This budget is the second Albanese Government Federal Budget and aims to provide welcome relief on the cost of living for individuals and some surprises for small and medium businesses. Here are some of the key takeaways.
Small and Medium Enterprises (SMEs)
$20,000 Instant Asset Write Off (IAWO)
From 1 July 2023 until 30 June 2024, the Government will temporarily increase the IAWO threshold from $1,000 to $20,000, meaning that thousands of SMEs with an aggregated annual turnover of less than $10 million will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready to be used within this time frame.
This is a change to the current temporary full expensing rules, which have provided an immediate deduction the full costs of the asset since 6 October 2020.
New Energy Incentive for SMEs
The Government will support SMEs, with an aggregated annual turnover of less than $50 million, with the electrification of assets and improvements to energy efficiency, allowing SMEs to deduct an additional 20% of the cost of eligible depreciating assets (up to $20,000). Eligible assets must be used or installed ready for use between 1 Jul 2023 and 30 June 2024.
Lodgement Penalty Amnesty Program
SMEs with an aggregated annual turnover of less than $10 million are being encouraged to re-engage with the tax system. The Government will be remitting the failure-to-lodge penalties for outstanding income tax statements from the period 1 December 2019 to 29 February 2022. These must be lodged between 1 June 2023 to 31 December 2023 to be eligible.
Lowering the tax instalment rate for small business (Change to GDP rate) for 2023-2024 tax year
The Government will be decreasing the GDP adjustment factor from 12% to 6% for the coming tax year. This is hoped to provide cash flow support for SMEs and individuals who use the PAYG instalment methods.
Individual Tax Rates
Stage 3 cuts
No changes announced to the already legislated Stage 3 personal income tax cuts. These will commence as expected on 1 July 2024.
Low and Middle Income Tax Offset (LMITO) and Low-income Tax Offset (LITO)
No extension has been announced by the Government, therefore the offset will no longer be available after the 2021 – 2022 income year. No extension to the LMITO means individual taxpayer refunds for 2022 – 2023 may be decreased by up to $1,500 compared to the 2021 – 2022 income year.
Increase in Medicare levy for low-income thresholds
As of 1 July 2022, the Government will increase the Medicare Levy for low-income thresholds for singles, families, seniors and pensioners. Increases in the thresholds aim to provide cost-of-living relief so that low-income individuals continue to be exempt from paying the Medicare Levy.
Superannuation
Changes to Superannuation for individuals
Earnings on total Superannuation balances exceeding $3 million are to be taxed at a rate of 30% as of 1 July 2025. Earnings below the $3 million threshold will continue to be taxed at 15%, or 0% if held in a retirement pension account.
Increasing the frequency of superannuation guarantee payments
As of 1 July 2026, employers will be required to pay their employee’s superannuation guarantee entitlements on the same day as paying their salary and wages. This is a change from the current requirements of paying the superannuation guarantee on a quarterly basis.
Other Budget Features
FBT Electrical Car Discount
As discussed in our blog on 6 March 2023, FBT and Electric Vehicles, the FBT exemption for electric vehicles will cease on 1 April 2025
We hope that the above has given you a quick insight to the key features from the budget that we feel will affect our clients.
As always, if you would like to discuss how the Budget might impact your finances, don’t hesitate to contact our office on 02 6260 4994 or email reception@gillespieadvisory.com.au
Information in this article has been sourced from the Budget Speech 2023-24 and Federal Budget Support Documents.
It is important to note that the policies outlined in this publication are yet to be passed as legislation and therefore may be subject to change.