What it Means For You
Treasurer Dr Jim Chalmers delivered his second Federal Budget last night, amidst an environment of high costs of living, wages growth and continued inflationary pressures.
He stated that his Budget was carefully crafted, purporting the Labor Government to be fiscally responsible and good economic managers, in response to ongoing criticisms from the Liberal Party that a Labor Government can be neither.
Dr Chalmers predicts a small ($4.2 billion) surplus for 2022/2023, before returning to (albeit smaller) deficits over the next few years. Thanks to increased tax receipts by virtue of low unemployment and increases in global resource prices, he had some unexpected income to play with which was heavily directed towards Labor’s voter base.
So, who are some of the winners & losers in this year’s Budget, and how will it impact you?
Individual taxpayers – while Dr Chalmers did not mention this in his Budget Speech, the Stage 3 personal tax cuts are still set to be implemented from 1 July 2024. The Medicare levy low-income threshold will also increase (backdated to 1 July 2022). [more]
Small Businesses (turnover < $10 million) – will still receive some depreciation concessions, as well as incentives to reduce energy costs & lower emissions. In addition, the GDP increase in PAYG Instalments will be halved, and a lodgement amnesty program will operate in the 7 months to 31 December 2023. [more]
Aged Care – the Government will fully fund wage increases for aged care workers, at a cost of $11.3 billion.
Child care – increases in the child care subsidy are slated to commence from 1 July 2023.
Indigenous communities – additional funding will be provided for various programs over the next 5 years to improve the lives and economic opportunities of Aboriginals & Torres Strait Islanders.
Jobseeker recipients – will receive a permanent increase of $40 per fortnight in their payments. As this equates to about $2.85/day, the Greens are already criticising this as not having gone far enough.
Pensioners, veterans, concessions card holders and people on government support payments – will be eligible to receive up to $500 in energy bill relief.
The gas industry – the Government expects to capture additional revenue, by making changes to the Petroleum Rent Resource Tax that are designed to capture LNG projects.
Truckies – will see a rise in the heavy vehicle road user charge of 6% per year for the next 3 years. Expect to see this have a knock-on effect on the price of goods transported by trucks.
Smokers & vapers – tobacco excise will increase by 5% each year over the next 3 years, disposable vapes will be banned and access to vapes as a quit smoking aid will only be available by prescription.
You win some you lose some
Superannuation – future changes to the timing of Superannuation Guarantee payments, and changes to the way some superannuation earnings are taxed, will be a win for some and a loss for others. [more]
The Medicare levy low-incomethresholds will be increased, backdated to 1 July 2022. This is designed to assist low income earners with cost of living pressures.
The stage-three tax cuts, legislated by the previous Government, are set to commence from 1 July 2024:
The top marginal tax rate of 45% will not apply until personal taxable income exceeds $200,000 (previously $180,000)
Taxpayers earning between $45,000 and $200,000 will all be taxed at the same flat (30%) rate (representing a tax saving of approximately $9,000 for individuals earning $200,000 per year)
The majority of cryptocurrency investors will be taxed on their trading on capital account i.e. cryptocurrency gains and losses will be subject to Capital Gains Tax (CGT) rules.
The ATO has data-matching capability in this area and is aware of who holds, or has sold, cryptocurrencies. If you are in the cryptocurrency space, please alert your client manager who can assist you in compiling the relevant information for your tax return.
Temporary Full Expensing Measures Remain In Place until 30 June 2023
The instant asset write-off concession will continue to be available to businesses with an aggregated annual turnover of <$5B, enabling them to deduct the full cost of new eligible depreciating assets acquired from 7.30 pm on 6 October 2020 and first used or installed ready for use by 30 June 2023.
Small and medium sized businesses (turnover <$50M) can also continue to deduct the full cost of second hand assets up to 30 June 2023.
Note that the maximum deduction for motor vehicles for FY23 is $64,741.
From 1 July 2023, “normal” depreciation rules will return – essentially, depreciating assets over their effective life for tax purposes but a new concession will be put in place for Small Businesses.
$20,000 Instant Asset Write-off for Small Businesses for the 2024 tax year
Small businesses (aggregated turnover of up to $10 million) will be able to claim an immediate deduction of up to $20,000 (per asset) for assets first used, or installed ready for use, in the period 1 July 2023 to 30 June 2024.
For all other assets acquired, normal depreciation rules will apply including the ability to place these assets in to a small business pool.
The “Base Rate Entity” Company Tax Rate remains at 25% for 2023 and future years
Companies that do not meet the “base rate entity” criteria will continue to be taxed at 30%.
Company Loss Carry-Back Measures Remain In Place for FY23
The loss carry-back provisions allow companies with aggregated turnover of <$5B who have paid tax in the past, but who are now in a tax loss position, to carry their tax loss back to the past years to obtain a tax refund.
Losses in FY20, FY21, FY22 & FY23 income years can be carried back to offset against taxable incomes from FY19 and subsequent years.
Companies can elect to claim the tax refund when they lodge their FY21, FY22 & FY23 tax returns.
The loss carried back must not be more than their earlier taxed profits.
The tax refund created by the carry-back cannot generate a franking account deficit. This means if the company has paid franked dividends that have used up the franking account balance the loss carry-back provisions cannot be utilised.
Note that companies do not have to adopt these carry back loss provisions and can still carry forward losses as usual.
Small Business lodgement penalty amnesty between June & December 2023
The ATO will not charge failure-to-lodge penalties to small businesses (turnover <$10 million) if they lodge outstanding tax returns and activity statements (that were originally due between 1 December 2019 and 29 February 2022) in the period 1 June 2023 to 31 December 2023. This is a great opportunity to catch up on any outstanding lodgements.
Small Business energy incentive – for businesses with a turnover of less than $50 million
An additional tax deduction will be available for businesses that acquire assets “that support electrification” e.g. energy efficient appliances and demand management assets.
The concession applies to assets first used, or installed ready for use, in the period 1 July 2023 to 30 June 2024.
The measure will allow an additional deduction of 20% of the cost of eligible assets. This is available on up to $100,000 of total expenditure, to give a maximum bonus tax deduction of $20,000. For base rate entities, this equates to a maximum tax reduction of $5,000.
The GDP increase applied to GST and PAYG Income Tax instalments will be halved – Reducing from 12% to 6%, for the 2024 income year, for small businesses AND for eligible individuals.
Effective 1 July 2023, the Super Guarantee contribution rate increases to 11% (then increases to 11.5% effective 1 July 2024).
Changes to the taxation of superannuation earnings from 1 July 2025
The tax concessions available on superannuation will be reduced, from 1 July 2025, for individuals with a total superannuation balance of more than $3 million.
Earnings corresponding to the proportion of an individual’s super balance that is more than $3 million will be taxed at 30% (up from 15%). This is still less than the top individual marginal tax rate of 45%.
Earnings relating to assets below the $3 million threshold will continue to be taxed at 15%, or 0% if the superannuation balance is in pension phase.
Changes to the frequency of Superannuation Guarantee payments from 1 July 2026
From 1 July 2026, employers will be required to pay their employees’ super guarantee contributions on the same day that they pay salary and wages. This is a massive change from the current requirement to pay contributions quarterly and will affect business cash flow.
Changes to the superannuation guarantee charge provisions (penalties for late payment of super contributions) will be made to align with the increased payment frequency
We see this as a “win” for employees, who will see their super contributions land in their Fund earlier, but may be a “lose” for employers, who will be faced with significant additional compliance costs and an extensive administration burden.
The bulk of Budget measures are aimed at welfare recipients and low income earners, with little in it for business, giving this Budget a very heavy social focus.
For more information on how this budget affects you and your business, please contact Jeni, Terry or your Sullivan Dewing client manager.