How The 2022-23 Federal Budget Affects Your Business

The ATO changes the way taxes are managed and collected for multinational companies. They proposed to rewrite certain tax laws to regain about $1.1 billion to help paying off debts.

The second Federal Budget for the 2022-23 has been announced on Tuesday, October 25, 2022 with measures focused on multinationals business tax reforms. The updated Budget includes some of the most substantial, comprehensive tax reforms that have seen in years.

Multinational Tax Changes Confirmed

As expected, the proposed tax reform measures are focused on the integrity and transparency for the multinationals. These measures should be considered by any taxpayers who are engaged in cross-border investments and activities.

The Multinational Tax Reforms include these three factors:

• Amending Australia’s existing thin capitalisation rules to limit interest deductions for multinationals to 30% EBITDA (earnings before interest, taxes, depreciation, and amortization). Interest deductions denied under this test will be able to carried forward to up to 15 years and claimed in a subsequent year. In addition, a new earnings-based group ratio will replace the existing worldwide gearing ratio. And while the arm’s length debt test will be retained, it will now be limited to third party or external debt.
• The second is the introduction of new rule limiting a Significant Global Entity’s ability to claim tax deductions for cross-border payments relating to intangibles and royalties where the tax rate in the recipient jurisdiction is less than 15% or where there is a tax preferential patent box regime in place and insufficient economic substance.
• And the third are the measures designed to enhance tax transparency through public reporting of certain tax information by multinationals.

The government also announced measures to align the tax treatment off-market share buybacks undertaken by listed public companies with the treatment of on market share buybacks. Also includes additional funding for ATO programs for Personal Income Taxation Compliance, the Shadow Economy Task Force, and the Tax Avoidance Task Force.

Get better understanding about the 2022-23 Federal Budget from our tax experts! Here’s the breakdown of the key elements discussed in the announcement and see what this means for you and your business.

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QUICK OVERVIEW OF THE FEDERAL BUDGET 2022-23

International Tax

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• Multinational Tax Integrity Package
• Changes to thin capitalisation rules
• Denying deductions for payments made on or after 1 July 2023 relating to intangibles held in low- or no-tax jurisdictions
• Greater tax transparency

Corporate Tax

• COVID-19 grants treated as NANE
• Digital Currencies
• Depreciation of intangibles
• Extend ATO Compliance Programs – Tax Avoidance Taskforce, Shadow Economy Program, Personal Income Taxation Compliance Program
• Improving the integrity of off-market share buy-back
• Commonwealth Penalty Unit update

Personal Tax

• The 32.5% marginal tax rate will be cut to 30% for taxable income between $45,000 and $200,000 and the 37% tax bracket will be entirely abolished

Superannuation

• Expanding eligibility for downsizer contributions, reducing the minimum age eligibility from 60 to 55 years of age
• Assist in providing available housing for younger families

Innovation Incentives

• National Reconstruction Fund will provide $15b investment in key national infrastructure and sovereign manufacturing projects
• $50.5m to establish the Australian Critical Minerals Research and Development Hub

Source: https://www.grantthornton.com.au/insights/federal-budget-2022-23/

What Does The Federal Budget Mean To You?

To learn more about how these tax reform measures can affect your business, contact our team today at Success Accounting Group.

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