From a business perspective, this year’s Federal Budget highlighted measures to support cash-flow and create avenues to combat inflation and rising business costs.
The measure provided do not provide any immediate cash injections, however revise current legislation to provide greater tax concessions and benefits.
Key priorities for businesses in the 2023/24 Federal Budget included:
From 1 July 2023 until 30 June 2024, the Government will temporarily increase the Instant Asset Write-Off Threshold from $1,000 to $20,000.
Small businesses with an aggregated annual turnover of less than $10 million will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first-used or installed ready for use between 1 July 2023 and 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% in the first income year and 30% each year thereafter.
The provisions that prevent small businesses from re-entering the simplified depreciation regime for five years if they opt-out will continue to be suspended until 30 June 2024.
AGR Commentary
As highlighted prior to Budget release, the Federal Government did not announce any extensions to the Stage Three Low & Middle Income Tax Offsets. No changes were also announced as part of the Budget for the Low Income Tax Offset category – with this remaining unchanged for the 2023/24 Year.
As part of the Budget papers, the Federal Government announced cash flow support for small businesses via adjustment factors attached to Pay-As-You-Go (PAYG) and GST Instalments.
Under the support package, a six per cent Gross Domestic Product (GDP) adjustment factor will be applied for the 2023-24 Income Year, halving the current arrangement of 12 per cent for the current statutory formula.
To be eligible for the adjustment, businesses must already fall under the current PAYG and GST instalment thresholds of $50 million and $10 million in aggregate turnover.
The introduction of the measure aims to “strike a balance between improving cash flow for small businesses and managing income tax and GST liabilities”.
Announced prior to the Federal Budget by Treasurer Jim Chalmers, small-to-medium businesses that invest in energy efficient equipment could be eligible for a tax deduction of up to $20,000.
Under the newly introduced Small Business Energy Incentive, businesses with a turnover of up to $50 million will be eligible for a tax deduction where investment is made in energy efficient processes – such as electrifying cooling and heating systems, installing batteries and heat pumps, and upgrading fridges and other appliances to better energy rate products.
The incentive offers an additional 20% tax deduction of cost (with a maximum tax deduction bonus being $20,000) eligible assets or upgrades needed, first-used or installed ready for use between 1 July 2023 and 30 June 2024.
The Government has decided to remove the Fringe Benefit Tax exemption for plug-in hybrid electric cars, with effect from 1 April 2025.
Any agreements or contracts made for such vehicles between 1 July 2022 to 31 March 2025 will still qualify for the electric car discount.
The “sunsetting” of this legislation is an extension of the Treasury Laws Amendment (Electric Car Discount) Bill 2022, which received Royal Assent in December 2022.
AGR Commentary
This change may impact individuals and businesses that utilise plug-in hybrid electric cars as part of their operations or for personal use.
As such, those utilising such vehicles may need to adjust their budget and costs planning in anticipation of the FBT exemption sunset.
From 1 July 2023, new changes will be introduced to Petroleum Resource Rent Tax (PRRT), with a cap on the use of deductions for offshore projects.
The cap will limit the proportion of PRRT assessable income that can be offset by deductions to 90 per cent.
A corporate tax measure, PRRT is generally on profits generated from the sale of marketable petroleum commodities – including:
Where the proposed legislation receives Royal Assent from Parliament, the changes will look to bring forward tax revenue originally due in 2030 and onwards of an estimated $2.4 billion over four years.
The Australian Government has announced several measures in the 2023/24 Budget to boost the country’s housing supply, with a particular focus on new build-to-rent (BTR) projects and affordable housing programs.
To encourage foreign investment in Australian BTR projects and increase the supply of rental housing, especially affordable rental housing, the Government has reduced the withholding tax from 30% to 15% on distributions from eligible residential BTR projects.
The measure will take effect from 1 July 2024 and is expected to benefit both investors and tenants. This could potentially lead to a considerable increase in foreign investment in the sector.
In addition, there is an incentive to accelerate the capital works deduction for BTR projects. The capital works deduction rate will increase from 2.5% to 4% for construction commencing after 9 May 2023. This means that (BTR) projects will provide investors with higher tax-free returns of capital at the early stages of the project as well as improving the cash flow.
To be eligible, buildings must have at least 50 apartments, minimum three-year leases, and single ownership for 10 years.
As part of the major tax measures announced in the 2023/24 Federal Budget, small businesses with an aggregated turnover of less than $10 million will be granted a Small Business Lodgment Penalty Amnesty.
The introduction of the amnesty is aimed at encouraging small businesses to re-engage with the tax system and ensure their compliance obligations are up-to-date.
The amnesty will remit failure-to-lodge penalties for outstanding tax statements lodged in the period from 1 July 2023 to 31 December 2023, that were originally due between 1 December 2019 to 29 February 2022.
To be eligible for the amnesty, small businesses must, at the time of lodgment, be an entity with an aggregated turnover of less than $10 million.
The Government will provide $588.8 million to the Australian Tax Office over four years from 1 July 2023 to continue a range of activities that promote GST compliance.
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 to develop more sophisticated analytical tools to combat emerging risks to the GST system.
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