Last night’s Budget was a bit of a mixed bag. It delivered the first surplus since before the Global Financial Crisis but was more focused on easing the cost-of-living pressures then making any meaningful reform to the taxation system.
Below are some of the highlights of items that were either announced last night or have been previously announced by the Government and now will form part of policies they will try to get through Parliament.
- Taxing of higher superannuation balances: The Government will reduce tax concessions on certain superannuation accounts for individuals with a ‘total super balance’ (TSB) of more than $3 million (unindexed). The calculated earnings on any balance that exceeds the $3 million threshold will be subject to an additional tax of 15%. The proposed start date for the change is 1 July 2025
- Increasing the payment frequency of employer super payments: Employers will be required to pay their employees’ super at the same time as their salary and wages from 1 July 2026. We expect the Government to work with payroll software companies and Superfund clearing houses to come up with a solution for this.
No changes to personal income tax: The Budget did not contain any measures announcing changes to personal income tax. This includes:
- no changes to the Stage 3 tax cuts which are still due to take effect from 1 July 2024, and
- no extension of the Low and Middle Income Tax Offset, which ended 30 June 2022.
Small business taxation
- Small Business Energy Incentive: Small businesses with an annual turnover of less than $50 million may receive an additional 20% deduction on spending that supports electrification and more efficient use of energy. Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business. Eligible assets or upgrades will need to be first used or installed and ready for use between 1 July 2023 and 30 June 2024. Examples of eligible assets include electrifying heating and cooling systems, upgrading to more efficient fridges and induction cooktops, and installing batteries and heat pumps, but not power generating assets such as solar panels.
- $20,000 instant asset write-off: Small businesses with an annual turnover of less than $10 million will also be eligible to immediately deduct the full cost of eligible assets costing less than $20,000 for assets that are first used or installed ready for use between 1 July 2023 and 30 June 2024. Small businesses can instantly write off multiple assets as the $20,000 threshold will apply on a per asset basis. This reverts to the pre-COVID system where eligible businesses will need to elect to use the simplified depreciation system.
Cost of living
- Energy bill relief: An electricity bill credit of up to $500 will be available in 2023/24 for:
- Commonwealth Seniors Health Card holders and other concession card holders
- Recipients of Carer Allowance and Family Tax Benefit A and B
- Veterans, and
- those eligible for existing State and Territory electricity concession schemes.
- Eligible small businesses will receive a credit of up to $650. The amount of the credit will vary depending on the location, with no further details revealed in the Budget.
- Changes to eligibility for home buyer guarantee schemes: From 1 July 2023, joint applications may be made by friends, siblings and other family members under the First Home Guarantee and the Regional First Home Buyer Guarantee. Non-first home buyers who have not owned a property in Australia in the last ten years will also be eligible. Eligibility for the Family Home Guarantee is also expanding to include eligible borrowers who are single legal guardians of children such as aunts, uncles and grandparents.
- Build to rent: The Government will increase the rate of a tax deduction for Capital Works from 2.5% to 4% for new projects where construction commences after 7:30pm on 9 May 2023
If you would like more information on any of the budget announcements that may affect your business, reach out to your Maxim advisor today.