The specific impact of the Budget’s measures will depend on each taxpayer’s particular set of circumstances. However, in most instances, we expect that for employees earning just below the highest-tier incomes, those in the medium-to-high-income earning range, they may see their tax burdens reduced as a result of the Budget’s rate and bracket changes. For those in the lower tax brackets, the fact that there are no changes to the rates and the bracket ranges could mean that inflation has the effect of increasing their tax liability through the phenomenon of “bracket creep.”
In the case of tax equalised/protected employees on assignment in Australia, subject to Australian tax law, these changes should reduce the cost of the assignments to the employer in respect of those assignees in the medium-to-high-income earning range. Moreover, once the proposals come into effect, this may necessitate adjustments to tax equalisation and tax protection calculations, as well as international assignment cost projections and budgeting.
Given the impact of these changes to the operation of Australian payroll/shadow payroll, these changes should be communicated to relevant stakeholders as soon as possible, to help ensure that payroll processes and software can be updated in a timely fashion.
In the case of the updates to the Child Care Subsidy and parental-leave rules, employers may wish to factor this increase into their reward strategy/policy for 2023 and on, and adjust their global-mobility policies.
