Budget Review 2023-2024
On Tuesday, 9 May 2023, Treasurer Jim Chalmers handed down the 2023-24 Federal Budget, his second Budget, which follows the October 2022 Budget.
We’ve tried to pull out what we think you might be interested in, and here’s our breakdown.
Small Business
Small businesses instant asset write-off threshold: to be increased to $20,000 for 2023-24 for businesses with aggregated annual turnover of less than $10 million. The $20,000 threshold will apply on a per-asset basis
Small Business Energy Incentive: businesses with an annual turnover of less than $50 million will be able to claim an additional 20% deduction on spending that supports electrification and more efficient use of energy. Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024. The maximum amount that can be claimed through the ‘Energy Incentive’ is $20,000, which means up to $100,000 worth of spending can be eligible for the incentive.
Small business lodgement penalty amnesty: will be provided for small businesses with aggregate turnover of less than $10 million to encourage them to re-engage 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 between 1 December 2019 to 29 February 2022.
Super to be paid on employees' payday from 1 July 2026; more funding to catch non-payers The Budget papers confirmed the Government's intention to require all employers to pay their employees' super guarantee at the same time as their salary and wages from 1 July 2026. This payday super measure was originally announced by the Treasurer on 2 May 2023. While there are scant details in the Budget papers, Treasury and the ATO are expected to consult closely with industry and stakeholders on these changes in the second half of 2023. The final design will be considered as part of the 2024-25 Budget.
FBT rules for Electric Vehicles: rules for plug-in hybrids to sunset The Budget papers state that the Government will sunset the eligibility of plug-in hybrid electric cars from the FBT exemption for eligible electric cars. This change will apply from 1 April 2025. Arrangements involving plug-in hybrid electric cars entered into between 1 July 2022 and 31 March 2025 remain eligible for the Electric Car Discount.
Personal Taxation
In the 2023-24 Budget, the Government did not announce any personal tax rate changes. The Stage 3 tax changes commence from 1 July 2024, as previously legislated.
Under the Stage 3 tax changes from 1 July 2024, as previously legislated, the 32.5% marginal tax rate will be cut to 30% for one big tax bracket between $45,000 and $200,000. This will more closely align the middle tax bracket of the personal income tax system with corporate tax rates. The 37% tax bracket will be entirely abolished at this time. Therefore, from 1 July 2024, there will only be 3 personal income tax rates - 19%, 30% and 45%. From 1 July 2024, taxpayers earning between $45,000 and $200,000 will face a marginal tax rate of 30%. With these changes, around 94% of Australian taxpayers are projected to face a marginal tax rate of 30% or less.
The 2023-24 Budget did not announce any extension of the low and middle income tax offset (LMITO) beyond the 2021-22 income year. The LMITO has now ceased and been fully replaced by the low income tax offset (LITO)
As a result, low-to-middle income earners may see their tax refunds from July 2023 reduced by between $675 and $1,500 (for incomes up to $90,000 but phasing out up to $126,000), all other things being equal.
Superannuation
Super account balances above $3 million: the Budget confirmed the Government's intention to apply an additional 15% tax on total superannuation balances above $3 million from 1 July 2025.
Payday super: employers will be required to pay their employees' super guarantee at the same time as their salary and wages from 1 July 2026.
Pension drawdowns: no reduction in minimum - the Budget did not announce a further extension to 2023-24 of the temporary 50% reduction in the minimum annual payment amounts for superannuation pensions and annuities.
Cost of Living
5 million eligible households and 1 million eligible small businesses will be entitled to rebates from 1 July 2023 of up to $500 for households and $650 for businesses.
The Household Energy Upgrades Fund will be established, which will provide low-cost loans for energy-saving improvements to around 170,000 homes.
The maximum rates of Commonwealth Rent Assistance will be increased by 15% to offset rising rents, which will support around 1.1 million households over 5 years from 2022-2023.
Some patients will be able to obtain 2 months’ worth of treatment in a single visit to the pharmacist for over 300 medicines saving up to $180 per year per medicine from 1 September 2023.
Changes to Medicare bulk billing are proposed from 2022-2023 for 5 years to enable GPs to provide free consultations to 11.6 million eligible Australians.
A $40 per fortnight increase for JobSeeker recipients and those on Youth Allowance, Austudy and other income support payments is proposed, which will support 1.1 million Australians. This will take effect from 20 September 2023.
The eligibility age for the higher rate of JobSeeker payments is proposed to be reduced from 60 to 55, which will increase the base rate for around 52,000 recipients by $92.10 per fortnight.
Parenting payments with a base rate of $922.10 per fortnight (as opposed to the lower JobSeeker payment base rate of $745.20 per fortnight) will be available to single parents until their youngest child turns 14, rather than 8. This will particularly assist single mothers and their children.
Funding Boost for Compliance Programs
$90 million in funding to the ATO and $1.2 million to Treasury to extend the Personal Income Tax Compliance Program for two years from 1 July 2025 and expand its scope from 1 July 2023.
A four-year extension of the GST compliance program which will see the ATO provided with $588.8 million to conduct a range of activities to promote GST compliance. The extended funding will assist the ATO to develop more sophisticated analytical tools to combat emerging risks to the GST system.
Expanding the scope of the general anti-avoidance rules for income tax. Part IVA will be expanded to include schemes that reduce tax paid in Australia by accessing a lower withholding tax rate on income paid to foreign residents and schemes that achieve an Australian income tax benefit, even where the dominant purpose was to reduce foreign income tax.
Additional funding to facilitate ATO engagement with taxpayers with high-value debts over $100,000 and aged debts older than two years. This will apply to taxpayers that are either public and multinational groups with an aggregated turnover of greater than $10 million, or privately owned groups or individuals controlling over $5 million of net wealth.
Summary
As with every Federal Budget, we read it so you don’t need to! These are the key points we believe will have the most impact on individuals, families and business owners.
If you have any concerns, would like more information, or would like to review your personal or business tax and financial situation, visit our website and Book an Appointment.
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