2023/2024 Budget Update
On 9 May 2023, Treasurer Jim Chalmers handed down the 2023/24 Federal Budget.
Some of the measures announced by the Government (including some which were actually announced prior to the Budget), include:
from 1 July 2026, employers will be required to pay their employees’ superannuation at the same time as their salary and wages;
providing businesses with annual turnover of less than $50 million with an additional 20% deduction on spending that supports electrification and more efficient use of energy (the 'Small Business Energy Incentive'); and
increasing the capital works tax deduction depreciation rate for eligible new build-to-rent projects from 2.5% to 4% per year.
In addition to these, one of the most important aspects of this Budget was that the Government has provided some further depreciation relief for small businesses once temporary full expensing comes to an end on 30 June 2023.
Specifically, from 1 July 2023 until 30 June 2024, the Government will temporarily increase the instant asset write-off threshold for small businesses (with an aggregated annual turnover of less than $10 million) from $1,000 to $20,000. Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool.
Also, the provisions that prevent small businesses from re-entering the simplified depreciation regime for five years if they opt-out will continue to be suspended until 30 June 2024.
Other important measures the Government announced include:
amending (and limiting) the non-arm’s length income (‘NALI’) provisions which apply to expenditure incurred by superannuation funds;
reducing the tax concessions available to individuals with a total superannuation balance exceeding $3 million; and
exempting lump sum payments in arrears from the Medicare levy.
Builder Knowing the rules for accessing Superannuation
The ATO has reminded SMSF trustees that their SMSF must be operated for the sole purpose of providing retirement benefits for its members. This means SMSF trustees can’t use funds from their SMSF to pay for personal or business expenses. This is known as 'illegal early access' of superannuation, and severe penalties apply.
The ATO also reminds SMSF trustees that there are rules regarding what they can invest in when dealing with a related party.
The ATO has recently released a factsheet to help SMSF trustees understand the rules on accessing their superannuation, and make sure they (and their business, if any) comply with the rules surrounding SMSFs.
In the ATO's sights this tax time
The ATO has announced its three key focus areas for this Tax Time:
rental property deductions;
work-related expenses; and
capital gains tax.
ATO Assistant Commissioner Tim Loh said the ATO is continuing to prioritise areas where they often see mistakes being made:
"Within these areas, we have identified common mistakes, and are particularly focused on addressing these and supporting taxpayers and registered tax agents to get their claims right this year."
However, the ATO also recognises that many people are "doing it tough" this year, and expects fewer people will receive a refund, or they may receive smaller refunds than they were expecting, and more may have tax debts to manage.
Mr Loh also recommends that any taxpayers feeling overwhelmed, or getting behind with their tax, should let the ATO know as early as possible or "have a chat with your registered tax agent so we can work with you to find a solution. Don’t bury your head in the sand".
Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.