The end of Temporary Full Expensing (“TFE”) and the new $20,000 Instant Asset Write-Off (“IAWO”)
The TFE measures previously implemented will end for all eligible assets installed and ready for use on 30 June 2023. Small businesses with an aggregated turnover of less than $10 million will be able to immediately deduct the full cost of eligible assets less than $20,000 that are installed and ready for use between 1 July 2023 to 30 June 2024. At present, it is expected that after 30 June 2024, the IAWO threshold will reduce to just $1,000.
Small Business Energy Incentive
Small and medium businesses (businesses with aggregated turnover less than $50 million) are able to deduct an additional 20% off the cost of eligible depreciating assets that support electrification and more efficient use of energy.
A range of depreciating assets, as well as upgrades to existing assets will be eligible for the Small Business Energy Incentive. These will include assets that:
- Upgrade to more efficient electrical goods (energy-efficient fridges)
- Assets that support electrification (heat pumps and electric heating or cooling systems)
- Demand management assets (such as batteries or thermal energy storage)
Full details of eligibility criteria are yet to be finalised.
Eligible assets will need to be first used/installed ready for use between 1 July 2023 and 30 June 2024.
Halving the increase in quarterly tax instalments
The government has announced a planned amendment to the tax law regarding the adjustment factor for pay as you go (PAYG) and Goods and Services Tax (GST) instalments. Currently, the statutory formula sets the GDP adjustment factor at 12%, but the government intends to reduce it to 6% for the 2024 income year. This reduction aims to provide cash flow support to small businesses and other PAYG instalment taxpayers.
The revised 6% GDP adjustment rate will apply to eligible small businesses and individuals who use the relevant instalment methods. For GST instalments, this applies to entities with aggregated annual turnover up to $10 million, while for PAYG instalments, it applies to those with aggregated annual turnover up to $50 million. The reduced adjustment factor will be effective for instalments that relate to the 2024 income year and are due after the enabling legislation receives Royal Assent.
Lodgment penalty amnesty program
A lodgment penalty amnesty program is being provided for small businesses with an aggregated turnover of less than $10 million. The amnesty will remit failure-to-lodge penalties for outstanding tax statements lodged in the period from 1 June 2023 to 31 December 2023 that was originally due during the period from 1 December 2019 to 28 February 2022. If you are a small business that has outstanding tax lodgements during the above period, now is the time to get up to date.
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, employers are only required to pay their employees’ superannuation guarantee on a quarterly basis
Capital allowances – Accelerating the capital works tax deduction for ‘Build-To-Rent Developments’
For eligible new build-to-rent projects where construction commences after 7:30pm (AEST) on 9 May 2023 (Budget night), the Government will increase the rate for the capital works tax deduction to 4% per year.
This measure will apply to build-to-rent projects consisting of 50 or more apartments or dwellings made available for rent to the general public. The dwellings must be retained under single ownership for at least 10 years before being able to be sold and landlords must offer a lease term of at least three years for each dwelling.
There are also state based land tax reductions available for the above schemes.
Please contact our team here at Roberts + Morrow if you need any further clarification on how the budget will impact small businesses.