Accounting and TaxFederal Budget

Federal Budget 2023 and impacts to small business

May McGarva May McGarva
10 May 2023
4 min read

10 May 2023

Described by ABC’s Business Editor, Ian Verrender as a ‘here comes the sun’ budget, Federal Budget 2023 centred on easing cost of living pressures for families, advancing gender equity, boosting primary health care funding and saw the delivery of our first budget surplus in 15 years. It also included some modest initiatives for small businesses.

Small business instant asset write-off

The depreciation rules post 1 July have been the subject of much anticipation as the doors close on the temporary full expensing rules this 30 June. Last night’s budget announcement contained a more modest depreciation concession, mirroring the pre-COVID-19 days.

The proposed measure will cap the instant asset write-off threshold to $20,000 per asset. These rules apply until 30 June 2024, and only businesses with a turnover of less than $10 million will be eligible. Assets costing greater than this threshold can be depreciated in a Small Business pool at 15% in year one, followed by 30% each remaining year.

Larger businesses turning over greater than $10 million will lose the generous depreciation concessions brought in during COVID-19 and will return to standard depreciation based on the effective life of the asset.

Stage 3 tax cuts to proceed

There is no change to the previously legislated tax cuts that will come into effect in the 2024 financial year. Despite being subject to much debate around the ongoing appropriateness of these tax cuts post COVID-19, the Government has indicated their intent to retain these tax cuts is to address bracket creep.

Cost of living relief for small business

A big focus of the budget has been measures to ease the cost of living pressures. Some relief in this area has also been offered to small businesses in the form of an energy rebate of up to $650 per annum. This will be delivered as a reduction in electricity bills to eligible businesses.

Incentives to accelerate the transition to electrification and energy efficient equipment

The Government is proposing a Small Business Energy Incentive in the form of a bonus 20% tax deduction on assets that support electrification or energy efficiency.

Businesses with a turnover of less than $50 million can claim the bonus on investments made during 2023/24 of up to $100,000, capping the additional bonus at $20,000 per business.

New assets and upgrades to existing assets will be eligible and are expected to include:

  • Installation of batteries

  • Upgrade to high-efficiency electrical equipment

  • Assets that support electrification, like electric heat pumps

The measure is not expected to apply to electric vehicles or solar generation assets.

FBT exemption for plug-in hybrid electric cars

The FBT exemption for plug-in hybrid electric cars will end on 1 April 2025. Any arrangements entered into between 1 July 2022 and 31 March 2025 will continue to remain eligible for the FBT exemption.

The current FBT exemption for Hydrogen and Battery Electric Vehicles is expected to remain in place.

Change to employer super requirements

From July 2026, employers will be required to pay their employer superannuation at the same time as employee payroll, rather than quarterly.

Additional tax on super balances over $3m

The Government has reiterated its intention to push forward with the previously proposed tax changes for individuals with superannuation balances over $3m. This measure which will apply an additional 15% tax on the earnings attributed to the balance over $3m is intended to commence in the 2025/26 year.

Additional funding for GST and tax compliance

The Government is proposing extended funding to expand and better target GST and income tax non-compliance and address the growth of businesses’ tax and superannuation debts. From this, we can expect to see more data matching activities, ATO audits and reviews and greater levels of ATO engagement with taxpayers with debts greater than $100,000 or older than two years.

In a surprise move, a late lodgement penalty amnesty is proposed for lodgements between 1 June 2023 and 31 December 2023 to encourage small businesses to re-engage with the tax system.

What initiatives didn’t rate a mention in the 2023 Federal Budget?

The previously proposed skills and training and digital technology boost that was proposed in the 2022 budget by the Liberal government has gone by the wayside.

Check out the full coverage from the Federal Budget 2023/24 here.

The views and opinions expressed in this article are those of the author/s and do not necessarily reflect the thought or position of Findex Group Limited.

May McGarva
Author: May McGarva | Senior Client Manager