Beyond multinational business groups and fossil fuel extractors and producers the direct tax measures for Australian businesses is limited. A number of measures will present business opportunities, some are targeted at ATO compliance activities, whilst others will impact human resources and resourcing.
Small Business $20,000 Instant Asset Write-off 1 July 2023 – 30 June 2024
Although the temporary full expensing of assets for most businesses ceases on 30 June 2023, the Government will once again, for small businesses with aggregated turnover under $10 million, temporarily increase the instant asset write-off threshold to $20,000 for assets installed ready for use from 1 July 2023 until 30 June 2024.
The $20,000 threshold will apply on a per asset basis, so small businesses can instantly write off multiple assets. Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15 per cent in the first income year and 30 per cent each income year thereafter. The provisions that prevent small businesses from re-entering the simplified depreciation regime for 5 years if they opt-out will continue to be suspended until 30 June 2024.
Small Business Energy Incentive – additional 20% deduction on up to $100,000 expenditure
Small and medium businesses, with aggregated annual turnover of less than $50 million, will be able to deduct an additional 20 per cent of the cost of eligible depreciating assets that support electrification and more efficient use of energy. Up to $100,000 of total expenditure will be eligible for the Small Business Energy Incentive, with the maximum bonus deduction being $20,000.
Depreciating assets and upgrades to existing assets will be eligible. These will include assets that upgrade to more efficient electrical goods such as energy-efficient fridges, assets that support electrification such as heat pumps and electric heating or cooling systems, and demand management assets such as batteries or thermal energy storage. Full details of eligibility criteria will be finalised in consultation with stakeholders. Eligible assets will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024. Eligible upgrades will also need to be made in this period. Certain exclusions will apply such as electric vehicles, renewable electricity generation assets, capital works, and assets that are not connected to the electricity grid and use fossil fuels.
Small Business managing tax instalments and cash flow
The Government will amend the tax law to set the GDP adjustment factor for pay as you go (PAYG) and GST instalments at 6 per cent for the 2023–24 income year, a reduction from 12 per cent under the statutory formula.
The 6 per cent GDP adjustment rate will apply to small businesses and individuals who are eligible to use the relevant instalment methods (up to $10 million aggregated annual turnover for GST instalments and $50 million annual aggregate turnover for PAYG instalments), in respect of instalments that relate to the 2023–24 income year and fall due after the enabling legislation receives Royal Assent.
Amendment to the Electric Car discount
This confirms a previously announced measure that the FBT exemption on Plug-in Hybrid Electric Vehicles (PHEV) will not apply to PHEVs delivered after 1st April 2025. Arrangements entered into between 1 July 2022 and 1st April 2025 for PHEVs will remain eligible for the FBT exemption.
Increasing the payment frequency of superannuation guarantee (SG)
From 1 July 2026 employers will be required to pay their employees SG entitlements on the same day that they pay salary and wages. Currently the minimum requirement for SG payments is to make payments within 28 days of quarter end. The start date of 1 July 2026 is to allow payroll service providers and superannuation funds time to make system changes and for employers to plan and adjust their cash flow practices.
ATO funding and compliance programs
A number of compliance programs will continue to receive funding, or receive additional funding:
- Enhance detection of unpaid Superannuation Guarantee payments and setting enhanced targets for the ATO for recovery of payments. The ATO estimates $3.4 billion of super was unpaid in 2019-20.
- The ATO will receive $588.8 million over 4 years from 1 July 2023 to continue a range of activities that promote GST compliance. It’s estimated to increase GST receipts by $3.8 billion, and other tax receipts by $3.8 billion, over the 5 years from 2022–23.These activities will ensure businesses meet their tax obligations, including accurately accounting for and remitting GST, and correctly claiming GST refunds. Funding through this extension will also help the ATO develop more sophisticated analytical tools to combat emerging risks to the GST system.
Housing Build To-Rent Developments
For eligible new build-to-rent projects where construction commences after 7:30 PM (AEST) on 9 May 2023 (Budget night), the Government will:
- increase the rate for the capital works tax deduction (depreciation) to 4 per cent per year
- reduce the final withholding tax rate on eligible fund payments from managed investment trust (MIT) investments from 30 per cent to 15 per cent.
This measure will encourage investment and construction in the build-to-rent sector, expanding Australia’s housing supply. This measure will apply to build-to-rent projects consisting of 50 or more apartments or dwellings made available for rent to the general public. The dwellings must be retained under single ownership for at least 10 years before being able to be sold and landlords must offer a lease term of at least 3 years for each dwelling.
Other Taxation & Welfare Measures
Other notable measures announced in relation to tax and welfare include:
- Part IVA General Anti-Avoidance will be expanded to apply to schemes that reduce tax in Australia by accessing lower withholding tax rates on income paid to foreign residents and schemes that achieve an Australian income tax benefit, even where the dominant purpose is to reduce foreign income tax
- Changes to Petroleum Resource Rent Tax to collect an extra $2.4 billion over four years
- Raising $3.3 billion over the next four years by increasing tax on tobacco by 5%
- Supporting an OECD push for a minimum 15% tax rate for multinationals and limiting debt related deductions. This relates to key aspects of Pillar Two of the OECD/G20 Two-Pillar Solution to address tax challenges of the digitalisation of the economy
- The age cut-off for the single parenting payment to be lifted from eight to 14 from 20 September 2023
- Funding boost of almost $10 million to increase financial assistance to young carers aged 12-25 so they can continue their education while taking on caring responsibilities
- Extra $2 billion funding for the National Housing Finance and Investment Corporation to support more social and affordable rental housing
- Expanding the three categories of the Home Guarantee Scheme from 1 July 2023 — including that friends, siblings and other family members will be eligible for joint applications. Australian Permanent Residents and people who have not owned a property in Australia in the last 10 years will become eligible
- Additional $3.7 billion for a 5 year National Skills Agreement with the states and territories from 1 January 2024
- To address national skills shortages, an additional $400 million for additional 300,000 TAFE and VET Fee-Free places
For more information on the May 2023 Federal Budget please click here for our overview.