$20,000 small business instant asset write-off

From

1 July 2023 to 30 June 2024

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 that are first used or installed ready for use between 1 July 2023 and 30 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 ready for use). 

If the business is registered for GST, the cost of the asset needs to be less than $20,000 after subtracting the GST credits that can be claimed for the asset.  If the business is not registered for GST, it is $20,000 including GST.

The write-off applies per asset, so a small business can deduct the cost of multiple assets.

The rules only apply to assets that fall within the scope of the depreciation provisions. Expenditure on capital improvements to buildings that falls within the scope of the capital works rules is not expected to qualify.

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 5 years if they opt-out will continue to be suspended until 30 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 effectively confirms that the temporary full expensing rules, which have provided an immediate deduction for the full cost of assets acquired from 6 October 2020, will come to an end on 30 June 2023. Small business entities that are considering acquiring depreciating assets with a cost of $20,000 or more and business entities with aggregated turnover of $10 million or more should keep this cut-off date in mind as 30 June 2023 approaches.

$20,000 small business incentives for energy efficiency

Date

1 July 2023 to 30 June 2024

As previously announced, 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 aggregated annual turnover of less than $50 million.

While the full detail of what qualifies for the incentive is not yet available, it is expected to apply to a range of depreciating assets and upgrades to existing assets such as electrifying heating and cooling systems, upgrading to more efficient fridges and induction cooktops, and installing batteries and heat pumps.

Some exclusions will apply including electric vehicles, renewable electricity generation assets, capital works, and assets that are not connected to the electricity grid and use fossil fuels.

Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024 to qualify for the bonus deduction.

 

Lowering tax instalments for small business

For

2023-24

Normally, 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 applied. And now for 2023-24, the Government has set the uplift factor to 6% instead of the 12% rate that would have applied.

The 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.
Payday’ super - Increasing payment frequency of employee super

Date

1 July 2026

As previously announced, from 1 July 2026, employers will be required to pay their employees’ super guarantee entitlements on the same day that they pay salary and wages.

Currently, SG is paid quarterly.

The Government will undertake a consultation process with the aim of providing details of the final design of the measure in the 2024-25 Federal Budget.

Hybrid cars excluded from FBT exemption for electric cars

Date

1 April 2025

As previously announced, plug-in hybrid electric cars will be excluded from the fringe benefits tax (FBT) exemption for eligible electric cars from 1 April 2025.

Arrangements entered into between 1 July 2022 and 31 March 2025 can remain eligible for the FBT exemption as long as the exemption applied to the car before 1 April 2025 and the employer has a financially binding commitment to continue providing private use of the car on and after this date.

Franked distributions funded by capital raisings start date

Date

15 September 2022

In 2016-17, the Government announced that it would seek to prevent shareholders from taking advantage of franking credits attached to dividends that are funded by capital raisings. The Budget confirms the Government’s intention to pursue this measure with a revised start date of 15 September 2022.

Under the measure, a distribution (dividend) paid by an entity will be treated as being funded by capital raising if:

  • The distribution is not consistent with an established practice of the entity of making distributions of that kind on a regular basis;
  • There is an issue of equity interests in the entity; and
  • It is reasonable to conclude, having regard to all relevant circumstances, that either:
    • The principal effect of the issue of any of the equity interests was to directly or indirectly fund all or part of the distribution; or
    • An entity that issued or facilitated the issue of the interests did so for a purpose of funding all or part of the distribution.

The proposed changes seek to prevent the use of artificial arrangements where capital is raised to fund the payment of franked dividends to shareholders and therefore enable the distribution of franking credits. The Government is concerned that these arrangements can involve a manipulation of the system to allow existing shareholders to obtain the benefit of both the franking credits and the profits that generated those credits being retained in the company.

The effect of the proposed amendments is that direct or indirect recipients of affected dividends are not entitled to a tax offset, and the amount of the franking credit is not included in the assessable income of the recipient. The dividends are also not exempt from non-resident withholding tax.

The application date of the original measure was to be 19 December 2016. It has now shifted to 15 September 2022.

This measure is contained in Treasury Laws Amendment (2023 Measures No. 1) Bill 2023, which was introduced to Parliament on 16 February 2023.

Tax breaks for build-to-rent developments

As previously announced, the Government is actively sweetening the deal for build-to-rent developments.

For eligible new build-to-rent projects where construction commences after 7:30pm AEST on 9 May 2023, the Government will:

  • Increase the rate for the capital works tax deduction (depreciation) from 2.5% to 4% p.a.
  • Reduce the final withholding tax rate on eligible fund payments from managed investment trust (MIT) investments from 30% to 15%.

The measure applies to build-to-rent projects where 50 or more apartments are made available to rent to the general public. The dwellings must be retained under single ownership for at least 10 years before being able to be sold and landlords must offer a lease term of at least 3 years for each dwelling.

The reduced MIT withholding tax rate for residential build-to-rent will apply from 1 July 2024. The Government will work through a consultation process to determine implementation details, including any minimum proportion of dwellings being offered as affordable tenancies and the length of time dwellings must be retained under single ownership.

Cost of tobacco to increase from September

From

1 September 2023

The tobacco excise and excise-equivalent customs duty will increase by 5% per year for 3 years from 1 September 2023 in addition to ordinary indexing.

In addition, the duty on products subject to the per kilogram excise and excise-equivalent customs duty (i.e., roll-your-own tobacco), will increase. The ‘equivalisation weight’ will be progressively lowered from 0.7 to 0.6 grams on 1 September each year from 2023, with the new weight coming fully into effect from 1 September 2026.

The measure is expected to increase receipts by $3.3bn and increase GST payments to the states and territories by $290m over the 5 years from 2022-23.

15% multi-national global and domestic minimum tax

The Government will implement key aspects of the OECD’s Two Pillar Solution introducing:

  • A 15% global minimum tax for large multinational enterprises with the Income Inclusion Rule applying to income years starting on or after 1 January 2024 and the Undertaxed Profits Rule applying to income years starting on or after 1 January 2025.
  • A 15% domestic minimum tax applying to income years starting on or after 1 January 2024.

The tax is based on the OECD Global Anti-Base Erosion Model Rules, which are designed to ensure large multinationals pay an effective minimum level of tax on the income arising in each jurisdiction where they operate.

The global minimum tax rules would allow Australia to apply a top up tax on a resident multinational parent or subsidiary company where the group’s income is taxed below 15%.

The global minimum tax and domestic minimum tax will apply to large multinationals with annual global revenue of EUR750 million (approximately $1.2 billion) or more.

Heavy vehicle user charge increase

From

2023-24

The Heavy Vehicle Road User Charge rate from 27.2 cents per litre of diesel by 6% per year over 3 years from 2023-24 to 32.4 cents per litre in 2025-26.

Tax law changes for general insurers
From 1         January 2023

The introduction of the new accounting standard, AASB17 Insurance Contracts, by the Australian Accounting Standards Board, has meant that the tax law is no longer aligned with accounting standards. A legislative amendment will be made to enable general insurers to continue to use audited financial reporting information, which is calculated according to the new standard, as the basis for their tax returns.

Clean building MIT withholding tax concession extended

From

1 July 2025

The clean building managed investment trust (MIT) withholding tax concession will be extended to eligible data centres and warehouses that meet the relevant energy efficiency standard, where construction commences after 7:30pm AEST on 9 May 2023.

This measure will also raise the minimum energy efficiency requirements for existing and new clean buildings to a 6-star rating from the Green Building Council Australia or a 6-star rating under the National Australian Built Environment Rating System. The Government will consult on transitional arrangements for existing buildings.

Tax treatment of exploration and mining, quarrying and prospecting rights
From Expenditure incurred from 21 August 2013

As previously announced, the Government will amend the Petroleum Resource Rent Tax (PRRT) to clarify that ‘exploration for petroleum’ is limited to the ‘discovery and identification of the existence, extent and nature of the petroleum resource’ and does not extend to ‘activities and feasibility studies directed at evaluating whether the resource is commercially recoverable’.

From

7:30pm AEST, 9 May 2023

The tax treatment of depreciation deductions for mining, quarrying and prospecting rights will also be clarified to ensure that deductions will only commence when they are used (not merely held).

Bringing forward tax on natural gas

As previously announced, the Government will amend the Petroleum Resource Rent Tax (PRRT) to limit deductions and introduce a series of integrity measures for the offshore LNG industry. Consultation on the changes will occur later in 2023.

This measure is estimated to increase receipts by $2.4bn over the 5 years from 2022-23. The ATO will also be provided with $4.4 million to administer and ensure compliance.

Picking winners: Hydrogen industry

Over $2bn has been committed to accelerate the development of Australia’s hydrogen industry, catalyse clean energy industries, and help Australia connect to new global hydrogen supply chains.

The Hydrogen Headstart program will provide revenue support for investment in renewable hydrogen production through competitive production contracts, including funding for the Australian Renewable Energy Agency and the Department of Climate Change, Energy, the Environment and Water to support the development and operation of the program.

In a separate program, $38.2m has been provided for a Guarantee of Origin scheme, which will certify renewable energy and track and verify emissions from clean energy products – in particular hydrogen from 2023-24.

Critical technology industry support

From

2022-23

$116m over 5 years will support the development of critical technologies. This includes support for businesses to integrate quantum and artificial intelligence (AI) technologies into their operations through:

  • A Critical Technologies Challenge Program supporting projects that use critical technologies to solve significant national challenges, and will commence with a focus on projects that use quantum computing
  • Extending the National AI Centre and its role in supporting responsible AI usage
  • Establishing an Australian Centre for Quantum Growth to support ecosystem growth and commercialisation in Australia’s quantum industry
  • Supporting SME’s adoption of AI technologies to improve business processes and increase trade competitiveness.

In addition, a Powering Australia Industry Growth Centre will develop advanced technology and skills as part of the Government’s Australian Made Battery Plan.

Support for child care workforce

From

2022-23

A series of measures will support the Early

Childhood Education and Care (ECEC) sector including:

  • 4m over 5 years to subsidise ECEC services to backfill up to 75,000 early childhood educators, and training for teachers and directors.
  • $33.1m over 5 years for financial assistance for up to 6,000 educators to undertake a paid practicum in initial teacher education courses at a bachelor or post-graduate level.
  • $4.8m for up to 2,000 ECEC workers to undertake a practicum exchange at a different service.
15% pay increase for Aged Care Workers

From

2022-23

$515m over 5 years will be provided to fund the outcome of the Fair Work Commission’s decision on the Aged Care Work Value Case – increasing award wages by 15% from 30 June 2023 for many aged care workers including registered nurses, enrolled nurses, assistants in nursing, personal care workers, home care workers, recreational activity officers, and some head chefs and cooks.

The increase will be partially offset by a temporary reduction in the residential aged care provision ratio from 78 places to 60.1 places per 1,000 people aged over 70 years.

Scrapped ‘Patent Box’ regime

The Patent Box regime was to provide a concessional effective corporate tax rate of 17% on income derived from patents, to the extent that the taxpayer undertakes the R&D of that patent in Australia. The patent box tax regime was originally announced for the medical and biotech industries, and later extended to agriculture and emissions.

All ‘patent box’ measures have now been scrapped.

Delayed Streamlining excise administration for fuel and alcohol

From

1 July 2024

The start date for the 2022-23 March Budget measure to streamline fuel and alcohol excise compliance has been pushed back to 1 July 2024.

Film industry location offset

To attract investment from large-budget screen productions and provide domestic employment and training opportunities, the Location Offset rebate rate will increase to 30%, whilst increasing the minimum Qualifying Australian Production Expenditure thresholds to $20m for feature films and $1.5m per hour for television series.