The word Budget appears over a collage of $100 Australian notes laid atop a $5 Australian note depicting Parliament House in Canberra

Budget 2023/24

Marketing Team

As you would all be aware, the Federal and WA governments handed down their latest budgets last week. As such, we’ve brought together a list of the tax measures we expect will affect you.

Individuals

  • The Low and Middle Income Tax Offset was not extended, meaning individuals who received up to $1,500 in an additional tax refund last year will not receive it again in 2023.
  • Beginning July 2023, $1.5 billion over five years will go towards providing 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.
  • The WA Government has earmarked $28.5 million for workforce attraction and retention including paying up to $12,000 of HECS-HELP loans for 350 newly qualified nurses and midwives commencing employment in regional WA, with priority given to hard-to-staff sites.
  • The WA Government has further allocated $48 million to training initiatives to expand the residential construction workforce, hopefully accelerating the construction timeframes of homes, and expanding WA’s capacity to deliver new housing supply in pace with the state’s growing population. The funding measure includes:
    • an increase to the Base Employer Grant from $10,000 to $12,000 for apprentices;
    • an expansion to the Group Training Wages subsidy to include residential and commercial construction sector apprentices;
    • a $2,000 training completion payment for apprentices;
    • faster approvals of occupational licensing; and
    • a targeted $11 million visa subsidy scheme aimed at attracting more skilled migrants to the industry.
  • The Medicare Levy low-income thresholds for singles, families and seniors and pensioners will increase from the 1st of July 2022, meaning fewer people will pay the 2% Medicare Levy.
  • Family income thresholds will increase further by $3,760 (up from the previous $3,619) for each dependent child or student a family maintains.
  • In addition to the above, the government will be ensuring that low income earners who receive eligible lump sum payments are not subject to a higher amount of the Medicare Levy. This would apply in situations where an individual receives a lump sum compensation payment for underpaid wages, for example. To qualify, however, taxpayers will have to have been eligible for a reduction in the Medicare Levy in the two most recent years to which the lump sum accrues. They must also satisfy the eligibility requirements of the existing lump sum payment in arrears tax offset, including that a lump sum accounts for at least 10% of the taxpayer’s income in the year of receipt.
  • The measure enabling Age Pensioners and Veterans to earn more money before their pension is reduced has been extended for another six months, to the 31st of December 2023. Under this measure, pensioners can earn up to $11,800 before their pension is reduced.
  • For those of you making PAYG instalments towards next year’s tax bill, the Government bases your payments on your previous year’s tax bill plus a GDP “uplift”. While the GDP uplift for 2024 otherwise would have been the legislated 12%, the government has limited it to 6%. Whilst this offers taxpayers some relief, if you’re paying instalments, you should prepare for higher PAYG payments in 2024.
  • The Budget confirmed the government’s controversial intention to apply an additional 15% tax on total superannuation balances above $3 million from the 1st of July 2025. What this means is that if your super member balance is less than $3 million, this change won’t affect you. However, if it is more than $3 million from the 1st of July 2025, your super will be taxed 30% on its earnings, up from the current rate of 15%.
  • The ATO will receive $89.6 million and Treasury $1.2 million over two years to extend the personal income tax compliance program. Whilst there will be a particular emphasis on deductions relating to short-term rental properties – essentially to ensure they are genuinely available to rent – rental property owners generally will be scrutinised more closely as the ATO has identified that the majority make errors in their tax returns when it comes to declaring income and claiming deductions.

Businesses

  • Small businesses with an aggregated turnover of less than $10 million will be able to access a lodgement penalty amnesty program. The amnesty will remit failure-to-lodge penalties for outstanding tax statements lodged in the period from the 1st of June 2023 to the 31st of December 2023 that were originally due during the period from the 1st of December 2019 to the 28th of February 2022. Please note that this amnesty doesn’t apply to privately owned groups or individuals controlling over $5 million in net wealth and that the General Interest Charge will still apply. If you have any outstanding business lodgements for the above period of time, we highly recommend you take action sooner rather than later.
  • Temporary full expensing is ending. Currently, most businesses that purchase business assets can claim 100% of the cost in full, in the year that the asset is purchased and ready for use. Full expensing will end on the 30th of June 2023. If you need to purchase a business asset and have the cashflow to do so, we recommend you buy and have it installed or ready for use before the 30th of June 2023 to be able to claim 100% of its cost in the 2023 year.
  • From the 1st of July 2023, 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 provided they are first used or installed and ready for use between the 1st of July 2023 and the 30th of 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 and ready for use). If your business is registered for GST, the cost of the asset must be less than $20,000 after subtracting the GST credits that can be claimed for the asset. Alternatively, if you are not registered for GST, it is $20,000 including GST. This write-off applies per asset, so a small business could deduct the cost of multiple assets.
  • 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 the 30th of June 2024. This will be particularly relevant to small business entities that chose to leave the simplified depreciation system in order to opt out of applying the temporary full expensing rules to one or more specific assets. This announcement by the government effectively confirms that the temporary full expensing rules – which have provided an immediate deduction for the full cost of assets acquired from the 6th of October 2020 – will come to an end on the 30th of June 2023. Small business entities that are considering acquiring depreciating assets with a cost of $20,000 or more and business entities with an aggregated turnover of $10 million or more should keep this cut-off date in mind as the 30th of June 2023 approaches.
  • The FBT exemption for eligible plug-in hybrid electric cars will end on the 31st of March 2025.
  • 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 an aggregated annual turnover of less than $50 million. Eligible assets or upgrades will need to be first used or installed ready for use between the 1st of July 2023 and the 30th of June 2024 to qualify for the bonus deduction.
  • As briefly touched upon above, ordinarily, 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 otherwise applied, and now for the 2023-24 financial year, the uplift factor has been set to 6% instead of the 12% rate that otherwise would have applied. This 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.
  • Although not an impact in this or the immediately forthcoming financial year, the government has announced that from the 1st of July 2026, employers will be required to pay their employees’ Superannuation Guarantee entitlements on the same day that they pay salary and wages. Currently for many businesses, Superannuation Guarantee needs to be paid at least quarterly and so this change will inevitably have an impact on business cashflow.
  • Among the programs to reduce the compliance burden on small businesses is a series of initiatives to reduce paperwork. These include:
    • From the 1st of July 2024, small businesses will be permitted to authorise their tax agent to lodge multiple Single Touch Payroll forms on their behalf;
    • From the 1st of July 2024, the Australian Taxation Office (ATO) will reduce the use of cheques for income tax refunds; and
    • From the 1st of July 2025, small businesses will be permitted up to four years to amend their income tax returns (currently generally two years).
  • The ATO will receive over $588 million over four years to continue its work to improve GST compliance.

Jody’s up for an award!

It’s with great pleasure that we announce Jody is an AccountantsDaily 2023 Australian Accounting Awards finalist, in the category of Public Accountant of the Year. 🥳

The awards ceremony will be held at The Star casino in Sydney on the 30th of June 2023, and we’re beyond thrilled that Jody’s years of hard work and dedication to public practice will be recognised by hundreds of our accounting peers.

We will be heading over to attend the awards night and will definitely let you know how it goes, but no matter what happens, Jody is always a winner in our eyes. 🤩

As always, for more information or help with anything you’ve read about here today, please contact us by phone on (08) 9221 1400 or by email at admin@up-to-date.com.au. We look forward to hearing from you!