10 May 2023
‘Ace in the Hole’ Budget 2023-24
The 'ace in the hole' of the 2023-24 Federal Budget was the $4.2bn surplus; the first in 15 years.
The surplus was driven by a surge in the corporate and individual tax take. High commodity prices, inflation, and high employment have all pushed up corporate and individual tax receipts. But the gains can’t be relied on long term. The Budget is expected to deliver a deficit of $13.9 billion in 2023-24, and a $35.1bn deficit in 2024-25.
Social initiatives dominated the Budget:
- Energy bill relief for some households and small business
- Encouraging doctors to offer bulk billing by tripling the incentive for children under 16, pensioners and other Commonwealth card holders
- Increases to commonwealth rent assistance
- Increases to JobKeeper and other income support payments
- Expanding access to the single parenting payment
For small business, the instant asset write-off will enable multiple assets of up to $20,000 to be written-off in the year of purchase.
Individuals & Families
From July 2023
$1.5bn has been provided over 5 years to provide targeted energy bill relief and progressing gas market reform.
The Energy Bill Relief Fund will provide targeted energy bill relief to eligible households and small business customers, which includes pensioners, Commonwealth Seniors Health Card holders, Family Tax Benefit A and B recipients and small business customers of electricity retailers.
In partnership with the states and territories, the plan is expected to deliver up to $500 in electricity bill relief for eligible households and up to $650 for eligible small businesses.
Household energy upgrade fund
A $1.3bn Household Energy Upgrades Fund will be established to support home upgrades that improve energy performance. No, the Government is not giving out cash for upgrades but providing $1bn to the Clean Energy Finance Corporation to provide low-cost finance and mortgages in partnership with private financial institutions for home upgrades that save energy.
Less people to pay Medicare Levy
From 1 July 2022
The Medicare levy low-income thresholds for singles, families and seniors and pensioners will increase from 1 July 2022.
|Single seniors & pensioners||$36,925||$38,365|
|Family seniors & pensioners||$51,401||$53,406|
For each dependent child or student, the family income thresholds will increase by a further $3,760 instead of the previous amount of $3,619.
Superannuation & Investors
Confirmed – 30% tax on super earnings above $3m
From 1 July 2025
An additional tax of 15% on earnings will apply to individuals with a total superannuation balance over $3 million at the end of a financial year from 1 July 2025. The definition of total superannuation balance (TSB) for the new tax uses the current definition and includes amounts in retirement phase pensions.
Individuals will have the choice of paying the tax personally or from their superannuation fund and those with multiple accounts can nominate which fund will pay the tax.
This measure is estimated to increase tax receipts by $950m and increase payments by $47.6m over the 5 years from 2022-23.
Business & Employers
$20,000 small business instant asset write-off
From 1 July 2023 to 30 June 2024
Small businesses, with an aggregated turnover of less than $10 million, will be able to immediately deduct the full cost of eligible depreciating assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2024.
“Immediately deductible” means a tax deduction for the asset can be claimed in the same income year that the asset was purchased and used (or installed ready for use).
If the business is registered for GST, the cost of the asset needs to be less than $20,000 after subtracting the GST credits that can be claimed for the asset. If the business is not registered for GST, it is $20,000 including GST.
The write-off applies per asset, so a small business can deduct the cost of 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 income year thereafter.
This announcement effectively confirms that the temporary full expensing rules, which have provided an immediate deduction for the full cost of assets acquired from 6 October 2020, will come to an end on 30 June 2023. Small business entities that are considering acquiring depreciating assets with a cost of $20,000 or more and business entities with aggregated turnover of $10 million or more should keep this cut-off date in mind as 30 June 2023 approaches.
$20,000 small business incentives for energy efficiency
From 1 July 2023 to 30 June 2024
As previously announced, the Small Business Energy Incentive provides an additional deduction of 20% 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, with a maximum bonus deduction of $20,000.
The incentive is available to small and medium businesses with aggregated annual turnover of less than $50 million.
While the full detail of what qualifies for the incentive is not yet available, it is expected to apply to a range of depreciating assets and upgrades to existing assets such as electrifying heating and cooling systems, upgrading to more efficient fridges and induction cooktops, and installing batteries and heat pumps.
Some exclusions will apply including electric vehicles, renewable electricity generation assets, capital works, and assets that are not connected to the electricity grid and use fossil fuels.
Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024 to qualify for the bonus deduction.
Lowering Tax Instalments for Small Business
Normally, GST and PAYG instalment amounts are adjusted using a GDP adjustment or uplift.
In 2022-23, the Government reduced this uplift factor to 2% instead of the 10% rate that would have applied. And now for 2023-24, the Government has set the uplift factor to 6% instead of the 12% rate that would have applied.
The 6% uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods for instalments for the 2023-24 income year and are due after the amending legislation comes into effect:
- Up to $10 million annual aggregated turnover for GST instalments, and
- $50 million annual aggregated turnover for PAYG instalments.
‘Payday’ super – Increasing payment frequency of employee super
From 1 July 2026
As previously announced, from 1 July 2026, employers will be required to pay their employees’ super guarantee entitlements on the same day that they pay salary and wages.
Currently, SG is paid quarterly.
$1bn to boost biosecurity
The Government has committed $1bn over 4 years to strengthen Australia’s biosecurity system. The spending is focussed on biosecurity policy and implementation including preparedness, digital systems in cargo pathways, and the reduction of biosecurity risks in Northern Australia.
The initiative is partially offset by increasing costs for the clearance of low value imported cargo and a biosecurity protection levy on Australian producers of agricultural, forestry and fishery products from 1 July 2024.
Small Business ATO Compliance
Among the programs to reduce the compliance burden on small business is a series of initiatives to cut paperwork. These include:
- From 1 July 2024, small businesses will be permitted to authorise their tax agent to lodge multiple Single Touch Payroll forms on their behalf.
- From 1 July 2024, the Australian Taxation Office (ATO) will reduce the use of cheques for income tax refunds.
- From 1 July 2025, small businesses will be permitted up to 4 years to amend their income tax returns (generally 2 years).
Personal income tax compliance and rental property owners under scrutiny
From 1 July 2025
The ATO will receive $89.6m and Treasury $1.2m over two years to extend the personal income tax compliance program for two years and to expand it to target emerging issues such as deductions relating to short-term rental properties to ensure they are genuinely available to rent.