As expected with the rising cost of living pressures and rising inflation, this budget is designed to help those who need it most.
There are also some green measures supporting energy efficiency and some key measures for businesses. Below is our budget breakdown with what it all means for you and your business.
You can also check out our live recording from budget night for a quick rundown with our experts.
$20,000 Instant Asset Write-Off
With Temporary Full Expensing ceasing on 30 June 2023, the Government has announced the pre-Covid Instant Asset Write-off will continue for assets costing up to $20,000.
Businesses with an aggregated turnover of less than $10 million will be entitled to an immediate deduction for the full cost of eligible assets costing less than $20,000.
These assets need to be installed and ready for use between 1 July 2023 and 30 June 2024. The $20,000 limit will be on a per asset basis.
A reminder, for businesses with an aggregated turnover of less than $5 billion [and $50 million for second-hand assets] you can immediately deduct the cost of all eligible assets that are installed and ready for use prior to 30 June 2023.
energy efficiency boost
You will recall in our previous Budget blog in October 2022, the Government announced it was proceeding with the Skills Training Boost and Digital Adoption Boost which provided small and medium sized businesses with an additional 20% tax deduction for eligible training and digital expenditure.
Should these measures become law, they will apply for expenditure incurred from budget night [7:30 pm AEDT on 29 March 2022] until 30 June 2022 and from 1 July 2022 to 30 June 2024 for the skills training boost, to 30 June 2023 for the technology boost.
In this year’s budget, the Government is providing an additional 20% deduction for expenditure on electrification of assets and improvements to energy efficiency. Businesses with an aggregated turnover of less than $50 million will be eligible for the Small Business Energy Incentive with the deduction capped at $20,000 [i.e. on expenditure up to $100,000].
The Energy Efficiency Boost will apply to eligible assets installed ready for use between 1 July 2023 and 30 June 2024.
small business energy bill relief fund
In this budget the Government has attempted to tackle rising electricity costs for small businesses via the Energy Bill Relief Fund. Eligible businesses won’t have to do anything; they will receive relief automatically on their electricity bills from 1 July 2023. The amount businesses are eligible for will vary from state to state and will be based on their energy consumption. The energy consumption threshold is:
- 40MWh in Victoria
- 50MWh in Western Australia
- 100MWh in the ACT, NSW and Queensland
- 150MWh in Tasmania
- 160MWh in the Northern territory and South Australia
If you are eligible, the amount you’ll receive will depend on the state or territory you are in. You will get $325 of bill relief if your eligible small business is in Victoria but
you will get a $650 of bill relief if your eligible small business is in these states and territories:
- Northern Territory
- South Australia
- Western Australia
If your small business is in the ACT and your business has average electricity use, it will receive a reduction in electricity charges of $624. Your business will also receive a $325 rebate.
If you run your small business from your home, you are unlikely to be eligible for the small business bill relief.
fbt on electronic vehicles
In our initial blog published 10 May 2023, we noted the FBT exemption on eligible electrical vehicles would cease on 31 March 2025. Please note, this exemption will only cease for plug-in hybrid vehicles, and the exemption will continue for hydrogen fuel cell electric vehicles and battery powered electric vehicles that are designed to carry a load of less than 1 tonne and fewer than 9 passengers [including the driver].
The measure introduced in July 2022 to remove the Fringe Benefits Tax [FBT] on eligible electric cars has been subject to a lot of media attention and received positive feedback that the measure was encouraging taxpayers to purchase ‘cleaner vehicles’. We have also received a lot of enquiries from clients with employees wanting to salary sacrifice electric vehicles off the back of the FBT exemption for eligible vehicles. Our October 2022 Budget blog outlined the eligibility for the FBT exemption.
It was announced in last night’s budget that the FBT exemption on plug-in hybrid electric vehicles will cease on 1 April 2025. Therefore, if you have employees wanting to salary sacrifice these type of vehicles and obtain the FBT exemption, the vehicle arrangement has to be entered into by 31 March 2025.
Remember, while not subject to FBT, the benefit provided is still a reportable fringe benefit, so log books and detailed records are required to be kept for these vehicles.
road user charge
The Road User Charge [RUC] is applied to each litre of diesel used by heavy vehicles on public roads including buses, coaches and trucks. This charge is being raised by 6 per cent a year for the next 3 years. This will take the current rate from 27.2 cents per litre of diesel to 32.4 cents by 2025-26.
The RUC is used to calculate fuel tax credits for eligible businesses and will save the government $1.1 billion over 4 years.
patent box measures scrapped
The previous Government had announced several measures around introducing a Patent Box Regime that would see the introduction of a concessional rate of tax of 17% for income generated from eligible patents. This measure was designed to promote the development of technologies in the biotech, medical, agriculture and low-emissions sectors.
The current Government did not mention in the October 2022 Budget whether this measure would progress, however it was announced last night that these previously announced measures will not proceed.
From 1 July 2023 students that hold visas will be subject to pre-Covid working restrictions again. Their working hours will be capped at a maximum of 48 hours per fortnight.
Students working in aged care will be exempt from the restrictions, but only until the end of the year. This will immediately make a signficant impact on employers of workers on student visas in an already stretched resource market including retail, hospitality and agriculture.
If your business is part of the PAYG Instalment system, you currently pay instalments on your next tax bill with each quarterly BAS. These amounts usually go up each year. Given inflation, the expectation was that this would rise 12% for the 2024 year, however the Government has halved this increase to just 6%.
build to rent concessions
To encourage investment and construction in the build-to-rent sector, the Government has announced accelerated tax deductions for building works and a reduction to the withholding rate for eligible fund payments for managed investment trust [MIT] investments.
In summary, the proposed measures will provide the following concessions:
- Increase the capital works deductions from 2.5% per annum to 4%
- Reduce the withholding rate on eligible fund payments for MIT investments to 15% from 30%
pay day superannuation
This measure was announced on 2 May 2023, and is proposed to take effect from 1 July 2026. It will require employers to pay their employees superannuation guarantee entitlements on the same day they pay their salary and wages.
With the introduction of Single Touch Payroll [STP] on 1 July 2018 and the subsequent phases of STP that have been implemented, it is not surprising that this measure has been announced. With STP allowing real time reporting of employee’s salary and wage and superannuation entitlements, the requirement to pay these entitlements on the same date is not unexpected.
At present, superannuation guarantee is payable on a quarterly basis on the 28th day after the end of the quarter in which the entitlement arose. The key takeaway with this measure is for employers review their payroll systems in advance of 1 July 2026 to ensure they meet the new pay day superannuation requirement.
The impact of late paid superannuation or underpaid superannuation can be costly for businesses, with superannuation guarantee charge [SGC] applying to laid paid or unpaid superannuation. The SGC, which includes an interest component, continues to accrue until SGC forms are lodged. The SGC and often the late paid superannuation is also non-deductible for the business so can have adverse tax implications.
We recommend all our business clients review their superannuation guarantee calculations and payment procedures on a regular basis to ensure they are complying with superannuation guarantee requirements. As always, if you need any help with this, please reach out to your regular businessDEPOT contact or someone in our tax team.
additional tax on super balances over $3 million
The Government previously announced the proposed super changes in February 2023 and it looks as though they are still going ahead. You can read more on what you need to know in the blog Director Megan Kelly wrote in February.
Once these measures become law, there will be more detail but what we do know right now is:
- It will apply to individuals with a super balance of more than $3 million
- Individuals with super balances greater than $3 million will be taxed at 30%, instead of 15%, on the proportion of the individuals super balance over $3 million
- Earnings relating to assets below the $3 million threshold will continue to be taxed at the concessional rate of tax of 15% [or 0% where they are held in a retirement pension account]
- This measure will apply to define benefit schemes, which is likely to create complexity for these superannuation schemes
- The individual taxpayer will be assessed on the additional tax, but will have a mechanism to have this additional tax released from their superannuation balance [similar to the operation of the Division 293 – Additional tax on concessional contributions]
- The value of the superannuation balance will be a market value basis, which effectively taxes the individual based on unrealised gains in their fund
Unsurprisingly when this announcement was made, serious concerns have been raised by the tax community in regards to the equity of this measure, as it is effectively leveling additional tax on unrealised gains. There is also concern amongst the Self-Managed Superannuation Fund industry where funds are invested in illiquid [not easily converted to cash] assets, and the taxpayers do not have the means to personally fund the additional tax.
So ‘watch this space’ and expect to see commentary from our very own SMSF experts Megan Kelly and Simone Murad as these measures progress.
individual tax cuts [already legislated]
Most personal tax cuts have already been legislated including some that were backdated to 1 July 2020 [when the then government did their mini-budget in October 2020] and some that are yet to come into effect in 2024-25 when the big tax cuts really come into play.
It was announced in this budget that the already legislated tax cut will continue for 2024-2025 and onwards, as follows:
|Taxable income||Tax rate on this income|
|$18,200 to $45,000||19%|
|$45,001 to $200,000||30%|
|$200,001 and over||45%|
These tax rate changes in 2024-25 are significant in that the government estimates around 95% of taxpayers will pay a marginal tax rate of 30% or less. This is important from a structuring perspective when you look at what the company tax rate will be at that point in time [25% for small to medium size businesses].
cost of living measures
To help combat the rising cost of living, a series of measures were announced including:
- JobSeeker rate will increase for all recipients by $40 a fortnight
- Young people on income support payments will also receive a $40 fortnightly increase to both Austudy and Youth Allowance
- The maximum rate of Commonwealth Rent Assistance will be increase 15% or about $31 a fortnight
- Pensioners, veterans, concession card holders and people on government support payments will receive up to $500 in energy bill relief, this again will vary from state to state
- Aged care workers will be getting an increase to their minimum wage of 15% which should see the wages for an aged care nurse increase by more than $10,000 per annum
- The age cut off for the single parent payment will be lifted Single Parent payment will be raised from 8 to 14. This will see eligible single parents receive an additional $176.90 per fortnight if they are on the base rate.
- Childcare subsidies will be increased for eligible families. For families earning a combined income below $80,000 the subsidy for their first child will climb to 90 percent. For families with combined income above this the subsidy will progressively reduce based on income a lift in their subsidy of up to 20 per cent.
- The cost of hundreds of medications listed on the Pharmaceutical Benefits Scheme (PBS) will effectively be halved with a rollout starting in September. The change allows people with chronic illnesses to buy two months of medication from a single script, saving them a co-payment.
still not sure how this budget impacts you?
You can reach out to one of our friendly experts and they can help break down the budget for your particular situation. Feel free to give us a buzz on 1300 BDEPOT or shoot us an email at email@example.com.
General advice disclaimer
The information provided on this website is a brief overview and does not constitute any type of advice. We endeavour to ensure that the information provided is accurate however information may become outdated as legislation, policies, regulations and other considerations constantly change. Individuals must not rely on this information to make a financial, investment or legal decision. Please consult with an appropriate professional before making any decision.