On Tuesday 9 May 2023, Treasurer Jim Chalmers handed down the 2023-24 Federal Budget, his second budget.
“This budget aims to address these challenges by providing support to those who need it the most, investing in areas that can promote growth sustainably and funding important services that Australians rely on”. 1
Table of Contents
Budget Outline For Businesses
The Federal Budget has outlined several key measures for businesses. The ATO will receive additional funding to engage with businesses more effectively and address tax and superannuation liabilities. Eligible small businesses will be able to immediately deduct eligible assets costing less than $20,000. The Small Business Energy Incentive will provide tax relief and support to help businesses electrify and save on energy bills. Additionally, cash flow support for small businesses will come through a halving of the adjustment factor applied to PAYG and GST instalments.
Tax Integrity
The Government will provide the ATO with additional funding over four years starting from 1 July 2023. This funding aims to assist the ATO in engaging with businesses more effectively and addressing tax and superannuation liabilities. There will be a particular focus on high-value debts greater than $100,000 and aged debts older than two years belonging to public and multinational groups with an aggregated turnover of more than $10 million, or privately owned groups or individuals controlling more than $5 million of net wealth.
What Does It Mean For Small And Medium Businesses?
To encourage small businesses with a turnover of less than $10 million to comply with tax requirements, the Government has introduced a lodgement penalty amnesty program. The program will enable the ATO to waive failure-to-lodge penalties for overdue tax statements lodged between 1 June 2023 and 31 December 2023 that were initially due from 1 December 2019 to 29 February 2022.
These measures are expected to result in an increase in payments to the ATO by $275.4 million over five years from 2022-23. As a business owner, it’s important to take note of these changes and use this opportunity to get everything up to date before the ATO starts getting firmer on penalties. Seeking advice from your accounting firm can help you navigate these changes and ensure that you are well-prepared for any potential impact on your business.
Instant Asset Write Off
The Temporary Full Expensing (TFE) Scheme is set to expire on 30 June 2023, restoring the Instant Asset Write Off (IAWO) threshold back to the legislative threshold of $1,000.
However, in the Budget, the Government announced a temporary increase of the Instant Asset Write Off threshold for another year. Up to 3.8 million small businesses with an annual turnover of less than $10 million will be able to immediately deduct eligible assets costing less than $20,000 from 1 July 2023 until 30 June 2024.
What Does It Mean For Small And Medium Businesses?
The Instant Asset Write Off is still a reduction when compared to the Temporary Full Expensing Scheme. If you want to benefit from the Temporary Full Expensing Scheme, you must act quickly and purchase and install assets before 30 June 2023. Check out our blog for more information and contact our accountants as soon as possible if you’re interested in this topic.
Small Business Energy Incentive
The Government is introducing a new tax break, the Small Business Energy Incentive, to help small and medium-sized businesses electrify and save on their energy bills. This incentive will provide $310 million in tax relief and support up to 3.8 million businesses make investments like electrifying their heating and cooling systems, installing batteries and upgrading to high-efficiency electrical goods.
What Does It Mean For Small And Medium Businesses?
Businesses with an annual turnover of less than $50 million will have access to a bonus 20 per cent tax deduction for eligible assets supporting electrification and more efficient use of energy from 1 July 2023 until 30 June 2024. Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business.
Eligible investments include electrifying heating and cooling systems, upgrading to more efficient fridges and induction cooktops and installing batteries and heat pumps. This incentive is expected to benefit small and medium-sized businesses across various industries such as tradies, manufacturers, restaurants, hairdressers and real estate agents by helping them save energy and reduce their energy bills.
This is in addition to $62.6 million towards energy efficiency grants for small and medium enterprises in the October 2022 Federal Budget.
Improving Small Business Cash Flow
The Government announced that cash flow support for approximately 2.1 million small businesses will come through a halving of the adjustment factor applied to Pay As You Go (PAYG) and GST instalments in 2023-24.
Instalments will only increase by 6 per cent instead of 12 per cent, which better reflects the economic conditions currently faced by the sector.
What Does It Mean For Small And Medium Businesses?
This new plan is said to strike a balance between improving cash flow for small businesses and managing income tax and GST liabilities.
Budget Outline For Superannuation
The Budget outlines several measures related to superannuation. From 2026, employers will be required to pay their employees’ super at the same time they pay their wages. The Government is also looking to improve data capabilities and increase the visibility of unpaid super.
Aligning The Payment Of Super And Wages For All Employees
From 1 July 2026, employers will be required to pay their employees’ super at the same time they pay their wages. This will enable employees to track their entitlements to ensure they are being paid on time and in full.
What Does It Mean For Individuals?
Around 8.9 million Australians will benefit from higher retirement savings from receiving their Superannuation Guarantee contributions earlier and more frequently throughout their working life. More frequent super payments will make employers’ payroll management smoother with fewer liabilities building up on their books.
Increasing The Visibility Of Unpaid Super For The ATO
The Government is investing $27 million in 2023‑24 for the ATO to improve data capabilities including matching both employers and super fund data at scale.
The ATO will also receive $13.2 million to consult and co‑design with stakeholders on a new ATO compliance system which will proactively identify instances of under or unpaid super in near‑real time.
Unpaid Super Recovery Measures For The ATO
The Government will implement enhanced unpaid superannuation recovery targets for the ATO.
From 2023-24, the ATO will be assessed on its performance on the payments made to employees as a proportion of super raised, and the amount of super raised and distributed within 12 months.
Improving The Equity And Sustainability Of The Superannuation System
From 1 July 2025, earnings on balances exceeding $3 million will attract an increased concessional tax rate of 30 per cent. Earnings on balances below $3 million will continue to be taxed at the concessional rate of 15 per cent.
Defined benefit interests will be appropriately valued and will have earnings taxed under this measure in a similar way to other interests to ensure commensurate treatment. The additional tax on earnings imposed by this modest change is only expected to affect around 80,000 people from 2025–26 or approximately 0.5 per cent of Australians with a superannuation account.
For Businesses To Keep In Mind
Cyber Security
The Budget announced that the Government will be investing $23.4 million to help small businesses build their resilience to cyber security attacks by training in-house cyber wardens.
If it has been a while since you reviewed your business insurance policies or you’re interested in adding cyber insurance to your policy, our insurance brokers can help. Get in touch with us today to learn more about how we can help safeguard your business from cyber threats.
Extending The Clean Building Managed Investment Trust Withholding Tax Concession
From 1 July 2025, the Government will extend the clean building managed investment trust (MIT) withholding tax concession to data centres and warehouses, where construction commenced after Budget night (9 May).
This measure will also raise the minimum energy efficiency requirements for existing and new clean buildings to a 6-star rating from the Green Building Council Australia or a 6-star rating under the National Australian Built Environment Rating System. These changes will support investment in energy-efficient commercial buildings and in turn, reduce energy usage and energy bills for commercial tenants.
Industry Growth Program
A new $392.4 million Industry Growth Program will support Australian small and medium-sized businesses and startups to commercialise their ideas and grow their operations.
This recognises the important contribution small and medium-sized enterprises make, and the role they play in transforming the Australian economy and creating new, high skill jobs.
Creative Industries
The Government is investing $286 million to renew and revive Australia’s arts, entertainment and cultural sector through its landmark National Cultural Policy Revive: a place for every story, a story for every place.
Revive will empower our talented artists and arts organisations to thrive and grow, unlocking new opportunities, reaching new audiences and telling new stories in compelling new ways.
In addition, the Government is boosting incentives for the film industry that will support jobs and local businesses in the film and television industry.
Budget Outline For Individuals
There were several budget announcements aimed at providing support and relief to those in need. The Energy Price Relief Plan will provide relief for eligible households and small businesses starting from July 2023 and the base rate of income support payments will be increased by $40 per fortnight.
Energy Bill Relief
The Government’s Energy Price Relief Plan shields Australians from the worst impacts of price increases and provides immediate help with power bills.
The Government is partnering with state and territory governments to deliver up to $3 billion of electricity bill relief for eligible households and small businesses.
From July 2023, this plan will deliver up to $500 in electricity bill relief for eligible households and up to $650 for eligible small businesses.
Increasing The Rate Of Income Support Payments
The Australian Government recognise that many people on income support payments like JobSeeker, Austudy and Youth Allowance have it tough which is why they’re increasing the base rate of these payments by $40 per fortnight to eligible people, delivering a boost in support to those most in need.
Targeted Support For Older Job Seekers
To recognise challenges faced by older Australians, the Government is expanding eligibility for the existing higher rate of JobSeeker to recipients 55 and over who have received the payment for nine or more continuous months, which currently applies to those 60 and over.
What Does It Mean For Individuals?
Eligible recipients will receive an increase in their base rate of payment of $92.10 per fortnight.
Providing More Care And Better Care
To support older Australians who wish to remain at home for longer, the Government is investing $166.8 million to provide additional home care packages.
The Government is providing $487 million to extend, and make ongoing, the Disability Support for Older Australian Program, which provides support to vulnerable older people with disability.
Budget Outline For Home Buyers And Renters
The Government is incentivising the supply of housing by reducing withholding tax rates and increasing tax deductions for newly constructed build-to-rent developments. This is estimated to unlock 150,000 rental properties over 10 years. The eligibility for the First Home Guarantee and Regional First Home Guarantee is also being expanded.
Encouraging Investments In Build-To-Rent Projects
The Government is offering new incentives to encourage the supply of housing by:
- Reducing the withholding tax rate for eligible fund payments from managed investment trusts attributed to newly constructed build-to-rent developments from 30 to 15 per cent.
- Increasing the capital works tax deduction (depreciation) rate from 2.5 per cent to 4 per cent per year, increasing the after tax returns for newly constructed build-to-rent developments.
What Does It Mean For Individuals?
This is estimated to unlock 150,000 rental properties over 10 years, boosting the supply of high-quality, long-term rentals in the Australian market.
Home Guarantee Scheme
Eligibility for the First Home Guarantee and Regional First Home Guarantee will be expanded to any 2 eligible borrowers beyond married and de facto couples, and non‑first home buyers who have not owned a property in Australia in the preceding 10 years. Australian Permanent Residents, in addition to Australian citizens, will be eligible for the Home Guarantee Scheme.
What Does The Budget Mean For Me?
It’s natural to have questions following an announcement like this. Our accountants, bookkeepers, brokers and financial advisers have been studying the Budget thoroughly so you don’t have to. By getting in touch with us, you can learn about any changes that may affect your business or personal finances and how we can help you navigate those changes.
