2023/24 Federal Budget

The 2023-24 Federal Budget contained a number of tax and superannuation measures with some inclusions to support small businesses.

Small Business Measures

Instant Asset Write Off

The Government has decided not to extend Temporary Full Expensing (TFE) past 30 June 2023. Instead, the Government proposes to allow a $20,000 Instant Asset Write Off (IAWO) for the 2023/24 income year. Further, the $20,000 IAWO will be limited to entities with an aggregated turnover of less than $10 million (i.e. SBEs). For non-SBE entities, the IAWO will revert back to $1,000.

Small Business Energy Incentive

In line with the Government’s commitment to energy efficiency measures, a bonus deduction of 20% will be allowable for entities with an aggregated turnover of less than $50 million for a range of depreciating assets and upgrades to existing assets such as energy-efficient fridges, assets that support electrification such as heat pumps and electric heating or cooling systems, and demand management assets such as batteries or thermal energy storage.

However, 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.

Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business.

For businesses to maximise deductions under both the IAWO and the 20% bonus deduction, expenditure on assets costing up to $20,000 should provide the optimal outcome. That is, the IAWO should allow a deduction for such asset up to $20,000 and the bonus deduction should allow another deduction up to $4,000 (being 20% of $20,000). The total deduction for an eligible asset costing just under $20,000 should therefore be approximately $24,000.

Personal Tax Measures

Medicare Levy Changes

The Government will exempt eligible lump sum payments in arrears from the Medicare levy for certain low-income taxpayers from 1 July 2024.

There are some specific eligibility requirements in terms of taxpayers being eligible for Medicare reductions in the previous two years and meeting the general conditions for the lump sum in arrears tax offset.

Medicare levy thresholds have also been slightly increased for the 2023 tax year across all taxpayer groups.

Other Measures

Build to Rent Incentives

A tax measure to be introduced to assist with Australia’s housing supply problem is the build-to-rent concession which will:

• Increase the rate for the capital works tax deduction to 4% per year; and
• Reduce the final withholding tax rate on payments from Managed Investment Trusts from 30% to 15%.

However, in order to qualify as an eligible build-to-rent project, construction of 50 or more apartments or dwellings which are made available for rent to the general public.  The dwelling must also be retained under single ownership for at least 10 years before being sold AND landlords must offer a lease term of at least 3 years for each dwelling.

This is targeted to large property developers who will commit to build large scale residential developments and rent their properties for at least 10 years.

Energy bill relief

In conjunction with the WA state budget, households and businesses will receive credits of $400 and $650 respectively, which will be automatically applied to their power bills.

Increasing payment frequency of superannuation guarantee

From 1 July 2026 employers will be required to pay their employees’ superannuation guarantee on the same day they pay salary and wages, rather than quarterly.

Increasing the frequency of super contributions by aligning the payment date with salary payments is expected to increase retirement incomes of employees through greater compounding returns over time.

If you have any questions in relation to the budget measures, please contact our office.