The Albanese Government has handed down its second Federal Budget which contains a range of measures. The following is a snapshot of the more relevant tax and superannuation related measures.
Instant asset write-off threshold temporarily increased to $20,000
The Government has announced that it will temporary increase the prescribed instant asset write-off threshold from $1,000 to $20,000, effective from 1 July 2023 and ending on 30 June 2024.
Small businesses with aggregated annual turnover of less than $10 million will be able to immediately deduct the full cost of eligible depreciable assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2024.
The $20,000 threshold will apply on a per asset basis.
Small businesses that have previously opted out of the simplified depreciation regime and are prevented from re-entering can now do so to take advantage of the increased threshold. 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 assist businesses in relation to smaller items, whilst winding back the levels of the existing write-off concession.
Small Business Energy Incentive (SBEI)
Small and medium businesses, with aggregated annual turnover of less than $50 million will be able to access an additional 20% deduction of the cost of eligible depreciating assets that support electrification and more efficient use of energy. The bonus deduction is capped at $20,000 and applies to eligible assets first used or installed ready for use between 1 July 2023 and 30 June 2024. We can see situations where this could be used in conjunction with the instant asset write off to effect an immediate 120% deduction.
Varying the GDP uplift factor for PAYG and GST instalments
The PAYG and GST instalment GDP adjustment factor will be set at 6% (rather than 12%) for the 2023–24 income year and applies to businesses and individual taxpayers who are eligible to use the relevant instalment methods with an annual aggregated turnover of up to :
- $10 million – for GST instalments; and
- $50 million – for PAYG instalments.
This will soften the cash flow impact of these instalments for affected taxpayers.
Fringe Benefits Tax – Electric car discount amendment
The Government will sunset the eligibility of plug-in hybrid electric cars from the fringe benefits tax exemption for eligible electric cars. This change will apply from 1 April 2025. Arrangements involving plug-in hybrid electric cars entered into between 1 July 2022 and 31 March 2025 remain eligible for the Electric Car Discount. So, employees may still be able to salary package any plug-in hybrid electric car purchased before 1 April 2025 under a novated lease arrangement without a FBT liability if the arrangement was entered into between 1 July 2022 and 31 March 2025. This is so notwithstanding that the lease period continues beyond this date.
Superannuation – Additional 15% tax on superannuation balances above $3 million
The Government has announced that from 1 July 2025, individuals with total superannuation balances (TSB) above $3 million will be subject to an additional 15% tax for earnings corresponding to the proportion of an individual’s total superannuation balance that is greater than $3 million. Earnings will be calculated by reference to the difference in TSB at the start and end of the financial year, adjusting for withdrawals and contributions. The calculation of earnings thus includes all notional (unrealised) gains and losses, meaning cash flow management will become critical for affected taxpayers.
Superannuation – Payment frequency of the superannuation guarantee (SG)
From 1 July 2026, employers will be required to pay their employees’ SG entitlements on the same day that they pay salary and wages. Currently, employers are only required to pay their employees’ SG on a quarterly basis. A 1 July 2026 commencement date will allow employers to make necessary system changes and adjust their cash flow practices.
Superannuation — NALI provisions
The Government will amend the non-arm’s length income (NALI) provisions which apply to expenditure incurred by superannuation funds by:
- limiting income of self-managed superannuation funds and small Australian Prudential Regulation Authority (APRA) regulated funds that are taxable as NALI to twice the level of a general expense. Additionally, fund income taxable as NALI will exclude contributions;
- exempting large APRA-regulated funds from the NALI provisions for both general and specific expenses of the fund; and
- exempting expenditure that occurred prior to the 2018–19 income year.
Capping the amount of NALI to twice the expense amount is an improvement to the consultation paper proposed cap of five times. However, SMSF trustees will still need to ensure that related party dealings are at arm’s length, given that any non-arm’s length expenditure could still result in a significant tax bill.
Expanding the Part IVA general anti-avoidance rule
The scope of the general anti-avoidance rule for income tax in Part IVA of the ITAA 1936 will be expanded to apply to schemes that:
- reduce tax paid in Australia by accessing a lower withholding tax rate on income paid to foreign residents;
- achieve an Australian income tax benefit, even where the dominant purpose was to reduce foreign income tax.
This measure will apply to income years commencing on or after 1 July 2024, regardless of whether the scheme was entered into before that date.
Small Business Lodgement Penalty Amnesty
A lodgement penalty amnesty program is being provided for small businesses with aggregate turnover of less than $10 million. The amnesty will remit failure to lodge penalties for outstanding tax statements that were originally due during the period from 1 December 2019 to 29 February 2022 and which are lodged between 1 June 2023 to 31 December 2023.
Taxpayers and practitioners should check the due date of lodgements of outstanding Business Activity/Instalment Activity statements to assess whether these are covered by the amnesty. Based on a 29 February 2022 due date, it seems Quarter 2 (Oct-Dec 21) BAS/IAS, and FY2021 annual GST return would be the last tax statements covered by the amnesty if these are lodged between the proposed prescribed period for lodgement.
Despite the amnesty, practitioner and taxpayers should continue to meet their lodgement obligations so as to minimise their exposure for late lodgement penalty relating to later periods. It is also worth noting for FY2021 income tax returns on a lodgement program that have a later lodgement due date other than 29 February 2022, the amnesty is not available, thus the necessity for continue monitoring of lodgement obligations.
Whilst the Budget measure for the amnesty is restricted to small business with aggregate turnover of less than $10 million, we note that the ATO factsheet QC 72506 states that the amnesty will not apply to privately owned groups, or individuals controlling over $5 million net wealth. Assuming the Budget measure is intended to exclude high net wealth taxpayers with over $5 million net wealth, practitioners/taxpayers may need to assess whether they could potentially be excluded from the amnesty notwithstanding that they satisfy the aggregated turnover threshold.