The Treasurer, Dr Jim Chalmers, handed down his first Federal Budget (an updated budget for the 2022/23 financial year) on Tuesday evening.
The good news is there were virtually no tax or superannuation changes that affect small or medium size business. This is very much welcomed.
The bad news is with interest rates rising, high inflation and labour costs rising, businesses looking for assistance from the Government will be very
disappointed by this interim Budget.
Based on our analysis, the big winners appear to be:
- Families – Childcare subsidies extended, increased benefits with the Paid Parental Leave scheme
- Pensioners – Deeming rates are frozen at current rates until 30 June 2024, new measures to incentivise pensioners to downsize their homes, and income levels lifted significantly for eligibility for the Commonwealth Seniors Health Card
- Retirees – Downsizer superannuation contribution eligibility age is reduced from 60 to 55 years, starting from first quarter after this legislation is passed. This allows each eligible person to contribute up to $300,000 into their super at a much earlier age, benefiting from super’s low tax rates.
OUR CONCERNS FOR FUTURE YEARS
This wasn’t the usual Federal Budget held in May where tax and superannuation and other changes that affect business owners are announced.
Instead, it was a Budget to wind back what the previous Government said they would do and to “fix” things and put in place new policies from
the new Government.
Based on the negative economic expectations discussed by the Government after releasing their Budget, it appears highly likely that significant
tax increases will occur in the 2023 or future Budgets.
Big changes affecting Family Trusts (also known as Discretionary Trusts)
We need to alert you that 2 key changes will affect people using Family Trust in this 2023 financial year.
|How This Will Affect You
|S100A + Distributions to Family MembersThe ATO has released draft Tax Rulings based on S100A of the Tax Act that restrict Trusts making distributions to adult children or family members unless the cash amount of the distribution is paid to the beneficiary.
|More Tax to Pay in 2023You may be restricted in the amounts your Family Trust can allocated to adult children or parents when compared with prior years.Our Tax Planning meeting with you in May/June 2023 will be crucial to get this right and not expose you to any penalties from the ATO.
|“Owies” Case + Consideration of BeneficiariesIn this recent Court case, the Trustee was removed, and an independent Trustee was appointed when 2 beneficiaries complained they weren’t considered.
|More Work to Administer your Trusts in 2023Prior to 30 June, accountants will have to assist all Trustees with the following:Reconsider the default beneficiaries in a Trust.Consider the purpose recited in a Trust.Consider the terms of a Trustee exercising their discretion.This process will take time and will need to start taking place from the beginning of May 2023.
For your peace of mind, we’re happy to start reviewing your 2023 Tax Planning and Trust profit allocations with you immediately so you can plan
for any extra tax you may have to pay in 2023 – and also to consider your options with the above 2 key changes that affect Family Trusts.
Fee free contact us immediately to book in your 2023 Tax Planning meeting with us. Otherwise, we will arrange this with you for April/May 2023.
We look forward to assisting you!