In today’s blog, we’ll highlight what tax changes have been made by the government. Let’s check out:

From the Government

Budget 2023-24

Federal budget 2023-24 will be released on 9 May 2023, Tuesday. This should be an interesting one as it is a mid-term budget. The primary focus is the cost of living, but on this, the government makes an effort to maintain a balance by easing pressure without maximising inflation.

Measures set to expire:

  • Temporary full expensing is set to expire on 30 June 2023. Now, it’s time to see whether the budget extends this measure, potentially with some strict parameters, or whether the government will come up with new measures targeting small businesses.
  • $1,500 low and middle-income tax offset – According to the government, this measure will not be extended.

New measures announced:

  • The small business energy incentive encourages small and medium businesses with a total turnover of below $50 million to invest in spending that supports “electrification” and the effective use of energy. A total expenditure of up to $100,000 will be eligible for the incentive with the maximum bonus tax deductions of $20,000 per business. Eligible assets will be required to be first used or ready to use between 1 July 2023 and June 30, 2024, to be eligible for the bonus deduction.
  • Starting on July 1, 2023, individuals who have not owned a home for at least ten years and joint applications from “friends, siblings, and other family members” will be eligible for the government’s Home Guarantee Scheme.
  • There will be a 30% tax on earnings where a superannuation fund member has a balance over $3m.

A number of unresolved challenges for accountants and advisors exist heading into the Budget:

  • Technology and training boosts – The former government announced in the federal budget for 2022–2023 that it will grant some business taxpayers “bonus” tax credits for spending money on employee training or enhancing digital operations. With the Skills and Training Boost, small businesses (with a combined annual revenue of less than $50 million) would be able to deduct 120% of eligible costs for employee external training between March 29, 2022, and 30 June 2024. With the Technology Investment Boost, eligible costs incurred to enhance digital operations or digitise business operations would be eligible for a 120% deduction. This could involve paying for depreciating assets. The increase is limited to a maximum bonus deduction of $20,000 and is intended for expenses incurred between March 29 and June 30, 2022. The legislation permitting both boosts has not passed Parliament. The outcome of the Senate enquiry appears to support the possibility in the Budget to broaden the range and type of incentives.
  • Division 7A – To streamline the Division 7A application in the 2017-18 and 2018-19 federal budgets, sweeping reforms were announced. In October 2018, the consultation paper released by the Treasury explained a number of new changes that might be applied to Division 7A. While the changes were due to start from 1 July 2019, in the 2019-20 federal budget, the government declared that that start date would be deferred until 1 July 2020. After some time, the government announced that changes will apply from the start of the first income year beginning after the Bill containing the changes receives Royal Assent.
  • Residency of SMSFs – The new change was announced in the 2021–22 Budget that the central control and management test safe harbour for SMSFs would be extended from two to five years, and the active member test would be eliminated for both fund types. The policy, originally scheduled to go into effect on July 1, 2022, has been postponed to the income year beginning on or after the date the enabling law received Royal Assent.

Country-By-Country Reporting Consultation

In exposure draft legislation, there have been additional public country-by-country reporting needs mentioned for large multinational groups. It needs the parent entity of multinational groups to release selected tax information on an Australian Government website. The details to be released could include:

  • Main business activities’ description
  • The number of employees
  • Revenue from related parties
  • Before income tax, profit and loss
  • Income tax paid
  • Effective tax rate
  • Expenditures from related party transactions

Tracking Superannuation Fund Performance

To conduct an annual performance test for MySuper products, APRA is required. Under the performance test, the assessment is likely to hold registrable superannuation entities (RSE) licensees in order to account for under-performance.

The regulations make a few changes to the operations of the performance test, including increasing the range of investments that are covered and can be added to the performance test, extending the lookback period from 8 to 10 years, changing the form content required to be delivered to members where the fund doesn’t pass the test, and some other changes.