The key Budget Measures for our clients to be aware of are summarised below. The full client newsletter can be found here.

‍Instant Asset Write Off

To 30 June 2023, small business asset purchases can be claimed as a tax deduction in full, there is no cost limit. E.g. A new vehicle delivered before 30 June 2023 for $55,000 including GST, you get the $50,000 as a tax deduction this year plus a $5,000 GST credit in your June 23 BAS (if GST registered).

This was a temporary measure, the rules by default are set at $1,000. The budget will temporarily increase the instant asset write-off threshold from $1,000 to $20,000. This applies 1 July 2023 until 30 June 2024. This means the tax deduction for the same car purchased next year would be 15% of $50,000 = $7,500 in the year of purchase, $12,750 in year 2, etc.

The rules limit this concession to businesses with annual turnover of less than $10 million. Temporary full expensing rules for non small businesses expires 30 June 2023.

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New Energy Incentive for small businesses

Small and medium businesses (turnover< $50m) will be able to deduct an additional 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 for the Small Business Energy Incentive, with the maximum bonus deduction being $20,000.

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.

Eligible assets will need to be first used between 1 July 2023 and 30 June 2024.

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

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"Payday super" - Increasing the frequency of superannuation guarantee payments‍

From 1 July 2026, employers will be required to pay their employees’ superannuation guarantee entitlements on the same day that they pay salary and wages. Currently, SG is legally required to be paid quarterly. We already recommend clients do this for easier cashflow management given the simplicity of this using xero. (and using staff super to fund business cashflow is the last creditor you should be doing this with for a number of reasons)

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Earnings for superannuation balances above $3 million taxed at 30%

From 1 July 2025, the Government will reduce the tax concessions available to individuals with a total superannuation balance exceeding $3 million. Individuals with a total superannuation balance of less than $3 million will not be affected.

It will bring the headline tax rate to 30%, up from 15%, for earnings corresponding to the proportion of an individual’s total superannuation balance that is greater than $3 million. This rate remains lower than the top marginal tax rate of 45%.

Earnings relating to assets below the $3 million threshold will continue to be taxed at 15% in accumulation phase, or 0% if held in a retirement pension account.

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Extending the compliance program for personal income tax, debt engagement, super guarantee, GST compliance

The Government will provide funding to the ATO to audit more tax risk areas, such as deductions relating to:

> rental property deductions - The ATO is particularly focused on interest expenses and ensuring rental property owners understand how to correctly apportion loan interest expenses where part of the loan was used for private purposes (or the loan was re-financed with some private purpose. Also including short-term rental properties to ensure they are genuinely available to rent.

> work-related expenses - avoiding 'copy paste' - now taxpayers are working at the office more, plus changes to deduction rules, ensuring WFH deductions are accurate.

> capital gains tax (CGT) - when you dispose of assets such as shares, crypto, managed investments or properties. Generally, your main residence is exempt from CGT, however if you have used your home to produce income, such as renting out all or part of it through the sharing economy, for example Airbnb or Stayz, or running a business from home, then CGT may apply.

> from 1 July 2023, a new reporting regime will require electronic distribution platforms to report their transactions to the ATO. The regime starts with ride sharing and short-term accommodation platforms, then extends to all other platforms, including OnlyFans, from 1 July 2024.

> Banks will be required to hand the ATO residential investment loan data on property owners for the period from 2021-22 through to 2025-26. Plus the ATO will require rental property software providers to provide details of property owners including income, expenses, etc. Data collection will cover the period from 2018-19 to 2022-23.

> The Government will provide funding over four years to enable the ATO to engage more effectively with businesses to address the growth of tax and superannuation liabilities, to improve data matching capabilities of superannuation guarantee underpayment by employers, to continue a range of activities that promote GST compliance.

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‍The legislated stage 3 tax cuts legislated to take effect on 1 July 2024 remain in place. Stage 3 radically simplifies the tax brackets by collapsing the 32.5% and 37% rates into a single 30% rate for those earning between $45,001 and $200,000.

There was no mention of the loss carry back rules for companies, suggesting that these rules will expire on 30 June 2023.

The Budget also doesn't refer to either the Skills and Training Boost or the Technology Investment Boost. These measures, announced by the previous Government, would provide a bonus deduction equal to 20% of qualifying expenditure if the legislation containing these measures is passed in its current form. They are not yet passed. The Technology Investment Boost is aimed at expenditure incurred between 30 March 2022 and 30 June 2023. The Skills and Training Boost is aimed at expenditure incurred between 30 March 2022 and 30 June 2024.

‍First Home Guarantee Scheme – guarantees part of a first home owner’s home loan enabling them to purchase a home with as little as 5% deposit without paying Lenders Mortgage Insurance. Guarantee capped at 15% of the value of the property. 35,000 places are available to the scheme per year. This program has been expanded to include friends and family members.

Family Home Guarantee Scheme – guarantees the home loan of an eligible single parent with at least one dependent child enabling them to purchase a home with as little as 2% deposit without paying Lenders Mortgage Insurance. Guarantee capped at 15% of the value of the property. 5,000 places are available to the scheme each year to 30 June 2025

‍An Industry Growth Program will support SMEs and start-ups to commercialise their ideas and grow their operations (businesses operating in the National Reconstruction Fund are a priority). The program has $392.4 million over 4 years and is aiming to open late in 2023, more info here.‍