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On Tuesday 29 March 2022, Treasurer Josh Frydenberg handed down the 2022 Federal Budget

Circumstances have continued to evolve as the COVID-19 Omicron variant has added further pressure to Australia’s healthcare sector, as well as increasing supply chain disruptions, bringing about staff shortages and reducing household spending. With a federal election expected in May, this Budget attempts to lay out a steady course through the headwinds that remain for the economy and our society.

Our team of experts have analysed the Budget announcement and our analysis below is aimed at assisting you understand, prepare and anticipate the suggestions and changes forthcoming. If you would like a briefing session, please contact us indicating your area of interest.


Select a topic below to view KPMG's analysis

  • Executive Summary

    With a federal election expected in May, this Budget attempts to lay out a steady course through the headwinds that remain for the economy and our society.


    There has been a considerable improvement in the Federal Government finances since last December's mid-year economic and fiscal outlook statement (MYEFO).


    The Budget forecasts the underlying cash balance for 2021-22 to be $79.8 billion, compared to MYEFO's estimate of $99.2 billion. However, it is expected that net debt will continue to grow until reaching 33.1 percent of GDP in 2025-26. The considerable challenge in managing budget deficits and government net debt over the next 10 to 20 years requires the implementation of productivity-enhancing measures if Australia is to succeed in reaching the forecast reduction.


    Nonetheless, the combined effect of a stronger economic recovery and the windfall of elevated commodity prices has created the breathing space for targeted support for households experiencing cost of living pressure. This comes in the form of an increase of up to $420 per taxpayer to the Low and Middle Income Tax Offset for 2021-22 and a $250 one-off payment to certain income support recipients. The 6 month halving of the fuel excise should also provide a short term temporary boost to both households and businesses.


    We welcome the expansion of the favourable patent box tax regime to include income derived from patents in the agricultural and low emissions technology sectors. Australia has the potential to create a comparative advantage in the clean energy sector, and it is important that the intellectual property we develop also continues to be owned here. Support for small businesses to improve cash flow through tweaks to the business tax instalment regime is welcome, as is the relaxation of various administrative requirements through increased digitisation of reporting.


    There is an announcement of a significant re-allocation of resources to improve Australia's future resilience in terms of cyber and critical technology, an indication of the current relatively tense state of geopolitical affairs.


    The Budget's commendable announcement on enhancing the scope and flexibility of the Commonwealth Paid Parental Leave (PPL) scheme is an important step towards improving economic opportunity for women. The announcement picks up a number of the recommendations that KPMG advocated for in our report on PPL released last year.


    Once the outcome of the election is known, we urge the future government to comprehensively review the tax system (including state taxes) with a view to replacing those taxes, which are a relatively large drag on economic activity, with revenue from taxes which detract less from achieving greater productivity in the economy. 

    • Many challenges remain for the Australian economy and our society in terms of lifting prosperity sustainably. This Budget seeks to promote stability rather than set out measures for transformational change.
      David HeathcoteNational Managing Partner, Deals Tax & Legal

    To find out more, or to book an in person briefing, please contact the KPMG experts below.

  • Economic Analysis

    The Australian economy has outperformed expectations, fuelled by highly expansionary fiscal and monetary policy put in place to deal with the COVID shock and by record high commodity prices.


    The myriad of support programs put in place by Commonwealth and State Governments, the most accommodating monetary policy settings ever seen in Australia and a strong health policy overlay resulting in a low disease burden have allowed the Australian economy to outperform most other countries over the past 2 years. Record high commodity prices have reinforced this strength, which is evident across most sectors in the economy - especially in the labour market where the unemployment rate is currently at 4 percent.  


    This strength is now bringing with it various challenges, including the emergence of inflation pressures not experienced in this country for a generation. These inflation pressures, including imported inflation, are being reflected in the bond market with bond yields rising in anticipation of the impending Reserve Bank of Australia (RBA) tightening cycle, which will increasingly be reflected by rising mortgage rates.  


    Households have felt an increase in the cost of living most directly through increased petrol prices, which have been steadily rising since the end of 2020 primarily because of global supply and demand imbalances.  


    Oil is a unique product in the sense that it touches every aspect of the economy directly or indirectly. Households feel the pinch directly at the bowser when they fill up their car and also indirectly in the cost of goods and services that they buy, which is impacted by higher transport costs and higher production costs. It is unsurprising that the Commonwealth Government has sought to provide short-term relief to households and businesses by reducing excise on petrol and diesel by 50 percent for 6 months.  


    However, the policy is not targeted to those most impacted by higher oil prices, with all households and businesses getting relief regardless of their capacity to absorb the cost increases. 


    The government has proposed a once-off payment of $420 to recipients of the low-to-middle income tax offset (LMITO) to help households with current cost of living pressures. This increase more than offsets the erosion of the purchasing power of LMITO, which has not changed from the amount set 4 years ago. It is being implemented at a time when aggregate demand in the economy is already incredibly strong, supply chain challenges have not been fully resolved, and the RBA is about to commence monetary tightening. One impact therefore of this payment is likely to be a further stoking of the inflation genie.


    A further $250 cost-of-living payment will be made to pensioners, welfare recipients, veterans and concession card holders. KPMG considers this payment to be appropriate given the acceleration in inflation that has occurred since the recent indexation round. In contrast to many LMITO recipients that participate in the labour market, welfare recipients have no capacity to seek near-term pay adjustments.        


    The Budget has also seen the government extend the First Home Loan Deposit Scheme from a capped 10,000 places last year to 45,000 places this year. History shows that housing schemes that only involve some form of price support for home buyers without incorporating additional supply measures generally result in higher house prices. In an already hot housing market these measures seem likely to add further pressure in the market without addressing the fundamental issues relating to housing affordability. 


    The Budget's temporary cost-of-living measures will add to consumption and pricing pressures in an already tight market. While tax receipts are expected to increase substantially to more than offset these additional costs - even with very conservative company income tax forecasts - the bigger question is whether they are an optimal use of tax revenue, particularly coming on the back of substantial COVID-related economic support.

    Key insights on potential business impacts

    • The cost-of-living support payments contained within the Budget are likely to exacerbate the inflationary pressures they are trying to alleviate
    • Targeted support for the most vulnerable is justified and appropriate. The one-off LMITO payments will add more stimulus to the economy, without necessarily supporting the most vulnerable households that have been hard hit by cost of living pressures
    • The government appears to be adding further support to an economy that is already running hot. This support is likely to bring forward the monetary policy tightening cycle, which will be aiming to take heat out of the economy through higher interest rates
    • Inflationary concerns are real and growing, which raises a question about the timing and the amount of the cost-of-living supports contained in the Budget.
      Brendan RynneChief Economist

    To find out more, or to book an in person briefing, please contact the KPMG expert below.

  • Economic Assumptions

    When interpreting the Budget estimates, the likelihood of volatility in economic fundamentals is an important consideration. Key risks for macroeconomic indicators are discussed below.


    2020-21 2021-22 2022-23 2023-24
    Real GDP 1.5% 4.25% 3.50% 2.50%


    The Australian economy is expected to grow at above trend over 2021-22 and 2022-23, and then return to more 'normal' growth the following year. Some of this growth is due to high commodity prices which have risen recently in response to supply uncertainty associated with Russia-Ukraine conflict. Consumption growth is also expected to be higher than average as a consequence of strong labour market conditions and a rundown of savings built up during the pandemic; while mining and non-mining investment is also forecast to rebound strongly in 2022-23 reflecting a catch-up on the delivery of projects that were disrupted during the pandemic.  


    2020-21 2021-22 2022-23 2023-24
    CPI 3.8% 4.25% 3.00% 2.75%


    Inflation is rising at its fastest rate since around 2010 and 2011; a time when Australia was experiencing a commodity-driven investment boom. This time inflation is rising for several reasons, including supply chain disruptions, oil price escalation, and increasing food costs. The Treasury forecasts suggest inflation is likely to be transitory to some degree, and while it is expected to be higher over the forward estimates period than recent experience, it is forecast to trend downwards over the next few years.


    2020-21 2021-22 2022-23 2023-24
    Wages 1.7% 2.75% 3.25% 3.25%


    The latest official Wage Price Index (December 2021) revealed annual wage growth was only 2.3 percent. The Budget is now anticipating stronger wage growth for the remainder of 2021-22, and a further escalation over the next 2 years. Low unemployment, which is forecast to be 3.75 percent during 2022-23 and 2023-24, underpins the stronger wage growth. Again, the Reserve Bank of Australia is looking for real wage growth to be sustainably higher before it increases the cash rate from its current 0.1 percent level, a likely point at which real wage growth will be negative.

  • Changes in the budget position

    These tables summarise the evolution of federal government finances over the period since the 2019-20 Mid-year economic and fiscal outlook (MYEFO).


    Annual budget deficit - underlying federal government cash balance ($billion)



    Government announcement

    2021-22

    2022-23

    2023-24

    2024-25

    2025-26

    2022-23 Budget

    -79.8

    -78.0

    -56.5

    -47.1

    -43.1

    2021-22 MYEFO

    -99.2 

    -98.9

    -84.5

    -57.5

    N/A 

    2021-22 Budget

    -106.6

    -99.3

    -79.5

    -57

    N/A

    2020-21 Budget

    -112

    -87.9

    -66.9

    N/A

    N/A

    2019-20 MYEFO*

    8.4

    4

    N/A

    N/A

    N/A


    Federal government net debt ($billion)



    Government announcement

    2021-22

    2022-23

    2023-24

    2024-25

    2025-26

    2022-23 Budget

    631.5 

    714.9

    772.1

    823.3

    864.7

    2021-22 MYEFO

    673.4

    773.1

    855.9

    914.8

    N/A

    2021-22 Budget

    729

    835

    920.4

    980.6

    N/A

    2020-21 Budget

    812.1

    899.8

    966.2

    N/A

    N/A

    2019-20 MYEFO*

    364.5

    360.8

    N/A

    N/A

    N/A


    *December 2019 (pre-pandemic)

  • Personal Tax & Incomes

    The main measures that impact individuals in the Budget are the increase to the Low and Middle Income Tax Offset, a temporary cut to the fuel excise that should reduce fuel prices and a one-off cash payment to certain recipients of other government payments.


    Personal income tax offsets and cuts


    The Low and Middle Income Tax Offset that applies for individuals earning less than $126,000 has been increased by $420 for the 2021-22 year. It will now range from $675 to $1,500. No extension to this offset beyond 2021-22 has been announced.


    The 'Stage Three' personal income tax cuts already announced (which predominantly impact middle-to-high income earners) will come into effect from 1 July 2024.


    Reduction to fuel excise


    Across all income levels, motorists will benefit from a reduction in fuel prices thanks to a temporary 50 percent reduction in the fuel excise from 44.2 cents per litre to 22.1 cents per litre. The changes will come into immediate effect from 30 March 2022 and last for 6 months. 


    Cost of living payment


    Certain recipients of other government payments and concession card holders (e.g., Age Pension and Youth Allowance recipients) will receive a one-off cash bonus of $250 to help with cost of living pressures. The payment will be made in April 2022.


    Employee share schemes


    The government will seek to increase the utility of employee share schemes as a tool for certain Australian businesses to incentivise their employees. Unlisted companies will be able to make larger offers to participants which would allow them in some cases to invest up to $30,000 each per year, plus 70 percent of dividends and cash bonuses.


    Regulatory requirements will also be removed for offers made to independent contractors who are issued with shares or options that they do not have to pay for. 

    Key insights on potential business impacts

    • The increase to the Low and Middle Income Tax Offset will be a boost for those with a taxable income of less than $126,000
    • Further relief from cost of living pressures has been provided to the broader population through the temporary reduction to the fuel excise, but also specifically targeted at welfare recipients through a one-off cash bonus
    • Changes to employee share scheme rules will benefit many start-ups as they help to level the playing field globally and are essential as Australia competes for global talent
    • Responding to cost of living pressures was clearly a focus of this Budget and the measures announced will be welcomed by Australian households.
      Ben TraversNational Leader, People Services

    To find out more, or to book an in person briefing, please contact the KPMG expert below.

  • Gender

    This Budget comes at a critical time for Australia, as we recover from the COVID-19 pandemic and build the nation's capability facing into an unpredictable global environment. KPMG commends the government on budget measures which will support women's safety and women's workforce participation.


    Although the participation rate for women is at a record high 62.4 percent, it is still below the rate for men of 70.7 percent. As such, KPMG strongly welcomes the announcement of an enhanced Paid Parental Leave (PPL) scheme which reflects our proposal in A better system of Paid Parental Leave. The enhanced PPL scheme will encourage increased workforce participation and productivity by:


    • Introducing a 20-week scheme transferable between both parents - combining the 18 weeks for primary carers and 2 weeks for secondary carers of the current scheme
    • Dropping the distinction between primary and secondary carers, driving cultural change
    • Being available to single parents who can now also claim the full 20 weeks and 
    • Aligning with the Childcare Subsidy with an expanded household income threshold of $350,000.


    This will help reduce the gender pay gap, as well as income and superannuation gaps. KPMG encourages the government to continue building on this scheme by increasing the number of weeks and introducing an equality supplement to incentivise more equal sharing of leave.


    The government has previously increased the childcare subsidy to 95 percent for families with two or more children in care. To further support women's workforce participation, we continue to encourage the government to expand this scheme for all families.


    We also welcome the Women's Budget Statement with $2.1 billion in new Budget measures:


    • $1.3 billion to improve women's safety by helping end violence against women and children
    • $482 million to enhance women's economic security, including the enhanced PPL scheme, support for women into higher paid jobs of the future, and support for increased diversity in leadership positions and
    • $330.6 million in measures for women's health, including a subsidy for a breast cancer drug and endometriosis prevention and management.

    Key insights on potential business impacts

    • KPMG strongly welcomes the changes to the Paid Parental Leave scheme to a 20-week scheme transferrable between both parents, no distinction between primary and secondary carers, and accessible to single parents
    • We welcome the $2.1 billion in new budget measures in the Women's Budget Statement, including $1.3 billion for women's safety, $482 million to enhance women's economic security and $330.6 million for women's health
    • We encourage the government to continue to focus on measures that will support women's workforce participation, such as continuing to build on the PPL scheme and expanding the childcare subsidy
    • We're pleased to see the announcement of an enhanced Paid Parental Leave scheme. This will help support women's workforce participation, critically important in not only shifting the dial on gender equality but also for increasing Australia's productivity and addressing some of the workforce and skills shortages being faced by businesses. We hope to see the government continue to build on this approach.
      Merriden VarrallDirector, Australia Geopolitics Hub

    To find out more, or to book an in person briefing, please contact the KPMG expert below.

  • Youth

    The key announcements relevant for youth are the expansions to the Home Guarantee Scheme and Boosting Apprentices Commencements wage subsidy, as well as the introduction of the ReBoot program.


    Home Guarantee Scheme expansion


    The government is expanding the Home Guarantee Scheme by:

    • Adding an additional 25,000 places to the First Home Guarantee scheme from 1 July 2022 that allows first home buyers to purchase eligible residential property with a deposit as low as 5 percent and without needing to pay lender's mortgage insurance.
    • Creating a new Regional Home Guarantee to support 10,000 eligible home buyers each year from 1 October 2022 to 30 June 2025, including non-first home buyers and permanent residents, to purchase or construct a new home in regional areas with a deposit as low as 5 percent.
    • Expanding the Family Home Guarantee to support 5,000 eligible single parents with children each year from 1 July 2022 to 30 June 2025 to buy their first home or to re-enter the housing market with a deposit as little as 2 percent.


    Apprentices and trainees


    The Boosting Apprenticeship Commencements wage subsidy is being extended for another 3 months until 30 June 2022, which is expected to support an extra 35,000 apprentices and trainees. Any employer who takes on an apprentice or trainee up until 30 June 2022 can access the subsidy, which starts at 50 percent of the apprentice or trainee's wages in the first year (capped at $7,000 per quarter per apprentice or trainee) and reduces to 10 and 5 percent respectively over the following 2 years.


    From 1 July 2022, a new streamlined Australian Apprenticeships Incentive System will also be introduced to provide further support to employers and apprentices in priority occupations.


    ReBoot program


    A new pre-employment program called 'ReBoot' will aim to help 5,000 young Australians to enter the workforce and reduce youth unemployment rates. The program is intended to help young people overcome the barriers to getting a job by providing mentoring and hands-on learning experiences through not-for-profit organisations.

    Key insights on potential business impacts

    • Encouraging home ownership, particularly for first home buyers, continues to be a focus with the Home Guarantee Scheme expansions
    • Reducing youth unemployment will be a key focus of the ReBoot program
    • Whilst the announcements for home buyers and apprentices build upon programs already in place, the introduction of a new program to help tackle youth unemployment is a welcome change.
      Hayley LockPartner, People Services

    To find out more, or to book an in person briefing, please contact the KPMG expert below.

  • Business Restructuring

    Inflationary pressures creating challenges for businesses will be somewhat mitigated by temporary fuel tax relief announced in the Budget.


    Australian businesses have largely proven very resilient in the face of the pandemic, thanks to well-designed and record levels of economic support measures.


    Whilst the economic outlook remains favourable, the inflationary headwinds on the horizon present post-pandemic challenges through higher supply chain prices and higher debt servicing costs. Supply chain delays are compounding the challenges businesses face in meeting customer demand in a timely way.


    Inflationary Pressures


    Higher petrol prices and supply chain disruptions are translating into higher input costs. Businesses are balancing how much of these cost increases they will absorb in their margins, and how much they will be able to pass on to the consumer.


    Rising prices may make consumers become more selective about their discretionary spending habits, which in turn may increase competition for discretionary consumer businesses.


    To ease the cascading impact of higher petrol prices on a range of input costs, the Federal Government has introduced a 6 month reduction to the fuel excise tax. The temporary tax cut of 22.1 cents per litre will provide some immediate relief for consumers and small businesses.


    Small and Medium Enterprises (SMEs)


    SMEs are the cornerstone of the Australian economy, with many of these businesses still in their recovery period following a challenging 2 years of COVID lockdowns and natural disasters.


    The Budget provides a $1.85 billion cash flow boost to SME businesses by overhauling the tax instalment system, via the reduction of quarterly instalment estimates.


    In addition, funding has been provisioned for a new IT system to reduce compliance time and costs in dealing with tax reporting, reducing red tape and making it easier to do business.

    Key insights on potential business impacts

    • Businesses need to be responsive to rising input costs, by assessing the corresponding impact on margins and ability to be able to pass some of these costs on by higher prices
    • We expect to see continued stress in the building and construction sector from rising input costs and supply chain delays, often putting fixed price contracts under further pressure
    • Robust modelling of cash flow forecasts and scenario planning will help businesses navigate increasing input costs and debt serving costs
    • Businesses should be modelling the impact of an increase in interest rates from their current record low rate, as well as an increase in certain input costs

    To find out more, or to book an in person briefing, please contact the KPMG experts below.

  • Business Tax

    With the Budget focusing on easing cost of living pressures, there was only a limited number of announcements impacting large businesses.


    Extension of ATO Tax Avoidance Taskforce (Taskforce)


    The Taskforce, formed in 2016, has been extended for a further 2 years to 30 June 2025 with a renewed period of funding to continue tax assurance and compliance activities targeted at multinational enterprises, large public and private businesses (and associated individuals). The government anticipates the extension of the taskforce will increase receipts by $2.1 billion and increase payments by $652.6 million over the forward estimates period.


    Expansion of patent box regime 


    The government will expand the patent box regime to the agricultural sector and low emissions technology innovations. Eligible corporate income will be subject to an effective income tax rate of 17 percent for patents granted or issued after 29 March 2022 and for income years starting on or after 1 July 2023. 


    The patent box regime for Australian medical and biotechnology innovations will also be expanded to now allow patents granted or issued after 11 May 2021 to be eligible for the patent box regime. This is contrasted with the regime previously proposed, which only covered patents which were applied for after 11 May 2021. The government will also now allow standard patents granted by IP Australia, utility patents issued by the United States Patent and Trademark Office, and European patents granted under the European Patent Convention to be eligible to the extent R&D occurs in Australia. 


    Given the differential between the Australian corporate tax rate of 30 percent for large businesses and 25 percent for small enterprises, the extension of the patent box to a broader range of eligible innovations provides a welcome boost to the commercialisation of innovation in Australia.


    Reducing administration through improved and integrated systems 


    The Budget includes a number of measures which aim to reduce the administration burden on businesses, including:


    • Pre-filling of payroll tax returns: facilitating shared single touch payroll data with State and Territory governments for pre-filling payroll tax returns to be implemented in late 2023.
    • Automatic reporting of taxable payments: eligible businesses can report taxable payments reporting system data via software at the same time as activity statements from 1 January 2024.
    • Digitising trust income reporting: all trusts will have the option to lodge income tax returns electronically, increasing the automation of trust reporting processes. This measure is intended to be in place 1 July 2024, subject to the capacity of software providers to deliver the solutions required for the process.
    • Aligning excise and other reporting requirements: a move from monthly to quarterly reporting for excise and excise-equivalent customs duty for manufacturers, importers and distributors in the alcohol and fuel sectors with less than $50 million of annual turnover is proposed from 1 July 2023. 


    Enhanced Paid Parental Leave initiative


    To be introduced no later than 1 March 2023, the expanded initiative will see 20 weeks of paid leave accessible to either parent during the first 2 years of their child's birth or adoption, and a widening of eligibility to be based on a household income threshold of $350,000.


    Key insights on potential business impacts

    • With the focus on easing cost of living pressures, the Budget does not include any large corporate tax announcements as compared to previous years. It is somewhat surprising that there was no formal announcement that Australia would adopt the OECD's 'BEPS 2.0' measures, including global minimum tax rules for in-scope multinationals, given that a 2023 start date has been anticipated
    • The extension of the patent box regime to encompass low emission technologies is a welcome development and supports innovation in a sector where Australia has the potential to create a comparative advantage. However, there are likely to be practical challenges with defining qualifying patents. Large business claimants will also need to be mindful of the overlay of global minimum tax rules from 2023, which may negate some of the benefits in certain cases
    • The government has continued its focus on bolstering its assurance capabilities through the extension of funding to the ATO's Tax Avoidance Taskforce
    • The Budget does not have large corporates at the forefront when compared to previous years. However, an extension of the patent box regime to the agricultural sector and to low emissions technology is a welcome boost to the commercialisation of innovation in Australia.
      Justin DavisNational Leader, Corporate, Deals & International Tax

    To find out more, or to book an in person briefing, please contact the KPMG expert below.

  • Superannuation

    There were no significant new superannuation tax measures announced in the Budget.


    Extension of the temporary reduction in superannuation minimum drawdown rates


    This was the only new specific superannuation measure forming part of the Budget. The Government frames this as a support for retirees. However, persons relying solely or primarily on their superannuation to pay living expenses may need to drawdown their accounts at higher rates, such that the temporary reduction will not affect them.


    Non-arm's length expenditure (NALE)


    Though not referenced in the Budget, last week the government announced that it will legislate to ensure that the NALE provisions operate as intended. This follows extensive submissions from the superannuation industry that has expressed concerns that this is not the case based on the Australian Taxation Office's interpretation of the present provisions. The industry has commended the government for listening to its concerns and looks forward to consulting on the appropriate amendments required to legislation.


    Measures outstanding from the 2021-22 Budget


    Most of the superannuation measures announced last year have been enacted, including, most importantly, the removal of the $450 per month threshold for superannuation guarantee eligibility, which was widely welcomed by the industry.


    One measure from last year that has neither been enacted nor indeed draft proposals circulated for industry consultation, is the proposal to make technical amendments to the Taxation of Financial Arrangements legislation to facilitate access to the portfolio hedging election in a wider range of superannuation fund circumstances.


    Tax collections from superannuation funds


    The taxes paid by superannuation funds during 2021-22 are forecast to be $24.6 billion, an historically high level due mainly to strong market conditions. The government is forecasting that tax collections from superannuation funds will initially drop to $15.7 billion in 2022-23 but then gradually increase to be close to 2021-22 levels by 2025-26 due mainly to expected growth in superannuation guarantee contributions.

    Key insights on potential business impacts

    • The absence of any significant superannuation tax changes in the Budget will be welcomed by the industry, given the extensive tax and regulatory changes that have had to be implemented in recent years
    • The industry will also welcome the opportunity to consult with government on both NALE and the portfolio hedging election as soon as these consultations commence, to achieve sensible and appropriate outcomes
    • The absence of tax changes affecting superannuation will be welcomed by the industry.

    To find out more, or to book an in person briefing, please contact the KPMG experts below.

  • Life Sciences Industry

    The government continues to focus on Australia's health security and resilience, encouraging innovation with the expansion of the patent box regime, investment in medical research and development and announced funding to support manufacturing of vaccine technology and address supply chain vulnerability. 


    Expansion of patent box regime for medical and biomedical innovations


    The government has made two significant expansions to the patent box regime, which taxes profits attributable to eligible patents at a concessional rate of 17 percent. Eligible patents now include those granted or issued (rather than only those applied for) after 11 May 2021, as well as utility patents issued by the United States Patent and Trademark Office, and European patents granted under the European Patent Convention, to the extent R&D occurred in Australia. Patents must link to a therapeutic good entered in the Australian Register of Therapeutic Goods.


    Increased funding for the Medical Research Future Fund (MRFF)


    A further $1.3 billion has been committed to the MRFF, which will provide research funding of $6.3 billion over 10 years from 2022-23 to support innovative treatments, advanced health care and medical technology.


    Manufacturing, supply chain and cash flow support


    Acknowledging industry comments regarding commercialisation of medical research and development, the Government has announced additional funding of $328.3 million over 5 years for the Modern Manufacturing Initiative (with medical products one of the National Manufacturing Priorities) and to address supply chain vulnerabilities.


    In addition, small and medium life sciences businesses may benefit from lower pay-as-you-go (PAYG) tax instalments (and improved cash flow) for eligible businesses following a significant reduction in the GDP uplift rate for PAYG and GST instalments for the 2022-23 income year from 10 percent to 2 percent. 


    Key insights on potential business impacts

    • Whilst the expansion of the patent box regime is a welcome development, there may be practical challenges in identifying eligible patents with sufficient links to research and development in Australia and determining the quantum of attributable profits subject to the concessional tax rate of 17 percent
    • The additional support for critical issues facing the industry (strengthening local manufacturing, addressing supply chain and cash flow issues and investment in medical research) is encouraging, but businesses will need to carefully assess eligibility and timing criteria
    • Life Sciences organisations will welcome the features of this Budget which facilitate translation of Australia's strong reputation for research and development into viable commercial outcomes.
      Kelly ChongPartner, Corporate Tax

    To find out more, or to book an in person briefing, please contact the KPMG expert below.

  • Tax Dispute Resolution

    The Budget confirms the government's commitment to extending the operation of the Tax Avoidance Taskforce through to 2024-25, with investment of $652.6 million and an expected increase in tax receipts of $2.1 billion over 2 years. 


    The government has announced additional funding of $652.6 million to extend the Tax Avoidance Taskforce (Taskforce) through to 2024-25, which means that there is a continued focus by the Australian Taxation Office (ATO) on conducting compliance activities to obtain tax assurance and to ensure taxpayers pay the appropriate amount of tax. 


    Taxpayers should be prepared for further ATO review activity, particularly targeting multinationals, large public and private groups, trusts and high net wealth individuals. Organisations should seek advice early and ensure they are prepared for further ATO review activity so as to minimise tax risk. 


    In 2016, the Taskforce was established to undertake compliance activities focussed on multinationals, large public and private groups, trusts and high wealth individuals. The 2016-17 Budget committed $678.9 million through to 30 June 2020. In the 2019-20 budget, the government extended the Taskforce committing $1 billion over 4 years through to 30 June 2023. This significant investment saw an increase in the deployment of ATO review products and scrutiny that has focussed on complex structures, transactions and where taxpayers have sought to shift profits offshore to relatively low tax jurisdictions. This has resulted in a closing of the perceived 'tax gap' by making tax adjustments and initiating disputes. 


    The ATO's justified trust programs and assurance activities have been enhanced since the establishment of the Taskforce in 2016. Consequently, taxpayers should seek advice early and prepare for ATO reviews.

    Key insights on potential business impacts

    • Taxpayers should seek advice early and be prepared to respond to any scrutiny regarding their tax positions
    • The Taskforce will continue to be focused on compliance activities that target multinationals, large public and private groups, trusts and high wealth individuals
    • The government's continued investment in this space demonstrates that it will be a matter of 'when' not 'if' taxpayers will need to be prepared to respond to scrutiny regarding their tax positions.
      Angelina LaganaNational Leader, Tax Dispute Resolution

    To find out more, or to book an in person briefing, please contact the KPMG expert below.

  • Enterprise

    This Budget aims to invest in growth, digitisation and upskilling the labour force of the future. In this election year there were no new taxes and no fundamental tax reform but there were meaningful measures to help drive innovation.  


    Small business skills, training, and technology investment boost


    A skills and training boost will enable eligible small businesses (i.e. turnover less than $50 million) to deduct an additional 20 percent of expenditure incurred on external training courses provided to their employees. The boost applies to eligible expenditure incurred from Budget night until 30 June 2024.


    A technology investment boost will enable small businesses to deduct an additional 20 percent of the cost incurred on business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems and cloud-based services. The boost will apply to eligible expenditure incurred from Budget night until 30 June 2023 with an annual cap of $100,000.


    Patent box expansion 


    The patent box regime previously announced in the 2021-22 Budget will be expanded to agricultural and veterinary chemical products as well as emissions reduction technologies developed in Australia. From 1 July 2023, corporate taxpayers will enjoy a 17 percent tax rate on profits generated from eligible patents granted after 29 March 2022. 


    The previously announced medical and biotech patent box will also be expanded to include income from certain patents issued under U.S. and European laws where the R&D took place in Australia.


    Modernising the tax instalment system


    To support companies to manage cash flows the government will provide the option to have pay as you go (PAYG) instalments based on real-time financial performance. If revenue declines, they may be able to obtain automatic instalment refunds. This will take effect from 1 January 2024. Additionally, the GDP uplift rate that applies an annual increase to PAYG and GST instalments will be reduced from 10 percent to 2 percent for the 2022-23 income year. 


    Employee share scheme measures


    Employee share ownership in unlisted companies is being encouraged through regulatory red tape reduction, as announced in the 2021-22 Budget, with consultation already underway. This legislation is keenly anticipated by start-ups and private business alike. 


    Tax integrity 


    The government will provide new funding totalling $652.6 million to extend the Tax Avoidance Taskforce by 2 years to 30 June 2025, enabling additional scrutiny of high net wealth groups. 


    Key insights on potential business impacts

    • Expansion of the patent box regime to drive innovation
    • 120 percent deduction for eligible training and technology investment for small business
    • Taxpayers should invest in tax governance frameworks and review known risk areas in response to increased Australian Tax Office tax audit activity
    • An encouraging budget for the mid-market sector, Australia's engine room, with no new taxes but targeted measures aimed at innovation and growth and skills training for Australia's workforce.

    To find out more, or to book an in person briefing, please contact the KPMG expert below.

  • Indirect Tax and trade

    It has been another year of significant disruption for importers, exporters and Australian business. This Budget sees various measures being introduced to strengthen Australia's supply chain, modernise the trade system, and increase access to export markets.


    A 6 month reduction in the excise fuel rate from 44.2 to 22.1 cents per litre of petrol and diesel, commencing 30 March 2022, will provide motorists with temporary relief at the bowser at a net cost of $2.9 billion to the government. While not expressly addressed in the budget, our expectation is that commercial fuel users will face a corresponding reduction in available fuel tax credits and no reduction in road user charges meaning only a marginal decrease in logistics costs across the supply chain.


    Fuel and alcohol producers, importers and distributors will benefit through deregulation to the excise regime commencing 1 July 2023, with changes including:


    • Providing small and medium businesses with an annual turnover of less than $50 million the ability to lodge and pay excise and excise-equivalent customs duty on a quarterly basis.
    • Enabling importers of fuel and alcohol requiring further manufacture or distribution to transfer goods directly into a licensed warehouse to defer payment of excise or excise-equivalent customs duty.
    • Streamlining licensing and administration requirements by removing licence renewals, fees and extending the eligible period for refunds of excise overpayments from 12 months to 4 years.


    The government's infrastructure investment will see a share of $17.9 billion going towards strengthening Australia's supply chain which will help move Australian products to ports for export.


    $267.1 million over 4 years will go towards modernising and improving Australia's trade system and supporting exporters via investment in agricultural export systems and the Export Market Development Grants program.


    The government continues to pursue its free trade agenda with the Australia - United Kingdom Free Trade Agreement signed in December 2021, coming into force in 2022, which will eliminate tariffs on more than 99 percent of Australian goods exported to the UK. Meanwhile negotiations continue on trade agreements with the European Union and the Comprehensive Strategic Partnership with India, in which the government is investing $245.5 million over 5 years.  


    The government will commit $6.6 million for the development of IT infrastructure to allow the Australian Tax Office (ATO) to share single touch payroll (STP) data with state and territory revenue offices. The funding will be deployed to states and territories to invest in processes and systems to pre-fill payroll tax returns with STP data, with a view to reducing compliance costs for businesses.

    Key insights on potential business impacts

    • A temporary reduction in the rate of fuel excise for 6 months commencing 30 March 2022
    • Deregulation of the excise system for excisable and excise-equivalent imported goods will improve cashflow and reduce administration for businesses from 1 July 2023
    • Investment in technology and physical infrastructure will support exporters and strengthen Australia's supply chain by reducing congestion and helping to get commodities to ports for export
    • The temporary reduction in fuel excise will benefit individuals more than businesses, but we are seeing welcome investment in infrastructure for exporters and deregulation of the excise regime.

    To find out more, or to book an in person briefing, please contact the KPMG experts below.

  • Funding for Innovation and Business Growth

    Strategic sectors and regions are the winners whilst existing programs stay strong. 


    Over the last two Budgets, the government has invested funding in industry-based innovation and growth. This has paid off so far with a more resilient economy than might be expected. This Budget sees levelling off for some measures, but an increase for strategic grant funding and sector specific incentives.


    Grants


    A series of funding programs will support business investment in priority sectors.


    Sector Package Initiative
    Regions and Environment
    • Regional Accelerator Program ($2 billion)
    • Environment Restoration Fund ($100 million)
    • Future Drought Fund ($84.5 million)
    • Safer Communities Fund Round Six ($50 million)
    Clean Energy and Recycling
    • Low Emissions Technology support ($247.1 million)
    • Support for affordable power, including microgrids in regional Australia ($148.6 million)
    • Recycling Modernisation Fund ($60.4 million)
    Manufacturing
    • Modern Manufacturing Initiative ($250 million plus $500 million allocated from the Regional Accelerator Program)
    • Manufacturing Modernisation Fund ($53.9 million)
    Research Translation
    • Australia's Economic Accelerator grants ($505.2 million)
    Critical Minerals
    • Critical Minerals Accelerator ($200 million)
    • Critical Minerals Research and Development Centre ($50.5 million)
    Defence
    • Sovereign Industrial Capability Priority Grants ($84.7 million)
    • Skilling Australia's Defence Industry Grants ($20.3 million)
    Exports
    • Export Market Development Grants ($80 million)
    Arts
    • Restart Investment to Sustain and Expand (RISE) Fund ($20 million)


    R&D Tax Incentive


    As expected, the Federal Government continues its support for the R&D Tax Incentive with previous changes continuing to fund Australian industry-led R&D.


    Other Tax Incentives


    The patent box regime originally announced in the 2021-22 Budget will be extended to encourage development and commercialisation of Australian innovations in clean energy and the agricultural and veterinary sectors. Originally, the regime was limited to medical and biotechnology. The extension to these new sectors will apply to patents granted or issued after 29 March 2022 and for income years starting on or after 1 July 2023, with a tax rate of 17 percent on profits derived from Australian owned and developed patents (regardless of the applicable corporate tax rate).


    This represents a significant extension of the regime. For low emissions alone, this will cover electricity generation, transport, buildings, industrial processes, hydrogen, fugitive emissions, carbon capture use and storage, soil carbon and bio-energy. These expansions mark an important and welcome step toward keeping commercialisation of innovation in Australia.


    We continue to see sector-specific tax incentives being rolled out, such as those for digital games, employee share schemes and small business training.

    Key insights on potential business impacts

    • Additional grant funding for Critical Minerals, Manufacturing, Clean Energy and Defence with a strong focus on regional areas
    • Key programs, such as the R&D Tax Incentive and Export Market Development Grant, continue to be supported
    • Other tax incentives have been extended beyond what was originally intended; e.g. patent box
    • The Budget builds on 2021's measures in offering further support to innovative businesses.

    To find out more, or to book an in person briefing, please contact the KPMG experts below.

  • Migration

    Following the reopening of Australia's international borders, the Federal Government continues to support targeted measures, concessions and flexibility to encourage visa holders to travel to Australia to aid economic recovery and growth.


    In stark contrast to the Budget 12 months ago when the international borders were closed shut, the Budget focuses on addressing skilled workforce shortages and supporting Australian industry sectors heavily impacted by the COVID-19 pandemic, by confirming Australia is 'open for business'.


    The Budget calls out the introduction of various efforts by the Federal Government since the international borders reopened to incentivise visa holders to travel to Australia. Examples referenced include visa fee refunds for specific students and working holiday visa makers, a commitment to bring an additional 12,500 workers to Australia to support the Pacific Australia Labour Mobility scheme, and the creation of the Australian Agriculture Visa, a stream of the Temporary Work (International Relations) subclass 403 visa. Other measures mentioned in the Budget include the relaxation of work restrictions for certain student and working holiday visa holders, and the extension of visa periods for eligible engineering graduates.


    The Budget announced the program numbers for the 2022-23 permanent Migration Program planning levels will be maintained at the current level of 160,000. In addition, 10,000 places in the 2021-22 Migration Program from the Partner visa category will be redistributed to the Skill stream, resulting in an increase in the Skill stream ceiling. This is aimed at supporting economic recovery by increasing the number of visas available for skilled visa holders. Overall, Skill stream places will account for around 70 percent of the permanent Migration Program for 2022-23, with planning levels for the Skill stream increased to 109,900. In contrast, Partner visa granting arrangements will move to a 'demand-driven' basis, likely to result in lengthier processing times.


    Also announced in the Budget is an increase in country caps for Work and Holiday visas in 2022-23 by 30 percent. This will result in an increase of overall places by approximately 11,000. These visas are often colloquially known as 'backpacker' visas, allowing young adults to holiday and work in Australia.


    In respect to global talent, the Budget confirms that the Federal Government will provide $19.5 million over 2 years to continue the Global Australia Taskforce to attract individuals and international investment to Australia. With Australian businesses competing to attract and retain global talent, this is anticipated to continue to be a focus for the Federal Government in years to come.

    Key insights on potential business impacts

    • Australia is 'open for business' with the Federal Government focused on addressing skilled workforce shortages and various incentives to encourage visa holders to travel to Australia
    • Over 1 million people have entered Australia since the reopening of Australia's borders, including 130,000 students, 190,000 tourists, 70,000 skilled migrants and 10,000 working holiday makers.
    • Skill stream places will account for approximately 70 percent of the 2022-23 Migration Program.
    • $19.5 million will be provided over 2 years to continue the Global Australia Taskforce.
    • The Budget aims to instil a renewed confidence in the migration program for both visa holders and Australian businesses competing to attract and retain global talent to address workforce shortages.
      Belinda WrightPartner, National Leader - Immigration Services

    To find out more, or to book an in person briefing, please contact the KPMG expert below.

  • Infrastructure and Cities

    The Budget provides another significant boost for infrastructure across Australia, with $17.9 billion in new commitments predominantly for road and rail projects. This increases the government's 10-year infrastructure pipeline to $120 billion.


    New infrastructure commitments $ Million
    QLD $3.3 billion including:
    Brisbane to Sunshine Coast Rail Extension 1,600.0
    Brisbane to Gold Coast Faster Rail Upgrade 1,100.0
    NSW $3.3 billion including:
    Sydney to Newcastle (Tuggerah to Wyong) Faster Rail Upgrade 1,000.0
    Milton Ulladulla Bypass 352.0
    ACT $51 million including:
    Athllon Drive Duplication 46.7
    VIC $3.4 billion including:
    Beveridge Interstate Freight Terminal 1,200.0
    Outer Metropolitan Ring Rail South 920.0
    Western Interstate Freight Terminal 740.0
    TAS $640 million including:
    Northern Roads Package (Stage 2) 336.0
    SA $2.8 billion including:
    North-South Corridor - Darlington to Anzac Highway 2,300.0
    WA $1.7 billion including:
    METRONET (various works) 441.2
    NT $237 million including:
    Central Australian Tourism Roads 132.0


    With a focus on job creation, improving connectivity and strengthening supply chains, the infrastructure investment reflects the government's vision for economic growth post-pandemic.


    The Budget provides a strong focus on rail infrastructure, including faster rail upgrades for Brisbane to Gold Coast and Sydney to Newcastle as well as rail intermodal terminals in Melbourne.


    The government's investment in rail infrastructure coincides with strong state investment putting pressure on an already overheated market. To enable projects to be delivered successfully, governments will need to partner with the construction industry to develop a strategic and coordinated approach.


    A stronger focus on water infrastructure is evident in the $5.4 billion investment for Hells Gates Dam, and a further $1.7 billion commitment for water infrastructure and supply chain projects in North and Central Queensland. The Australian Government's commitment to water infrastructure has increased to $8.9 billion.

    Key insights on potential business impacts

    • The Budget provides a further $17.9 billion in new investments predominantly in road and rail projects
    • Investment remains focused on longer term productivity improvements to increase supply chain efficiency and job creation
    • To deliver the infrastructure investment it will be necessary for government to strategically partner with industry to avoid creating further pressures in an already overheated construction market
    • Staying the course with its infrastructure investment program, the Australian Government's focus on road and rail projects will enhance productivity and job creation, paving the way for future economic growth.
      Paul FoxleeNational Sector Leader, Transport & Infrastructure

    To find out more, or to book an in person briefing, please contact the KPMG expert below.

  • Climate change and environment

    There is little new in the Budget to support a response to Australia's climate change risks or support progress towards the Net Zero targets set at COP 26. 


    The Budget provides few new initiatives for the environment and climate change. The main announcements include: 


    • $6.9 billion investment (over 12 years) in nationally significant water infrastructure projects in regional communities. This includes $5.4 billion allocated to build the Hells Gates Dam in North Queensland.
    • $1 billion investment (over 9 years) in protecting the Great Barrier Reef, extending the Federal Government's investment under the Reef 2050 Plan to more than $3 billion. 
    • $840 million to strengthen strategic and scientific capabilities and presence in Antarctica, including $365 million (over 5 years) to support Australia's scientific leadership.
    • An estimated $100 million in savings to qualifying farmers from concessional tax treatment of Australian Carbon Credit Units (ACCU's) and biodiversity certificates.
    • Changes to the Emissions Reduction Fund (ERF) means holders of fixed delivery contracts (of ACCUs) can exit their contracts with the Commonwealth and sell their ACCUs on the private market. Budget impacts of this have not been published due to commercial sensitivities.  
    • There are also a number of other measures including: $200 million to expand the Environment Restoration Fund, $60 million for the Recycling Modernisation Fund, $47 million (over 15 years) to simplify the ERF and Renewable Energy Target, and $38 million to develop a Biodiversity Stewardship Trading Platform.


    In 2021 we saw significant global momentum to address climate change through COP26 and Australia's announcement of a Long-Term Emissions Reduction Plan (LTERP), to deliver net zero emissions by 2050. This Budget is much less ambitious in terms of new reforms.


    Despite this, corporate Australia continues to prepare for climate change and the strategic and reporting challenges that our global trading partners are already responding to.

    Key insights on potential business impacts

    • New investment in Hells Gate Dam and continued investment in the Great Barrier Reef health and the reef economy
    • Increased supply of ACCUs in the private market and potential reduced government contribution to national emissions reduction
    • Little extra to support the LTERP or Australia's broader response to the risks posed by a changing climate
    • Despite the lack of a strategic response or dedicated funding in the Budget, corporate Australia will continue to consider its own response to the risks and opportunities posed by a changing climate.
      Adrian KingGlobal KPMG Impact Co-Chair: ESG & Sustainability Services

    To find out more, or to book an in person briefing, please contact the KPMG expert below.

  • Energy Policy

    The Budget reinforces the Federal Government's existing policy of supporting low emissions technology and gas infrastructure, but adds significant new funding to support regional energy security and development.


    Budget measures largely continue the government's current approach to energy policy, focussed on low emissions technology and supporting infrastructure, though with a major new program to accelerate economic development in energy dependent regions.


    Key measures in the Budget include:


    1. Additional funding of $84 million over 5 years for Australian Renewable Energy Agency (ARENA) to support increased private sector investment in low emissions technologies including hydrogen, and funding for continued development of a hydrogen Guarantee of Origin scheme. A complementary measure to extend the patent box to low emissions technologies is discussed on the tile for Funding for Innovation and Business.
    2. $148.6 million over 5 years from 2022-23 to support more investment in affordable and reliable power, including the development of community microgrid projects in regional and rural Australia.
    3. $50.3 million in grants over 2 years to accelerate priority gas infrastructure projects, and support investment in carbon captures and storage infrastructure.
    4. $7.1 billion over 11 years from 2022-23 to turbocharge the economies of four key regional hubs - Northern Territory, North and Central Queensland, the Pilbara in Western Australia, and the Hunter region in New South Wales. The investment will be targeted at strategic and connecting infrastructure projects, and to developing supply chains.


    Investment in technology development is welcome, though will not make a large impact on the deployment of emerging low emissions technologies which will continue to be driven by state governments. 


    The new regional funding offers the opportunity to assist the nominated regions (all currently heavily dependent on fossil fuel industries, but with significant clean energy potential) to respond to the challenge of energy transformation and decarbonisation. This will have maximum impact if: 


    • Targeted at strategic investments that build new areas of comparative advantage 
    • Connecting new energy technologies to each other and the market
    • Coordinated with the existing efforts of regional stakeholders and other levels of government

    Key insights on potential business impacts

    • Additional funding for hydrogen and other low emission energy technologies, building on existing approaches
    • Funding of $148.6 million to develop affordable and reliable energy including community microgrid projects
    • Major new funding of $7.1 billion to assist four key fossil fuel dependent regions build energy security and new opportunities for prosperity
    • The Budget continues the current approach to energy policy, though new funding for key transitioning regions offers opportunities, if used wisely, to benefit from the necessary energy transformation.
      Barry SterlandPartner, Energy Transition Leader

    To find out more, or to book an in person briefing, please contact the KPMG expert below.

  • Health

    Through prioritising innovative models of care for specific conditions, expanding onshore vaccine manufacturing capability and capacity, and harnessing health technology, this Budget prioritises maintaining the resilience of the Australian healthcare system. The government has also focused healthcare investment on the extension of funding for existing programs, providing welcome additional funding for the health workforce, mental health, and access to healthcare services. 


    COVID-19 Pandemic 


    The government will provide $1.1 billion over 2 years from 2022-23 to support the government's emergency response to COVID-19. As part of this, $984 million will be invested over 2 years from 2022-23 to extend activities under the National Partnership on COVID-19 Response. A further $2.6 billion will be invested over 2 years from 2021-22 to distribute free rapid antigen tests (RATs) to priority population groups, and $1 billion over 2 years from 2021-22 to support the continued distribution and uptake of COVID-19 vaccines across Australia. 


    Mental health 


    Every year, more than 3,000 people lose their lives to suicide, and suicide remains the leading cause of death for Australians between the ages of 15 and 44 years old. Mental Health remains a high priority in this Budget, with the government providing $547 million over 5 years from 2021-22 to implement reforms under the National Mental Health and Suicide Prevention Plan. This investment includes $285.5 million over 5 years from 2021-22 for a range of mental health treatment initiatives. Priority areas include services for young Australians with severe mental illness, innovative pilot programs to address the needs of people with eating disorders, and digital mental health services. 


    Workforce 


    To assist with mitigating workforce shortages, particularly in rural and remote settings, the government will provide $224.4 million over 4 years from 2022-23 to improve access to health services and support doctors delivering primary care in rural and remote Australia. The government has also allocated $93.2 million over 5 years from 2021-22 to develop and support the workforce dedicated to mental health and other more general healthcare providers.


    Improving access to care 


    The government will provide $2.4 billion over 5 years from 2021-22 for new and amended listings on the Pharmaceutical Benefits Scheme (PBS) and other pharmaceutical and consumable schemes. Within this funding, $525.3 million over 4 years will be provided to reduce the Safety Net thresholds, which will mean patients will reach the Safety Net sooner each year. To support research and cancer care the government will invest $375.6 million over 4 years from 2022-23 to establish the WA Comprehensive Cancer Centre and $28.1 million to establish Genomics Australia, with a view to drive translation and integration of genomics in the Australian health system.  


    Primary and preventative care


    The government will provide $230.7 million over 5 years from 2021-22 to improve access to primary health care services, including better integration and availability of services. This includes $108.5 million over 2 years from 2022-23 to extend public dental services and $56 million to support Primary Health Networks deliver after hours care. With a focus on preventative health, $170.2 million will be invested over 5 years from 2021-22. This includes $31.6 million over 4 years from 2022-23 to fund projects under the National Ice Action strategy.

    Key insights on potential business impacts

    • Building on previous years' investments, this Budget directs investment with a particular focus on access to medicines, and the skills and access gaps in rural and remote areas
    • This Budget provides some of the investment needed to build better access to services and necessary skills in our health system through extension of Medicare Benefits Schedule (MBS) and PBS and workforce development
    • Funding to improve access to preventative and early intervention services demonstrates a commitment to better connect individuals and communities to the health system when and where they need it
    • The Budget includes welcome investment in key areas; however, it does little to invest in long term reform, particularly Aboriginal and Torres Strait Islander Health, and structural reform of the healthcare system
    • This Budget reflects the government's commitment to harness and build on earlier investments made in response to the COVID-19 pandemic, however noticeable gaps in investment exist in Aboriginal and Torres Strait Islander Health and health system structural reform

    To find out more, or to book an in person briefing, please contact the KPMG experts below.

  • Aged Care

    The government continues to support reform in the aged care sector, with $926.4 million committed in the Budget. Funding is split between continued implementation of the government's response to the Royal Commission into Aged Care Quality and Safety ($468.3 million) and COVID-19 response packages ($458.1 million). Whilst the amount allocated in this Budget is relatively low, this follows a record investment of $18.3 billion in last year's Budget.


    Medication management


    In recognition of the issues facing residential aged care providers in the management and administration of medication, including the overuse of antipsychotics, the government has committed $345.7 million over 4 years to provide access to an on-site pharmacist or a community pharmacy service for all residential aged care facilities.


    Integration across the aged, disability and veterans' care sectors


    There is a strong focus on integrating the aged care, disability and veterans' care sectors, with a total of $17.7 million allocated to streamline workforce regulation and promote efficiencies across the three sectors, including:


    • $10.8 million to develop a Cross-Agency Taskforce on Regulatory Alignment to implement the next stage of regulatory reforms across the aged, disability and veterans' care sectors.
    • $6.9 million to support the development of co-operatives and other collaborative business models across the aged, disability and veterans' care sectors.


    Multidisciplinary outreach


    The Budget provides funding to enable the states and territories to develop and trial innovative approaches to multidisciplinary outreach care for residential aged care facilities, with $22.1 million allocated over 3 years to provide more comprehensive healthcare for people in residential care.


    COVID-19 response package


    There is continued support for aged care providers in managing their response to the COVID-19 pandemic, with an extension to the Aged Care Surge Workforce program and Aged Care Support Program Extension Grant (which reimburses providers for costs associated with managing the direct impacts of COVID-19) to include aged care providers directly impacted by floods. Funding is also extended to additional bonus payments of up to $800 to residential care and home care workers as a workforce retention strategy ($215.3 million over 2 years).


    Key insights on potential business impacts

    • This is the first Budget since 2016-17 where there is no new investment in growing home care services This may have implications for meeting consumer preferences to age in place and the ongoing demands for home-based supports
    • The aged care sector continues to feel the impacts of widespread reform and financial and workforce pressures, however there is limited funding allocated to address these pressing issues
    • Significant investment is focused on responding to the impacts of COVID-19 and managing ongoing outbreaks, with minimal investment directed at improving wages for the aged care workforce
    • After an unprecedented investment in last year's Budget, minimal new funding has been allocated to address the ongoing financial and workforce issues which are causing continued challenges throughout the aged care sector.
      Nicki DoylePartner, Aged Care

    To find out more, or to book an in person briefing, please contact the KPMG expert below.

  • Human Services

    The Budget includes cost of living relief through one-off payments and housing affordability measures, alongside continuing investment in the prevention of violence against women. 


    Social security


    A $250 one-off Cost of Living Payment will be made in April 2022 to people receiving eligible income support payments, including the Age Pension, Disability Support Pension, Parenting Payment, Carer Payment, Jobseeker Payment and Youth Allowance. This $1.5 billion economic support payment measure will also be available to health care card holders, including pensioners, seniors and veterans.


    Social and affordable housing


    The Government will increase its guaranteed liability cap for the National Housing and Finance Investment Corporation's Affordable Housing Bond Aggregator by $2 billion. This will support an additional 27,500 social and affordable housing dwellings. 


    The existing Home Guarantee Scheme will be expanded by up to 50,000 places per year. This includes a new Regional Home Guarantee, supporting eligible homebuyers (including non-first home buyers and permanent residents) to purchase or construct a new home in regional areas. This is at a cost of $8.6 million over 4 years from 2022-23, and $138.7 million over 7 years from 2026-27. 


    Disability


    With the substantial additional investment provided in last year's Budget to meet the increasing costs of the National Disability Insurance Scheme (NDIS), there are limited measures within this Budget specific to Australians with a disability. Additional funding is likely to follow completion of the Disability Royal Commission in 2023.


    Violence against women and children


    The Budget announced $1.3 billion under the next National Plan to End Violence against Women and Children 2022-2032 (National Plan). This includes $22.4 million to establish a Domestic, Family and Sexual Violence Commission to monitor and oversee the implementation of the next National Plan. Budget measures also include:


    • $203.6 million over 6 years for violence prevention, including $104.4 million to increase the reach of Our Watch into diverse communities
    • $328.2 million over 5 years for early intervention activities, including $54.4 million for workforce training and development
    • $480.1 million over 6 years for response measures, including a $20.0 million fund for states and territories to trial electronic monitoring of high-risk and persistent domestic violence offenders and 
    • $290.9 million over 5 years in recovery measures, including $87.9 million over 4 years to improve the safety and accessibility of the family law system.


    Key insights on potential business impacts

    • One-off economic support payments of $250 per person to eligible payment recipients
    • Continued investment of $1.3 billion over 6 years in preventing family and domestic violence
    • A range of measures to support housing affordability for Australians
    • Ending all forms of violence against women and children remains a national priority with the Government investing $1.3 billion to drive change across prevention, early intervention, response and recovery

    To find out more, or to book an in person briefing, please contact the KPMG expert below.

  • Education

    This year's Budget places significant emphasis on skills and jobs, with a particular focus on the apprenticeship system. 


    Skills has been supported by two key announcements:

    • $954 million over 5 years from 202122 to introduce a new Australian Apprenticeships Incentive System from 1 July 2022, providing support to employers and apprentices in priority occupations and
    • $365.3 million to extend the Boosting Apprenticeship Commencements and Completing Apprenticeship Commencements wage subsidies by 3 months to 30 June 2022, aimed at further supporting employers taking on and retaining new apprentices.  


    These measures are partially funded via previously announced and existing funding. The wage subsidy appears to be limited to 2021-22, placing limits on its practical application given that a significant lead time is required to take on new apprentices, which has only been heightened since the onset of COVID-19. 


    The Commonwealth is negotiating a new National Skills Agreement with States and Territories. It is unlikely that this will be finalised in advance of the upcoming Federal election. However, the Budget papers indicate that if a new Agreement is signed, this will equate to approximately $3.7 billion in funding over 5 years from 2022-23. 


    Higher Education and Schools 


    There is little new funding for higher education or schools. The government will provide $988.2 million over 5 years from 202122 to support university industry collaboration, workforce mobility and research translation and commercialisation. For schools, there is support for COVID-19 recovery, mental health and wellbeing initiatives and implementation of the Quality Initial Teacher Education Review.

    Key insights on potential business impacts

    • Similar to last year, the education focus in this Budget is on skills to drive economic recovery
    • This year, the skills investment is targeted to apprenticeships and connected to jobs
    • Skills and jobs are cited as being at the centre of this year's Budget. However, understanding the conditions for the funding to flow including agreements with state and territory governments, will be important.

    To find out more, or to book an in person briefing, please contact the KPMG expert below.

  • Defence & Space

    The 2022-23 Defence Budget sees spending increase to above 2 percent of GDP (some $44.5 billion in FY2025-26) cementing recently announced investments in capital equipment and workforce. 


    Geopolitical risks arising from the war in Ukraine, cyber threats from nation state actors and tensions in the South China Sea are driving continued investment in Defence in the Budget - $575 billion to 2029-30 including a remarkable $270 billion for new capability investments.


    This increased spend covers Defence infrastructure such as the $4.3 billion for a submarine capable dry dock facility at the Henderson shipyard, $244 million for the upgrade of RAAF Base Curtin and a further $875 million on 234 projects in the Estate Works Program, creating over 1,600 jobs. The Budget also confirms a tripling of the size of the Osborne shipyard and $10 billion for an east coast base in preparation for the nuclear submarine program.


    With the unemployment rate anticipated to fall from historic lows of 4 percent today to 3.75 percent by the end of the year, the ability of Defence to achieve $38 billion in funded total permanent workforce growth to over 101,000 by 2040, including an increase in the Australian Defence Force (ADF) workforce to 80,000, is a significant attraction and retention challenge.


    These workforce increases, announced in early March, took a backseat on the night to Resilience, Effects, Defence, Space, Intelligence, Cyber and Enablers, 'REDSPICE', a new initiative that doubles the size of the Australian Signals Directorate, providing for an additional 1,900 positions, and investing in areas of collaboration vital to AUKUS beyond nuclear submarines, such as artificial intelligence (AI), cyber and space. With the competition for STEM skills heating up, the breadth of skilling investments announced in this Budget, across numerous portfolios, must be viewed as an issue of importance to Defence capability. 


    Through the $1.3 billion commencing last year, the Government is continuing to invest in growing the space sector and space manufacturing industry, including establishing a National Space Mission for Earth Observation and fast-tracking the national rocket launch capability. 

    Key insights on potential business impacts

    • Defence spending has grown to above 2 percent of GDP - a total funding of $575 billion to 2029-30
    • There continues to be money spent on the nuclear submarine program, with a tripling of the size of the Osborne shipyard and $10 billion for an east coast base
    • $38 billion is committed to support permanent Defence workforce growth to over 101,000 by 2040, including growth of the ADF workforce to 80,000
    • New spend of $96 million encompassing 145 additional staff for enhanced veterans' services
    • A confirmed Defence spending growth trajectory, now above 2 percent of GDP.
      Sanjay MazumdarPartner, Defence Industry

    To find out more, or to book an in person briefing, please contact the KPMG experts below.

  • National Security & Justice

    The government steps up its investment in Australia's National Security and Justice functions to bolster the nation's resilience, security, safety and cohesion. The announcement of ASD's newly established REDSPICE will see unprecedented investment in Australia's intelligence and cyber capabilities.  


    Unprecedented investment in Australia's intelligence and cyber capabilities


    A $9.9 billion investment over 10 years to the Australian Signals Directorate (ASD) to deliver Resilience, Effects, Defence, Space & Intelligence, Cyber and Enablers (REDSPICE) will bolster the government's commitment to Australia's Five Eyes and AUKUS trilateral partners while supporting a secure Indo-Pacific region. Funding for this program will be partially offset from the Defence Integrated Investment Program, but it is still the largest ever investment in Australia's intelligence and cyber capabilities.


    REDSPICE will offer significant opportunities for Australian industry and will include tripling of offensive cyber capability and doubling of cyber hunt and response activities. The package will help ASD to keep pace with the rapid growth of cyber capabilities of potential adversaries, as well as being able to counterattack and protect our most critical systems.


    In addition to the REDSPICE program, the government has included similar expansion of intelligence capability within the Australian Federal Police (AFP) ($287.2 million over 4 years), the Australian Criminal Intelligence Commission (ACIC) ($116.8 million) and Home Affairs to improve domestic intelligence capabilities. 


    Emergency Management


    The government continues to deliver significant investment to the emergency management of Australia, including disaster relief, disaster recovery and national resilience.


    These funds - spread between eight agencies - include a broad range of targets including Disaster Recovery payments, recovery and rebuilding efforts, and support to businesses and individuals to support the mental health of impacted residents.


    • Over $6 billion will go towards disaster and flood relief for Australian businesses, households and communities. 
    • For Queensland and New South Wales, $150 million will be invested from the Emergency Response Fund to target high priority and nationally significant disaster risk mitigation projects, and support to recovery efforts for affected communities.
    • $5.4 million for 2 years from 2021-22 for additional legal assistance services for support, relief, and recovery efforts for individuals, small businesses, and primary producers. 
    • An investment of $10 million over 2 years from 2021-22 for a national program run by Fortem Australia to provide psychological support, wellbeing activities and training in maintaining mental health for first responders involved in natural disaster settings.


    Justice


    In addition to measures for financial assistance for police officers ($2.5 million over 2 years) and increased funding for legal aid commissions (by state under the National Legal Assistance Partnership 2020-25), justice measures in this budget focus on family law, counter-terrorism and legal services support, including for victim-survivors of sexual assault.


    Family law measures include:


    • Legal aid for family law services ($16.5 million over 2 years from 2021-22 for legal aid commissions to improve their capacity to support the implementation of, and transition to, a new case management approach in the Federal Circuit and Family Court of Australia) and
    • Family law information sharing ($6.4 million each year for the next 3 years) 


    Counter-terrorism measures include:


    • $11.5 million over 4 years to support states to de-radicalise high risk violent extremists in their custody through the High-Risk Extremist De-radicalisation Program and 
    • $19.6 million to the states to assist in reducing the risk of young Australians becoming radicalised.


    Specialised and trauma-informed legal services for victim-survivors of sexual assault include $7.7 million over 3 years from 2023-24 to pilot a new service model in three locations across Australia to provide victim-survivors of sexual assault with greater access to specialised and trauma-informed legal support and guidance in navigating the criminal justice system. 


    The government will also provide a confidential amount of funding over 2 years to states and territories to support implementation of the Optional Protocol to the Convention against Torture and other Cruel, Inhuman or Degrading Treatment or Punishment (OPCAT) in each jurisdiction.


    Key insights on potential business impacts

    • $9.9 billion for ASD is the largest historical investment in Australian Intelligence and Cyber capability
    • Additional measures for intelligence across government including Home Affairs, ACIC and AFP
    • Immediate focus in Emergency Management in response to the East Coast floods and the anticipated recovery effort over the next year including provisions for responders, business, and community
    • $31.1 million to support de-radicalisation programs across Australia through the 'High-Risk Extremist De-radicalisation Program' and 'Living Safe Together Intervention Program'
    • We welcome the government's investment into strengthening capability of our national security, law enforcement and intelligence agencies to build safer communities, and a just and resilient Australia.

    To find out more, or to book an in person briefing, please contact the KPMG experts below.

  • Cyber & Critical Infrastructure

    The Australian Signals Directorate has received $9.9 billion over 10 years to deliver a Resilience, Effects, Defence, Space, Intelligence, Cyber and Enablers package (REDSPICE). 


    REDSPICE is the largest ever investment in Australia's intelligence and cyber capabilities, tripling Australian Signals Directorate's (ASD) offensive cyber effort and doubling ASD's size. This will create 1,900 new jobs over the next decade, bolstering the government's commitment to Australia's Five Eyes and AUKUS trilateral partners, while supporting a secure Indo-Pacific region. The allocation is $680 million in 2022-223 and over $1 billion each year thereafter until 2025-26. 


    $30.2 million is invested to extend the Cyber Hubs Pilot, from Defence, the Department of Home Affairs, and Services Australia to a fourth Cyber Hub Pilot within the Australian Taxation Office (ATO). These whole-of-government Cyber Hubs will deliver cyber services to an initial group of smaller agencies. This coordinated approach has already commenced and will ensure top cyber talent supports the protection of information across government. 


    $1.8 million is invested into the Digital Transformation Agency to further support the development of the Digital Identity system, including the governance, regulatory frameworks and funding arrangements associated with the Digital Identity legislation. This measure will also provide funding to the Department of Industry, Science, Energy and Resources to further invest in the Australian quantum computing industry supporting growth, and fast-tracking technology development.


    The government will provide $29.7 million over 4 years from 2022-23 (including $2.7 million in operating funding), and $0.8 million per year (ongoing) to purchase and maintain security assets at the Australian Parliament House, including enhancements to the CCTV network, upgraded screening equipment, and an expanded Parliamentary Security Operations Room.


    Small businesses, with aggregated annual turnover of less than $50 million, will be able to deduct an additional 20 percent of the cost incurred on business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud-based services.

    Key insights on potential business impacts

    • Following the $1.35 billion invested last year into the ASD Cyber Enhanced Situational Awareness and Response (CESAR) package, the $9.9 billion this year into REDSPICE is one of the most significant cyber investments ever within Australia
    • A fourth Cyber Hub Pilot will be extended to the ATO. The Hub will deliver cyber services to an initial group of smaller agencies
    • $29.7 million over 4 years has been allocated for enhancements to purchase and maintain security assets at the Australian Parliament House
    • The 2022 Budget will strengthen the Nation's cyber capabilities and defend Australia from global threats by improving cyber intelligence facilities, cyber hubs, and other key centralised services.
      Ian GrayPartner, Cyber

    To find out more, or to book an in person briefing, please contact the KPMG expert below.

  • Agribusiness

    The government is continuing to support the sector to reach its $100 billion by 2030 ambition with over $114 million specifically committed to the agenda. The Budget focuses significantly on the environment including carbon, biodiversity and broader landscape restoration, strengthening exports, maintaining biosecurity, developing regional infrastructure, and supporting the prosperity of regional Australia.  


    Carbon, biodiversity, and sustainability 


    • The agricultural sector will benefit from several commitments:
    • From 1 July 2022, proceeds from the sale of Australian Carbon Credit Units (ACCUs) and biodiversity certificates generated from on-farm activities can be treated as primary production income for tax purposes. 
    • $100 million commitment for the Environment Restoration Fund to support community-driven action to protect and restore the environment over 3 years from 2022-23. 
    • Under the $52.5 million Digital Environmental Assessments Program, regulatory burdens of environmental assessment processes will be reduced.
    • Alongside Australia's Long Term Emissions Reduction Plan, $247.1 million has been committed over 5 years from 2021-22 across several carbon initiatives including the development of a Biodiversity Stewardship Trading Platform. This will support farmers to undertake biodiversity activities ahead of a voluntary biodiversity stewardship market. A further $148.6 million will be invested in affordable and reliable power including the development of community microgrid projects in regional and rural Australia. 
    • $83 million funding for up to 5 years from 2022-23 targeted at accelerating plastics recycling technology and capabilities will support the development of Australia's circular waste economy. 
    • Additional $1 billion over 9 years from 2021-22 to strengthen Australia's stewardship and leadership in the protection of the Great Barrier Reef, with $579.9 million specifically focused on water quality improvement and working with land managers to reduce nutrient and pesticide run-off and landscape remediation.
    • Further $139.9 million over 3 years from 2021-22 to continue to invest in a sustainable Murray-Darling Basin by improving river health, enhancing environmental water outcomes, and stimulating economic activity in Basin communities.
    • $139.6 million over 4 years from 2022-23 to progress Environment Protection and Biodiversity Conservation (EPBC) Act reforms. 


    Exports 


    A $267.1 million trade modernisation package will improve the sector's competitiveness in international markets. Agricultural exporters will benefit from the $80 million provided to small and medium export businesses to re-establish their presence in overseas markets. 


    Biosecurity


    The Budget focuses on protecting Australian agriculture from biosecurity risks like lumpy skin disease and improving on-farm biosecurity, such as reducing the impact of pests and weeds. $135.6 million has been committed over 5 years, namely $61.6 million over 4 years from 2022-23 for funding to improve biosecurity across Northern Australia, and $20.1 million to support the adoption of livestock traceability reforms, accessible through 3-year grant programs.


    Drought and flood resilience


    The government is taking practical action to improve farmer resilience. An additional $84.5 million over 4 years from 2022-23, met with the $100 million per year expenditure under the Future Drought Fund itself, is targeted towards improving drought readiness and resilience of Australian farmers and communities. To support farmers' recovery from the 2022 Floods in New South Wales and Queensland, the On-farm Emergency Water Infrastructure Rebate Scheme will be extended to 30 June 2023.  


    Regional infrastructure 


    Regional Australia is a significant focus of this Budget. The big-ticket item is a $5.4 billion guarantee to construct the much-anticipated Hells Gate Dam in the Upper Burdekin Catchment in North Queensland, set to become the largest in Queensland and opening up 60,000 hectares of irrigation across the region. Further investments will also be made into Paradise Dam, Dungowan Dam, Darwin Region Water Supply Infrastructure and Emu Swamp Dam. The agriculture sector will benefit from the $2 billion Regional Accelerator Program which will improve skills, education, exports, and supply chains in key agricultural regions. An additional $811.8 million is being committed to improving mobile phone coverage in the bush and a further $27.4 million has been committed over the next 2- 3 years to promote agricultural shows and large agricultural trade events.


    Forestry and Fisheries


    These sectors will receive $114.6 million over 5 years from 2021-22, to the industries to respond to emerging challenges such as securing wood supply and improving long-term sustainability of fisheries via a temporary partial waver of Australian Fisheries Management Authority Levies. 


    Other


    • Additional $328.3 million over 5 years from 2021-22 to further support the Modern Manufacturing Strategy and National Manufacturing Priorities to address critical supply chain vulnerabilities. 
    • The government will amend Australia's foreign investment framework to reduce the regulatory burden faced by investors and support Australia's economic recovery from the COVID-19 pandemic which will directly benefit the Agribusiness sector. 


    Key insights on potential business impacts

    • Carbon farming and biodiversity opportunities have generated significant focus across the agricultural sector; however, they have been hindered by complexities. Several changes are being made to simplify the processes for primary producers to participate in carbon and biodiversity opportunities with significant Budget commitments to drive further sustainability and environmental outcomes
    • A continued focus on exports is a welcomed measure after 2 years of export and import bottlenecks and will go a long way in boosting the competitiveness of agricultural exports in international markets
    • Infrastructure packages across regional Australia will play a vital role in growing agriculture and primary industry sectors and will help build resilience and confidence for Australian farmers
    • The Government has signalled the natural environment as a key priority with significant budget commitments which will support the sector to deliver enhanced environmental outcomes

    To find out more, or to book an in person briefing, please contact the KPMG experts below.

  • Announced measures not yet enacted

    The government has introduced some tax-related measures to parliament which have not yet been enacted. Other measures have not yet been introduced to parliament.


    Measures currently before parliament (as of 28 March 2022)
    1 Patent box regime providing concessional tax treatment for ordinary and statutory income derived by a corporate taxpayer from exploiting a medical or biotechnology patent
    2 Providing taxpayers with the choice to self-assess the effective life of certain intangible depreciating assets they start to hold on or after 1 July 2023
    3 Financial reporting and auditing requirements on registrable superannuation entities
    4 Increased Administrative Appeals Tribunal powers for small business tax decisions
    5 Requirement for electronic platform operators to provide information on transactions made through the platform to the Australian Taxation Office
    6 Removal of the $250 non-deductible threshold for work-related self-education expenses
    7 Refunds of large-scale generation shortfall charges to be treated as non-assessable non-exempt income for income tax purposes


    Measures not yet introduced to parliament (as of 28 March 2022)
    1 Reform of the corporate tax residency rules
    2 Reform of the individual income tax residency rules
    3 Regulatory relief for businesses making offers of securities under employee share schemes
    4 A 30 percent refundable tax offset for expenditure on the development of digital games, where this exceeds $500,000

  • Overview of changes

    A summary of key revenue and expenditure measures for 2022-26 which have resulted in a change in the forward estimates compared to the December 2021 mid-year economic and fiscal outlook (MYEFO).


    Significant revenue reductions / expenditure increases $ billion
    Transport infrastructure 4.5
    Increase to the LMITO for 2021-22 4.1
    Skills Reform to Support Future Growth 2.7
    Improving Access to Medicines 2.3
    Regional Accelerator Program 1.8
    Investing in Skills Development 1.5
    Energy Security and Regional Development Plan 1.4
    Temporary reduction in fuel excise 1.1
    COVID-19 response package 1.1
    National Water Grid Fund 1.0


    Significant revenue increases / expenditure reductions $ billion
    Extension of Tax Avoidance Taskforce (net of ATO costs) 1.5

  • CFO / Head of Tax Checklist

    Leaders within finance and tax functions should consider the impact of the following measures as a priority.


    Detail checklist
    1 In light of the extension of funding for ATO's Tax Avoidance Taskforce, seek advice early to prepare for future ATO scrutiny. Review tax governance procedures and identify any potential weaknesses
    2 Review potential cash-flow impact of proposed changes to the PAYG instalment and GST payment regimes
    3 Ensure that where relevant, the appropriate colleagues are aware of the proposed extension of the patent box regime to the agricultural, medical and biotechnology, and low-emissions technology sectors
    4 Assess the impact of temporary changes to fuel excise rates
    5 Consider eligibility for enhanced deductions for certain training and business digitisation expenditure proposed for small business
    6 Consider the impact of the proposed changes to the regulation of employee share schemes (ESS) and whether these will make it more favourable to implement or expand an ESS
    7 Ensure FBT is not being applied where COVID-19 tests are provided to employees to facilitate attending a place of work

A print version of our full analysis is also available.



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