Federal Budget 2023–24

Key points:

• The IPA’s Advocacy and Policy team lodged the IPA’s pre-Budget submission with the Federal Treasury in January, with recommendations focused on tax reform, productivity growth and more, informed by the work of the IPA Deakin SME Research Centre.
• Chalmers presented his first full Federal Budget on 9 May.
• While temporary full expensing has not been extended, the instant asset threshold will not drop right back to $1,000 but instead sit at $20,000.
• Chalmers provided detail of the $14.6 billion cost-of-living package for individuals and small businesses.

Tax reform

Tax announcements include measures aimed at making multinationals pay their fair share while providing a better deal for Australia on gas resources. Changes to the super system look to increase sustainability and fairness, while tax compliance programs will be bolstered.

Personal income tax compliance measures will particularly address rental property owners, GST and employers’ payment of superannuation guarantee.

Eligible small businesses with outstanding tax statements originally due 1 December 2019 to 29 February 2022, which lodge statements between 1 June 2023 and the end of the year, will receive an amnesty on non-lodgement penalties.

Additional funding will also enable the AustralianTaxation Office to pursue larger businesses and high-net-worth individuals with high-value tax debts and aged debts.

The bottom line: Wholesale tax reform was off the table, as expected, for this year. More money for the ATO is a clear message to tax practitioners: Swim between the flags.

Superannuation

Expected superannuation changes include to the non-arm’s length income provisions and 15% additional tax on superannuation balances higher than $3 million.

Employers will be required to pay super alongside wages and salaries, rather than on a quarterly basis, from 2026 – a change aimed at increasing future retirement incomes that will also enable faster compliance action for employers that do not pay super in a timely manner.

The IPA’s pre-budget submission called for a reduction in the penalties applied for non-payment or late payment, and we will continue to advocate against unjustifiably harsh penalties that disincentivise small businesses reporting and correcting non-compliance.

The bottom line: Super will be paid on the same day as wages and salaries rather than quarterly, penalties for non-payment and late payment remain onerous.

Cost-of-living (and of operating) package

For small businesses and their operators, the impact of the government’s $14.6 billion cost-of-living package is to be seen. What we know so far – energy cost subsidies for 5.5 million households and 1 million small businesses will make up around 10% of the total package. Eligibility and the level of subsidisation will vary across states and territories based on deals the Federal Government has struck with each and the package has been created with one eye on avoiding inflationary impact.

The bottom line: There will be some operational cost relief for small businesses but we can’t tell you which businesses will receive it or how much they will receive.

Small business energy incentive

As announced on 30 April, small businesses with revenue under $50 million will be supported to take up electrification and increase their energy efficiency, with a 20% bonus tax deduction for a range of energy-efficient upgrades.

Up to 3.8 million small businesses will be able to access the measure to help offset the cost of energy-efficient electrical goods, energy storage assets that support demand management, heat pumps, and electric heating and cooling.

Eligible businesses will be able to claim up to $100,000 of expenditure, for assets installed and ready for use during FY 2023-24.

The bottom line: Eligible small businesses may receive a maximum bonus tax deduction of $20,000 under this temporary measure.

Industry Growth Program

To promote growth in new products and services, a new $392.4 million Industry Growth Program will support Australian small to medium size enterprises and start ups to commercialise their ideas and grow their operations.

This recognises the important contribution SMEs make, and the role they play in transforming the Australian economy and creating new, high-skill jobs.

Support will be targeted towards businesses operating in the priority areas of the National Reconstruction Fund.

Concessional tax treatment for commercialisation of patents, previously announced in 2021-22 and 2022-23 – referred to as the ‘patent box’ measures – will not continue.

The bottom line: A new fund may promote innovation by the 1-2% of small businesses the Productivity Commission identified as new product and service producers, but the loss of the patent box measures will stifle commercialisation. The IPA has campaigned for and will continue to urge support for adoption and adaptation of new technologies aimed at increasing productivity.

Instant asset write-off with $20,000 threshold

While temporary full expensing will end 30 June 2023, the threshold will not immediately revert to the previous level of $1,000.

A temporary increase to the instant asset write-off threshold to $20,000 from 1 July 2023 to 30 June 2024 means that small businesses with revenue under $10 million will be able to write off the full value of eligible assets first used or installed ready for use during FY 2023-24.

The $20,000 threshold is per asset, and small businesses can immediately write off multiple assets that meet the criteria.

The bottom line: Temporary full expensing has not been extended, but the temporary threshold provides some relief.

PAYG and GST instalment uplift factor reduced

Providing a marginal cash flow benefit for small businesses, the PAYG instalment uplift factor will be reduced from 12% to 6%, halving the increase in their quarterly tax instalments for GST and income tax in FY 2023-24.

The bottom line: Cashflow relief for 2.1 million eligible small businesses.

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