The Federal Budget was handed down on the 9^th May and our Tax Expert Vanessa Falconer has prepared an outline of the key measures that impact our clients.

In summary the budget shows an improved picture of Government finances. However, the challenge was to find measures to assist with cost of living pressures without flaming inflation.

Key announcements;

Small and medium business tax measures

Energy Bill Relief Plan

Businesses with a turnover of up to $50 million will get a one-off payment of $650 off their power bills and a 20 per cent deduction to electrify cooling and heating systems, install new batteries and heat pumps, and replace ageing tools.

Small business energy incentive

The Government announced an additional 20% deduction on spending that supports electrification and more efficient use of energy for eligible businesses with annual turnover of less than $50 million. 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 assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024. Eligible expenditure will include investment in electrifying heating and cooling systems, upgrading to more efficient fridges and induction cooktops, and installing batteries and heat pumps. Full details of eligibility criteria will be finalised in consultation with stakeholders.

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.

Temporary increase to the instant asset write-off threshold

Small businesses, with 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. 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.

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.

Tax administration relief for small business

The Government will introduce reforms to cut paperwork and reduce the time small businesses spend doing taxes:

• From 1 July 2024, small businesses will be permitted to authorise their tax agent to lodge multiple Single Touch Payroll forms on their behalf, reducing paperwork.
• From 1 July 2024, small businesses will benefit from faster, safer and cheaper income tax refunds by reducing the use of cheques.
• From 1 July 2025, small businesses will be permitted up to four years to amend their income tax returns, reducing the burden of making revisions.

Small business PAYG and GST instalment relief

• The Government will amend the tax law to set the GDP adjustment factor for pay as you go (PAYG) and GST instalments at 6% for the 2023–24 income year, a reduction from 12% under the statutory formula.
• The 6% 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.

Small business lodgement penalty amnesty

A lodgement penalty amnesty program is being provided for small businesses with aggregate turnover of less than $10 million to encourage re-engagement with the tax system. The amnesty will remit failure-to-lodge penalties for outstanding tax statements lodged in the period from 1 June 2023 to 31 December 2023 that were originally due during the period from 1 December 2019 to 29 February 2022.

Superannuation

Superannuation tax rate for large balances

The Government recommitted to its announced changes to reduce the tax concessions available to individual superannuation account balances above $3 million.

• From 1 July 2025, the tax rate applied to earnings attributable to superannuation account balances above $3 million will be 30%. These measures will not impact individuals with total superannuation balances of less than $3 million nor will this change affect that portion of an individual’s balance below the $3 million threshold.
• The introduction of this measure is estimated to affect around 80,000 people or 0.5 per cent of superannuation members, but this will grow as the cap is not indexed. It will bring in $2.3 billion in revenue in its first full year of receipts.

Superannuation contributions to be paid on payday

• From July 2026, employers will be required to pay super when they pay salary and wages, in a bid to offer employees greater oversight over whether their entitlements are being paid, and better enable the ATO to recover unpaid superannuation.
• The ATO will receive $40.2 million to invest in improved data matching capabilities to find and act on cases of underpayment of super.
• It’s expected to save $1.1 billion by 2026-27, with younger workers set to receive the greatest benefit. In 2021-22, 48 per cent of those reporting unpaid super to the ATO were younger than 35.
• It will be particularly beneficial for those in lower paid, casual and insecure work who may otherwise miss out when superannuation is paid less frequently. The Treasurer has noted more frequent superannuation payments will make employers’ payroll management smoother with fewer liabilities building up on their books.
• To further strengthen the system, the ATO will receive additional resourcing to help it detect and act on unpaid superannuation payments. The Government will also set enhanced targets for the ATO for the recovery of payments.

Amendments in respect of superannuation NALI provisions

• Where income is deemed to be derived from a non-arm’s length transaction, it is taxed at the highest marginal rate of 45%
• the Government has announced changes to their original proposal for amendments to the NALI provisions.

As a result:

• Large APRA regulated funds will be exempt from the NALI provisions for both general and specific expenses. Self-managed superannuation funds (SMSFs) and Small APRA regulated funds (SAFs) will have income taxable as NALI, limited to twice the level of a general expense.
• Fund income that is taxable under these provisions will exclude contributions. All expenditure occurring prior to the 2018-19 financial year will be exempted.

Additional funding for ATO

• Treasury is hoping to claw back $9.1 billion in unpaid tax over the next five years by ramping up investment in a slew of compliance programs for the Australian Taxation Office in Tuesday’s budget.
• Those avoiding GST and personal income tax are particular targets, with compliance programs for both getting funding to extend their work.
• Multinationals trying to cut their tax bills also lose out, with the government implementing a 15 per cent minimum tax rate for the large ones from next January.

Individuals

Single parents

• Single parents will receive extra payments until their youngest turns 14 years old, up from the current cut-off of eight.
• Parents will also be able to earn up to $227.20 per fortnight, rather than $202.60, while receiving the full payment of $922.10. And they will receive a tapered payment until they earn $2646.95, when the payment cuts out altogether. Previously, the cut-off was $2622.35.
• The change will cost $1.9 billion through to 2026-27.

Low-income households

• The $1.5 billion Energy Bill Relief Fund will deliver $500 rebates to 5 million low-income households and $650 to 1 million eligible small businesses.
• The $1.3 billion Household Upgrades Fund is touted to help up to 111,000 households to help make their homes more energy efficient by installing solar panels or double glazing windows.
• Changes to dispensing rules at pharmacies will allow about 6 million people to buy two months’ worth of medicine for the price of a single prescription. The $1.2 billion in budget savings will be reinvested in community pharmacies.
• GPs will be paid three times as much to bulk bill concession cardholders, families with young children and pensioners. The $3.5 billion plan will apply to all face-to-face and telehealth general practices running between six and 20 minutes.
• JobSeeker payments will increase by $40 per fortnight, as of September 20, 2023, at a cost of $4.9 billion over five years. Currently, a single JobSeeker recipient with no children receives $693.10 a fortnight.
• The higher JobSeeker rate of $745.20 per fortnight, previously only available to recipients 60 and older, will be extended to include those 55 and older who have been receiving the payment for at least nine consecutive months.

Aged care workers

• The planned pay rise for aged care workers, which was set to cost $11.3 billion over the forward estimates period will now be $14.1 billion.
• International students working in the aged care sector will also be exempt from their usual cap on fortnightly work hours until the end of the year.

First home buyers

• From July 1 2023, access to the Home Guarantee Scheme will be expanded to allow any two people, including siblings and friends, to purchase an eligible home with a 5 per cent deposit.
• Non-first home buyers who have not owned a property for 10 years will also be able to access the scheme. Housing Minister Julie Collins said this measure was designed to support older women who may have lost their property in a divorce or relationship breakdown.

Renters

• Renters won with $2.7 billion funnelled towards increasing the maximum payment rates of Commonwealth Rent Assistance by 15 per cent, up to $31.36. That takes the maximum fortnightly payment from $208.74 to $240.
• However, it comes against record-breaking rent hikes across Australia’s capital cities, which – in the year to May – soared 11.7 per cent.
• An additional $2 billion will be directed to the National Housing Finance and Investment Corporation, which has an investment mandate to deliver at least 1200 social and affordable housing homes to each state and territory within five years.