2022 Federal Budget

Before we get started This information has been prepared by Netwealth. Whilst reasonable care has been taken in the preparation of this presentation using sources believed to be reliable and accurate, to the maximum extent permitted by law, Netwealth and its related parties, employees and directors and not responsible for, and will not accept liability in connection with any loss or damage suffered by any person arising from reliance on this information.

Netwealth Investments Limited (Netwealth) (ABN 85 090 569 109, AFS Licence No. 230975) is a provider of superannuation and investment products and services, and information contained within this presentation about Netwealth’s services is of a general nature which does not take into account your individual objectives, financial situation or needs. Any person considering a financial product or service from Netwealth should obtain the relevant disclosure document at www.netwealth.com.au and consider consulting a financial adviser before making a decision before deciding whether to acquire, dispose of, or to continue to hold, an investment in any Netwealth product.

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As a specialist platform provider, Netwealth provides financial advisers with a wide range of financial products & services to help manage their clients’ investments and superannuation.

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See wealth differently

Meet today’s speakers

Keat Chew Head of Technical Services Netwealth Nigel Smith Technical Services Consultant Netwealth

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Session overview

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1.

Taxation - Personal

2.

Taxation - Business

3.

Superannuation

4.

Social Security

5.

Winners and losers

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2022 Federal Budget Review (General use)

Taxation Personal

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2022 Federal Budget Review (General use)

Personal income tax reduction plan – 3 stages We are now in stage 2 : Middle income bracket creep protection

Rate (%)

Stage 1 FY 19/20 Income range ($)

Stage 2 From 1 July 20 Income range ($)

Tax free

0 - $18,200

0 - $18,200

19

$18,201 – $37,000

$18,201 – $45,000

32.5

$37,001 – $90,000

$45,001 – $120,000

37

$90,001 – $180,000

$120,001 – $180,000

45

>$180,000

>$180,000

Low & middle income tax offset (LMITO)

Up to $1,080

Up to $1,080

Low income

Up to $445

tax offset (LITO)

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2022 Federal Budget Review (General use)

Stage 2 tax incentives • From 1 July 2020, increase LITO from $445 to $700 – Increased LITO reduced at 5.0c per $ between $37,500 and $45,000, and 1.5c per $ between $45,000 and $66,667 • LMITO of $1,080 was retained for extra FY 21/22 (and now to be increased by extra $420 for this year) – $37k or less, $255 in tax offset

+ $420 FY 21/22

– Between $37k and $48k, tax offset increase 7.5c per $ up to max of $1,080

Up to $700

– Between $48k and $90k, max offset of $1,080 – Between $90k and $126k, offset phases out at 3c per $

Personal income tax reduction plan – Stage 3 Stage 3: Simplify the tax system – and further tax benefit

Rate (%)

Stage 1 FY 19/20 Income range ($)

Stage 2 From 1 July 20 Income range ($)

New tax thresholds From 1 July 2024 Income range ($)

Tax free

0 - $18,200

0 - $18,200

0 - $18,200

• No change to the timing for the introduction of stage 3 tax benefit

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$18,201 – $37,000

$18,201 – $45,000

$18,201 – $45,000

Strategic considerations and impacts

32.5/30.0*

$37,001 – $90,000

$45,001 – $120,000

*$45,001 - $200,000

37

$90,001 – $180,000

$120,001 – $180,000

-

45

>$180,000

>$180,000

>$200,000

Low & middle income tax offset (LMITO)

Up to $1,080

Up to $1,080

-

Low Income

Up to $445

+ $420 FY 21/22

tax offset (LITO) 9

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2022 Federal Budget Review (General use)

Up to $700

Up to $700

Stage 3 yet to come

• LITO and LMITO are non-refundable offsets, only available to tax residents to reduce tax liability (not even against Medicare levy) • LMITO max of $1,500 single, $3,000 for couple • Consider income split and direct income to lower earning spouse • Use personal deductible contributions to manage income

Medicare levy threshold changes Increased thresholds from 1 July 2021

Strategic consideration and impact

• $23,365 (ex $23,226) for individuals and $39,402 (ex $39,167) for families

• Reduce income below the threshold where no Medicare levy (or Medicare levy reduction) applies

• Additional amount for each dependant child/student of $3,619 (ex $3,597) • Single seniors and pensioners, threshold increased to $36,925 (ex $36,705) • Family threshold for seniors and pensioners increased to $51,401 (ex $51,094)

– With good planning, various tax offsets (this year with the additional $420 LMITO) and deductions may assist those earning $30k to $40k to pay little or no tax (including Medicare levy) • Any deductible expenses will reduce assessable income for Medicare levy purposes – Main one being personal deductible contributions to super – Don’t forget unused carry forward concessional cap may be available

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2022 Federal Budget Review (General use)

Other tax matters Temporary reduction in fuel excise

Strategic consideration and impact

• Commencing 30 Mar 22 and ending 28 Sep 22

• Salary packaging a car remains highly tax effective

• Half the rate of excise to 22.1 cents/litre • Indexation of the rate will continue Tax deduction of covid test expenses • Test to attend a place of work is tax deductible • Applies from 1 July 21 • FBT will not apply to employers who provide the tests Employee share schemes – unlisted companies • Limit of $30,000 per participant per year, accruable for unexercised options for up to 5 year, plus 70% of dividends and cash bonuses • Any amount, if allowed to immediately take advantage of a planned sale (incl listing of the company) 11

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2022 Federal Budget Review (General use)

– With increase in costs (especially fuel), of running a car, salary packaging can provide immense savings – Especially for some years now, FBT no longer depends on mileage travelled • Employee share plan not as tax effective as they used to be but unlisted companies schemes have improved tax concessions

Taxation Business

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2022 Federal Budget Review (General use)

Small business (T/O < $50m) initiatives Skills and training boost expenses deductible • Eligible expenditure from Budget night to 30 June 24 • 120% of expenses deductible incurred on external training courses (accredited) provided to employees Technology investment boost expenses deductible • Eligible expenditure from Budget night to 30 June 23 • 120% of cost of expenses that support digital adoption • Annual cap of $100,000 per annum Hire a new apprentice from 1 July incentive • Wage subsidy of 10% for 1st and 2nd yr apprentices (up to $1,500 per quarter) • Wage subsidy of 5% for 3rd yr apprentices (up to $750 per quarter) • In total, $15k of wage subsidy per apprentice • Apprentices can apply for training support payment of $1,250 every 6 months (total $5k over first 2 yrs) 13

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2022 Federal Budget Review (General use)

Strategic considerations and impacts • Great encouragement for employers to invest in their employees and apprentices – Assist with jobs creation • Don’t forget the advance depreciation for new assets purchase measures brought in previous budget • Also loss relief carry back for FY 22 and 23 (extended in last budget)

Expensing capital assets (last budget) Full expensing for businesses with aggregated T/O < $5b • Deduct full cost of eligible capital assets purchased after 7:30pm AEDT 6 October 2020 – First used or installed by 30 June 2023 (extended) – New depreciable assets only – Cost of improvements on existing eligible assets • For those with T/O < $50m, full expensing can be applied to second hand assets

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2022 Federal Budget Review (General use)

Strategic considerations and impacts • Huge incentive to get business to invest over the next couple of years • Advance depreciation gives upfront cashflow (and gets cashflow moving) – Additional cash for other purposes e.g. employment • Any asset purchased in this period could potentially maximise benefit • Consider bringing forward investments

Loss relief carry back (last budget) Applies only to eligible companies with T/O < $5b

Strategic considerations and impacts

• Normally, losses can only be carried forward

• Carry back losses only available to companies

• Allows carry back losses for FY20, 21, 22 and 23 – Extended by 1 year in last budget – To offset profits for FY19 or later years Providing refundable tax offset in the year of loss • Loss ‘carry back’ offset prior year profits (tax already paid) – Tax offset calculated based on tax rate of year of loss • Carry back loss no more than the amount of taxed profit – Must not generate a franking account deficit • Refunds based on the carry back losses will be available on lodging FY21 and FY22 and FY23 tax returns

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2022 Federal Budget Review (General use)

– Significant incentive for upfront cashflows which otherwise may not be recovered for years • Good business planning can optimise amount of refund – E.g. super contributions deductible to the company • Use it in conjunction with full expensing of capital asset – Asset purchase fully deductible instantly, creating loss which can be carried back to offset earlier year profits

Superannuation

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2022 Federal Budget Review (General use)

Extension of reduction in min pension drawdown 50% reduction of annual pension minimum drawdown

Strategic consideration and impact

• Extended for another year to 30 June 2023

• Avoids any unnecessary sell down of assets to meet min pension payments

Age

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Normal Pension Minimum

2019-20 to 2022-23 income years (inclusive)

Under 65

4.0%

2.0%

65-74

5.0%

2.5%

75-79

6.0%

3.0%

80-84

7.0%

3.5%

85-89

9.0%

4.5%

90-94

11.0%

5.5%

95 or more

14.0%

7.0%

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2022 Federal Budget Review (General use)

• Given lower min pension, consider if should start a pension to restructure portfolio if necessary • Dial down to the new reduced min pension – Top up any annual higher amount needed by commuted lump sums to better manage TBA

First Home Super Saver Scheme (last budget) Maximum release amount to increase to $50,000

Strategic consideration and impact

• Applying from 1 July 2022

• Now even better, contribute more to make up the $50,000

What is the maximum release amount

– For a couple, 2 times $50,000

• Contributions from 1 July 2017

– Can use unused CC cap but watch annual $15k limit

– 100% of eligible non-concessional contributions – 85% of eligible concessional contributions – Limited to an annual limit of $15,000 and total across all years of $50,000 in contributions – FIFO contributions rule applies • Plus associated earnings on these contributions at deemed rate of return (90 day Bank Bill rate + 3%)

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2022 Federal Budget Review (General use)

– Requires at least 4 years of contribution, start early • Plan ahead for 1 July 22

More flexible super (last budget) Reducing eligibility age for downsizing contributions

Strategic consideration and impact

• Applying from 1 July 2022, minimum age lowered to 60

• Plan ahead for the downsizer contribution

• All other requirements remain the same

– Make sure client is age 60 at time of contribution

Work test changes

– All other rules remain the same

• From 1 July 2022, no longer required for those age 67 to 74 – On NCC or salary sacrificed contributions – Brought forward NCC aligns with work test abolition • Work test still needed for personal deductible contribution Removing the $450 per month threshold for SG • Applying from 1 July 2022 SG rate increase (10% on 1 July 2021 rising to 12% on 1 July 2025) going ahead as planned 19

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2022 Federal Budget Review (General use)

• Watch out for interaction between downsizing contributions and NCC (with regard to $1.7m TSB) • Work test abolition for NCC allows more time for contributions to be made – Allows spouse contributions – Also allows more effective estate planning through recontribution strategies • Work test exemption can be used to meet work test requirement for personal deductible contribution

Social security

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2022 Federal Budget Review (General use)

Cost of living payment $250 support payment to help eligible recipients with higher cost of living pressures

• Jobseeker payment

• Payment will be made in April 22

• Austudy and Abstudy living allowance

• Exempt from taxation • Will not count as income support for purposes of any income support payment • Only available to Australian residents • Can only receive under 1 qualifying category List of eligible recipients and concession card holders • Payment will be made in April 22 • Age pension and DSP • Parenting payment • Carer payment and carer allowance

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2022 Federal Budget Review (General use)

• Youth allowance • Double orphan pension • Special benefit • Farm household allowance • Pensioner concession card holders • Commonwealth seniors health card holders • Eligible Veterans affairs payments recipients and Gold card holders Strategic consideration and impact • Remember Commonwealth seniors health card eligibility is based on ATI

Winners & losers

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2022 Federal Budget Review (General use)

Who are the winners and losers?

Winners

Losers

• Companies and businesses

• No obvious category

• Many individuals – Taxpayers earning less than $126,000 – First home buyers – Apprentices • Motorists • Retirees and pensioners

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2022 Federal Budget Review (General use)

– High income taxpayers

Questions and answers

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Disclaimer This document is for general use.

This information has been prepared by Netwealth. Whilst reasonable care has been taken in the preparation of this presentation using sources believed to be reliable and accurate, to the maximum extent permitted by law, Netwealth and its related parties, employees and directors and not responsible for, and will not accept liability in connection with any loss or damage suffered by any person arising from reliance on this information.

Netwealth Investments Limited (Netwealth) (ABN 85 090 569 109, AFS Licence No. 230975) and Netwealth Superannuation Services Pty Ltd (ABN 80 636 951 310), AFS Licence No. 528032, RSE Licence No. L0003483 as the trustee of the Netwealth Superannuation Master Fund, is a provider of superannuation and investment products and services, and information contained within this presentation about Netwealth’s products or services is of a general nature which does not take into account your individual objectives, financial situation or needs. Any person considering a financial product or service from Netwealth should obtain the relevant disclosure document at www.netwealth.com.au and consider consulting a financial adviser before making a decision before deciding whether to acquire, dispose of, or to continue to hold, an investment in any Netwealth product.

Thank you Contact

Contact Keat Chew

Nigel Smith

Head of Technical Services Keat Chew Head Technical Services 1800of 888 223 1800 888 223 keat@netwealth.com.au keat@netwealth.com.au

Technical Services Consultant Nigel Smith 1800Technical 888 223 Services Consultant 1800 888 223 nigel@netwealth.com.au nigel@netwealth.com.au