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$20,000 Small Business Instant Asset Write-Off

Small businesses with a total turnover of less than $10m can deduct the full cost of eligible depreciating assets of less than $20,000 used or installed ready for use between July 1, 2023, and June 30, 2024.

“Immediately deductible” denotes the ability to claim a tax deduction for an item in the same tax year that it was acquired, utilised, or installed and made ready for use.

The cost of the asset, less any GST credits that may be claimed for the asset, must be less than $20,000 if the business is GST registered. It is $20,000 plus GST if the company isn’t registered for GST. A small business can write off the cost of several assets because the write-off is per asset.

The regulations are limited to assets that are covered by the depreciation provisions. Capital expenditures for building improvements that fall under the capital works regulations are unlikely to be eligible. Assets worth $20,000 or more that are not eligible for immediate deduction can be added to the simplified depreciation pool for small businesses. These assets can be depreciated at a rate of 15% in the first year and 30% in subsequent years.

The suspension of regulations that prohibit small businesses from returning to the simplified depreciation system for five years after opting out will remain in effect until June 30, 2024. This is significant for small business entities that left the simplified depreciation system to avoid applying the temporary full expensing rules to particular assets.

The announcement serves as a confirmation that the temporary full expensing rules, allowing an immediate deduction for the full cost of assets purchased since October 6th, 2020, will expire on June 30th, 2023. As the deadline approaches, small business entities looking to acquire depreciable assets costing $20,000 or more, as well as business entities with a combined turnover of $10 million or more, should be aware of this cutoff date.

$20,000 Small Business Incentives for Energy Efficiency

The Small Business Energy Incentive, as announced earlier, offers a 20% extra deduction on the cost of qualifying depreciating assets that aid in the adoption of energy-efficient practices and electrification. The maximum allowable bonus deduction is $20,000, with total expenses of up to $100,000 qualifying for the incentive. This incentive is open to small and medium-sized enterprises with a combined annual revenue of less than $50 million. Qualified assets will require to be installed ready or first used between July 1, 2023, and June 30, 2024, to be eligible for the bonus deduction.

Reducing Tax Instalments for Small Businesses

Using a GDP adjustment, GST and PAYG instalments can be adjusted. In 2023-24, the reduction had been imposed by the government to 2% instead of the 10% rate that would have applied. For the upcoming 2023-24 period, the government has decided to apply an adjustment or uplift factor of 6%, rather than the 12% rate that was originally planned.

Small to medium businesses that meet the eligibility criteria for instalment methods for the 2023-24 income year and have instalments due after the enactment of the amended legislation will be subject to an uplift rate of 6%:

  • Up to $10m annual total turnover for GST instalments, and
  • $50m annual total turnover for PAYG instalments.

‘Payday’ Super – Maximising Payment Frequency of Employee Super

Starting from 1st July 2026, employers will be required to make super guarantee payments to their employees on the same day as their wages and salaries are paid. Currently, SG is paid quarterly. The government will consider a consultation process while aiming to provide details of the final design of the measure in the federal budget 2024-25.

Exclusion of Hybrid Cars from FBT Exemption for Electric Cars

There will be the exclusion of plug-in hybrid electric cars from the FBT exemption for qualified electric cars from 1 April 2025. As long as the employer has a financial obligation to continue providing the car for private use beyond April 1, 2025, arrangements made between July 1, 2022, and March 31, 2025, can still qualify for the FBT exemption, provided that the exemption has been applied to the car before April 1, 2025.

Franked Distributions that are Funded by Capital Raisings Start Date

In 2016-17, the Government announced that it would prevent shareholders from getting the benefit of franking credits associated with dividends that are funded by capital raisings. Under the measure, distribution paid by an entity will be treated as being funded by capital raising if:

  • There is no consistency in the distribution with an established entity’s practice of making distributions of that type on a daily basis
  • In the entity, the issue of equity interests
  • It is appropriate to conclude, having regard to all suitable circumstances, that either:
    • the principal effect of the issue of any equity interests was to indirectly or directly fund all or part of the distribution, or
    • an entity that facilitated the issue of interest did so with the aim of funding all or part of the distribution.

The suggested modifications aim to prohibit the utilisation of contrived setups where funds are gathered to finance franked dividends for shareholders, thereby facilitating the dispersal of franking credits. The government has reservations that such setups could entail manipulation of the system, enabling current shareholders to acquire the advantages of both franking credits and the profits that led to the creation of those credits remaining within the company.

The proposed amendments would result in direct or indirect recipients of affected dividends losing their entitlement to a tax offset, and the franking credit amount would not be considered part of the recipient’s assessable income. Moreover, the dividends would not be exempt from non-resident withholding tax. The original measure was supposed to be implemented on 19 December 2016, but it has been postponed to 15 September 2022. These changes are part of the Treasury Laws Amendment (2023 Measures No. 1) Bill 2023, which was presented to Parliament on 16 February 2023.

Tax Breaks for Build-To-Rent Developments

The Government has announced that it is currently making efforts to provide more incentives for build-to-rent developments. Starting from 7:30 pm AEST on May 9th, 2023, the Government will offer additional benefits for qualifying new build-to-rent projects that commence construction.

  • Increase capital works tax deduction rate from 2.5% to 4% p.a.
  • Reduction in the final withholding tax rate on qualified fund payments from managed investment trust (MIT) investments from 30% to 15%.

The regulation pertains to developments constructed for rental purposes, which involve a minimum of 50 apartments that are accessible for public renting. These units must remain under the ownership of a single entity for a minimum of ten years before they can be sold, and landlords must offer a lease of at least three years for each dwelling. The reduced withholding tax rate for residential build-to-rent will be effective starting from 1 July 2024. The administration will go through a discussion process to determine the particulars of the implementation, which may include the least proportion of units that must be made available as affordable rentals and the duration that the units must remain under single ownership.

Cost of Tobacco to Increase from September

Increase the cost of tobacco excise and excise-equivalent customs duty by 5% per year for 3 years from September 1, 2023. Apart from this, the duty on products liable to the per kilogram excise and excise-equivalent customs duty will increase.

15% Multi-National Global and Domestic Minimum Tax

The implementation will be done by the government for the OECD’s Two Pillar Solution introducing:

  • A 15% global minimum tax for large multinational companies with the income inclusion rule applying to income years commencing on or after January 1, 2024, and the undertaxed profits rule applying to income years commencing on or after January 1, 2025.
  • A 15% domestic minimum tax applies to income years commencing on or after January 1, 2024.

Heavy Vehicle User Charge Increase

The heavy vehicle road user charge rate increased from 27.2 cents per litre of diesel over three years from 2023-24 to 32.4 cents per litre in 2025-26.

Changes in Tax Law for general Insurers

A new accounting standard, AASB17 Insurance Contracts, has caused a misalignment between tax law and accounting standards. General insurers can use audited financial reporting information based on the new standard for tax returns through a legislative amendment.

Clean Building MIT Withholding Tax Concession Extended

From 9 May 2023, eligible data centres and warehouses that meet the energy efficiency standard can get the MIT withholding tax concession. New and existing clean buildings will need a minimum 6-star rating, and the Government will consult on the transition for existing buildings.

Exploration and Mining, Quarrying and Prospecting Rights Tax Treatment

The Government will change the Petroleum Resource Rent Tax (PRRT) to specify that only discovering and identifying the petroleum resource counts as exploration. Depreciation deductions for mining and prospecting rights will only apply when they are used.

Bringing Forward Tax on Natural Gas

The government will amend PRRT to limit deductions and introduce integrity measures for the offshore LNG industry. This will increase receipts by $2.4bn over 5 years from 2022-23 and ATO will get $4.4 million to ensure compliance. Consultation on the changes will happen later in 2023.

Critical Technology Industry Support

Critical technology development will be supported with $116 million over five years. This includes helping companies implement quantum and artificial intelligence (AI) technology into their processes by:

  • The Critical Technologies Challenge Program is aimed at backing initiatives that leverage critical technologies to address major national issues. Initially, the program will prioritise projects that utilise quantum computing.
  • Expand National AI Center to promote responsible AI usage.
  • Create the Australian Center for Quantum Growth to boost the quantum industry.
  • Aid SMEs in adopting AI tech for better business and trade competitiveness.
Support for Child Care Workforce

Various measures will support the Early Childhood Education and Care (ECEC) sector including:

  • Up to 75,000 additional early childhood instructors can be hired with the help of $34.4 million over a five-year period, along with training for teachers and directors.
  • Up to 6,000 educators may receive $33.1 million in financial help over a five-year period in order to participate in paid practicum for initial teacher education courses at the bachelor’s or master’s level.
  • Up to 2,000 ECEC employees can participate in a practical exchange at a separate agency for $4.8 million.
15% Pay Increase for Aged Care Workers

Over the next 5 years, $515m will fund a 15% wage increase for various aged care workers, including nurses, assistants, and cooks, following the Fair Work Commission’s decision. However, the residential aged care provision ratio will temporarily decrease from 78 to 60.1 places per 1,000 people aged over 70.

Postponed Streamlining Excise Administration for Fuel and Alcohol

The start date has been delayed to 1 July 2024 to streamline fuel and alcohol excise compliance.

Film Industry Location Offset

The Location Offset rebate rate will go up to 30% to lure big-budget screen productions and create local job and training chances. The Qualifying Australian Production Expenditure minimums will also increase to $20m for feature films and $1.5m per hour for TV series.

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