TaxRambling.com

Another Budget and before the Treasurer has finished his speech, we have finished reading the budget papers and know that almost every change to tax and super was announced before Budget night.

But there were three main announcements that we were not aware of: 

$20k instant asset write-off for small businesses (under $10m aggregate turnover)

The current unlimited instant asset write-off for businesses with a turnover of less than $50 million is being slashed to only covering assets up to $20,000, and that only being available to entities with an aggregated annual turnover of less than $10 million. 

If you have a client who have between $10 million and $50 million in turnover, to get an instant asset write off they need have the asset installed ready for use by the coming 30 June. After this there will be no instant write-off. Further, if your client has less than $10 million in aggregate turnover, but the asset is costing more than $20,000, to get an immediate write off the asset again must be installed by the coming 30 June.

And just a reminder for businesses with aggregated turnover of less than $10 million, the pooling rules will once again apply to assets valued at $20,000 or more. These assets can be placed into the small business simplified depreciation pool and depreciated at

15 per cent in the first income year and 30 per cent each income year thereafter.

Lodgment penalty amnesty program

A lodgment penalty amnesty program going to be provided for small businesses (aggregate turnover under $10 million). The Commissioner will remit failure-to-lodge penalties for outstanding tax statements lodged in the period from 1 June 2023 to 31 December 2023 that were originally due during the period from 1 December 2019 to 29 February 2022.

GDP adjustment factor for pay as you go and GST instalments down to 6%

The Government will amend the tax law to set the GDP adjustment factor for pay as you go and GST instalments at 6% for the 2023–24 income year, down from 12%.

Confirming the leaks… that the Government made before the budget

Often the Government leaks out what will be in the budget, but this year the Treasurer leaked many of the changes by releasing press releases on the changes weeks before the Budget night.

The first of these leaks was that for eligible new build-to-rent projects, where construction commences after 9 May 2023, the Government will both increase the rate for the capital works tax deduction under Division 43 from 2.5% to 4% and they will reduce the final withholding tax rate for MIT investments from 30% to 15%.

The second of these pre budget leaks was that, from 1 July 2026, employers will be required to pay their employees’ SG entitlements on the same day that they pay salary and wages.

The third leak is the most interesting. They are proposing to add another “boost” to the already existing education boost and the digital adoption boost. Under this “energy incentive” boost, businesses with aggregated annual turnover of less than $50 million, will be able to deduct an additional 20% of the cost of eligible depreciating assets that support electrification and more efficient use of energy. The maximum bonus deduction under this is capped $20,000, and it will only be applicable to the 2024 tax year.

This means that if you have clients who are going to buy assets that upgrade to more efficient electrical goods 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, they should do this in the 2024 tax year to get this additional deduction. 

And the final confirmed leak is that the Government will amend the Petroleum Resource Rent Tax to introduce a cap on the use of deductions to offset assessable PRRT income of liquefied natural gas producers.

Re-announcing things again for the second time

Like every budget, the Government includes in the budget a list of previous announcements. These include:

• Changing the date of the tax integrity measure stopping franked distributions funded by capital raisings from 19 December 2016 to 15 September 2022.
  
• Amend the non-arm’s length income provisions which apply to expenditure incurred by superannuation funds by limiting income of SMSFs that are taxable as non-arm’s length income to twice the level of a general expense – which is down from the  five times penalty from the initial Government proposal.
  
• Implement a sunset the eligibility of plug-in hybrid electric cars from the fringe benefits tax exemption for eligible electric cars from 1 April 2025.

They of course also re-announce the additional tax they are proposing to apply to those with super balances over $3 million starting form 1 July 2025, stating that in the first full year of this change applying, they expect it to collect an additional $2.3 billion.

More money to review our tax returns

It would not be a budget without promises of more funding to the ATO to collect more tax. 

For example the Government will provide $89.6 million to the ATO for the Personal Income Tax Compliance Program that will increase receipts by $474.9 million and increase payments by $90.8 million over the 5 years.

The Government will also extend funding for the Serious Financial Crime Taskforce and Serious Organised Crime program to increase receipts by $279.5 million and increase payments by $256.6 million.

The additional funding will also be provided to the ATO to go after taxpayers who have high-value debts over $100,000 and aged debts older than two years where those taxpayers are either public and multinational groups with an aggregated turnover of greater than $10 million, or privately owned groups or individuals controlling over $5 million of net wealth.

Also, the Government will provide $588.8 million to the ATO over 4 years to continue a range of activities that promote GST compliance, which will increase GST receipts by $3.8 billion over 5 years.

Other interesting stuff

Some other announcements that we should at least be aware of include:

• The Government will introduce legislation to allow general insurers to use audited financial reporting information, which is calculated according to a new accounting standard, as the basis for their tax returns. 
  
• The Government will extend the clean building managed investment trust withholding tax concession to data centres and warehouses.
  
• The Government will exempt eligible lump sum payments in arrears from the Medicare levy from 1 July 2024 (as it always should have been).
  
• The Government is still looking to apply a global minimum tax to entities with over $1.2 billion in world-wide turnover.

• The Government will amend the general anti-avoidance rule in Part IVA so that it can apply to schemes that reduce withholding tax rate on income paid to foreign residents and schemes that reduce foreign income tax.

And that’s it for another Budget. See you again in May 2024.