Background

The Australian Government announced the 2022-23 Budget on 29 March 2022 against a backdrop of a looming federal election (expected by May 2022) and rising cost-of-living concerns. The ‘headline’ economic indicators include a 2021-22 budget deficit of $79.8 billion (down from the $98.9 billion estimate at the Mid-Year Economic and Fiscal Outlook in December 2021) and unemployment forecast to reach a near five-decade low of 3.75% by the end of 2022.

The Budget contains several initiatives relevant to MTA Queensland members and the MTA Institute. Announced prior to the release of the Budget is the extension of the Boosting Apprenticeship Commencements wage subsidy program to June 2022. New arrangements beyond that date were also outlined along with a commitment to increase training places through the National Skills Agreement with states and territories.

Speculation around a cut in the 44.2 cent/litre fuel excise in response to record high domestic fuel prices was confirmed with a 22.1 cent/litre cut for six months. Further elements of a cost-of-living package include an increase in the low and middle-income tax offset (up to $1,500) and a $250 payment to self-funded retirees, pensioners and others on benefits.

There was, however, no broader changes to the tax regime that currently impacts the automotive sector, such as the luxury car tax and import duties. Nor were there any significant enhancements to skilled migration to address widespread skill shortages.

Issues

Extension of the Boosting Apprenticeship Commencements wage subsidy

The Boosting Apprenticeship Commencements (BAC) wage subsidy was introduced by the Australian Government in October 2020 as part of its COVID-19 recovery plan. It provides up to a 50% wage subsidy for new or recommencing apprentices and trainees. It was scheduled to finish in March 2022.

There is also a complementary Completing Apprenticeship Commencements (CAC) wage subsidy initiative that was introduced in October 2021.

Under the BAC extension, employers who engage a new apprentice or trainee up until 30 June 2022 will be eligible for a 12-month wage subsidy of 50% (capped at $7,000 per quarter). They will also be eligible for the corresponding CAC wage subsidy for second (10% wage subsidy capped at $1,500 per quarter) and third-year (5% wage subsidy capped at $750 per quarter) apprentices and trainees engaged through the BAC initiative.

The Government estimates an additional 35,000 apprentices and trainees will be supported through the BAC extension at a cost of $365.3 million. With the extension of the CAC to June 2027 it is estimated the total cost of BAC and CAC will be $5.8 billion.

The initiative has contributed to MTA Institute apprentice commencements growing more than 50% (to 1,549) in calendar year 2021. As a result of this growth there are now 2,265 apprentices and 74 trainees in training with MTA Institute, up some 12% over the last 12 months.

Given extension of the BAC is only for ‘sign-ups’ until 30 June 2022, it will be important MTAQ Queensland members and existing MTA Institute apprentice employers are advised as soon as possible. A communications strategy is being developed.
This initiative is welcome given the significant skill shortages in the automotive industry that are estimated at more than 30,000 nationally, of which automotive technician and mechanic occupations are prominent.

Australian Apprenticeships Incentive System

This new $2.4 billion initiative over five years will essentially replace the BAC and CAC from July 2022. Until June 2024 it will offer employer wage subsidies of 10% for first and second-year apprentices and 5% for third-year apprentices in priority occupations. Apprentices in priority occupations will be eligible for a $1,250 payment every six months over the first two years of their apprenticeship.

Employers of apprentices in non-priority occupations will be eligible for a $3,500 hiring incentive.

From July 2024 incentives will target priority occupations with a $4,000 employer incentive and up to $3,000 for apprentices.

Extra training places

The Budget includes a $3.7 billion commitment over five years to provide an additional 800,000 training places through the National Skills Agreement with states and territories. These places will, of course, be subject to agreements with the states and territories. Reaching agreement has proven to be problematic in the past.

Increased Training and Technology Tax Deductions

Businesses with annual turnover of less than $50 million will be able to claim a 120% tax deduction for staff training provided by external Australian registered providers, up from 100%, through the Skills and Training Boost initiative. This initiative has an immediate start and runs until June 2024.

The Budget also provides, through a technology investment boost, a 120% tax deduction (an additional 20% deduction) for those businesses with less than a $50 million turnover for business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud-based services. This initiative, that commences immediately and runs until June 2023 only, has an annual expenditure cap of $100,000.

Fuel Excise Cut

The 2022-23 Budget includes a six-month 22.1 cent/litre cut in the fuel excise to be implemented immediately with monitoring by the Australia Competition and Consumer Commission to ensure the cut is passed on to motorists. It is worth noting that due to existing holdings it may take several weeks for the cuts to pass to motorists.

While this cut will provide some relief to motorists (the Government indicates a two-car family could save up to $700) there is likely to be little impact for service station MTAQ members beyond dealing with fewer consumer complaints and enquiries about high fuel prices.

30 March 2022