few years. That is, good economic management, manageable national debt having regard to Covid support measures provided and an economic environment that provides good employment opportunities and anticipated strong wage growth.

Suffice it to say, there was no appetite for any major tax reform in this year’s Budget however at some point of time in the near future there is a continuing and concerning need for Government’s tax policy to address the Government’s substantial reliance on revenue from personal tax vis a vis company tax, or GST. By way of illustration

Total government receipts were $548bn of which:

• personal tax receipts totalled $250bn (45%);
• GST $79bn (15%); and
• Company tax $ 90bn (16%).

The ongoing reliance on revenue from personal tax has long been identified as a structural taxation problem. This reliance on personal tax, increases the tax burden on individuals and limits the Government’s capacity to embark on broader social issues. Arguably this also inappropriately results in fewer individuals carrying a greater burden to fund social and welfare policies of the Government. Having said that, the obvious solution would be to reconsider the rate and application of GST, however, all GST revenues are allocated to the State Government. If Australia’s response to Covid has illustrated anything that is the difficulty of the State Governments to adopt a coordinated approach to Federal issues.

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Want to learn more about the other announcements from the 2022 budget? Click on the links below to go through to the specific summary or view the entire budget summary here.