Summary of tax and superannuation measures
On Tuesday, 9 May 2023, Treasurer Jim Chalmers handed down the 2023-24 Federal Budget, his 2nd Budget, which follows the October 2022 Budget.
Here are the tax-related measures announced.
Tax-related measures for small business
- Instant asset write-off for small businesses: $20K threshold for 2023-24
The Government will temporarily increase the instant asset write-off threshold to $20,000 from 1 July 2023 to 30 June 2024. Small businesses, ie those with aggregated annual turnover of less than $10 million, will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2024.
The $20,000 threshold will apply on a per asset basis, so small businesses can instantly write off multiple assets. Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business
simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year thereafter.
- Small Business Energy Incentive: 20% bonus deduction
The Budget papers confirmed that the Small Business Energy Incentive will provide 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. This measure was originally announced by the Treasurer on 30 April 2023.
The Small Business Energy Incentive will apply to a range of depreciating assets and upgrades to existing assets. These will include 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.
However, certain exclusions will apply, such as:
– Electric vehicles
– Renewable electricity generation assets
– Capital works
– Assets that are not connected to the electricity grid and used fossil fuel
Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business.
Date of effect
Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024.
- Small business lodgment penalty amnesty; integrity measure to target unpaid tax and super
The Government announced that a lodgment penalty amnesty program will be provided for small businesses with aggregate turnover of less than $10 million to encourage them to re-engage with the tax system.
The amnesty 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.
Integrity measure to target unpaid tax and super
The Government will also provide funding from 1 July 2023 over four years to assist the ATO to engage more effectively with businesses to address the growth of tax and superannuation liabilities
The additional funding will facilitate ATO engagement with 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.
- PAYG and GST instalment uplift factor: 6% for 2022-23
The Budget papers state that the GDP uplift factor for PAYG and GST instalments will be set at 6% for the 2023-24 income year. The papers state that this uplift factor is lower than the 12% that would have applied under the statutory formula.
The 6% GDP uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods (up to $10 million annual aggregated turnover for GST instalments and $50 million annual aggregated turnover for PAYG instalments) in respect of instalments that relate to the 2023-24 income year and fall due after the enabling legislation receives assent.
This measure is estimated to have no net impact on receipts.
- FBT rules for Electric Vehicles; rules for plug-in hybrids to sunset
The Budget papers state that the Government will sunset the eligibility of plug-in hybrid electric cars from the FBT exemption for eligible electric cars. This change will apply from 1 April 2025.
Arrangements involving plug-in hybrid electric cars entered into between 1 July 2022 and 31 March 2025 remain eligible for the Electric Car Discount.
It can be noted that while the Government seems to be stating that it will implement the sunset, this measure is already enacted by the Treasury Laws Amendment (Electric Car Discount) Act 2022. This was the result of a Senate amendment put forward by Senator Pocock and the Greens.
The other amendment that made it to the amending Act was that a review must be undertaken in 2025 to determine the effectiveness of the measures it contains.
- GST compliance program extended by 4 years
The Government will provide $588.8 million to the ATO over four years from 1 July 2023 to continue a range of activities that promote GST compliance.
These activities will ensure businesses meet their tax obligations, including accurately accounting for and remitting GST, and correctly claiming GST refunds. Funding through this extension will also help the ATO develop more sophisticated analytical tools to combat emerging risks to the GST system.
Impact on budget bottom line
This measure is estimated to increase GST receipts by $3.8 billion, and other tax receipts by $3.8 billion, over the five years from 2022-23.
- Super fund NALI to be capped at twice general expense under NALE rules
The non-arm’s length income (NALI) provisions in s 295-550 of the ITAA 1997, as they apply to non-arms length expenses (NALE), will be amended to limit the income taxable as NALI to twice the level of a general expense for SMSFs and small APRA funds.
In addition, fund income taxable as NALI will exclude contributions to effectively exempt significant APRA-regulated funds from the NALI provisions for the fund’s general and specific expenses. Expenditure that occurred prior to the 2018-19 income year will also be exempted.
These proposed changes follow industry concerns regarding the ATO’s interpretation of the NALE provisions in Law Companion Ruling LCR 2021/2, and the implications of the ruling for both APRA-regulated funds and SMSFs.
Date of effect
Not specified. However, a Government consultation paper, previously released on 23 January 2023, indicated that any proposed legislative amendments in relation to the NALE rules would apply from 1 July 2023 (following the expiry of the ATO’s transitional compliance approach for general expenses (PCG 2020/5) for the period 2018-19 to 2022-23).
- Super tax changes for account balances above $3m confirmed, but no further details
The Government confirmed its intention to implement superannuation tax changes for individuals with account balances above $3 million from 1 July 2025, including in relation to defined benefit schemes.
However, the Budget Papers did not reveal any further details other than to note its estimate that the measure will increase receipts by $950m, and increase payments by $47.6m, over the five years from 2022-23.
This includes $50m in receipts associated with updating the notional contribution calculation methodology, applicable to all defined benefit members. In 2027-28, the first full year of receipts collection, the measure is expected to increase receipts by $2.3bn.
- Super to be paid on employees’ payday from 1 July 2026; more funding to catch non-payers
The Budget papers confirmed the Government’s intention to require all employers to pay their employees’ super guarantee at the same time as their salary and wages from 1 July 2026. This payday super measure was initially announced by the Treasurer on 2 May 2023.
While there are scant details in the Budget papers, Treasury and the ATO are expected to consult closely with industry and stakeholders on these changes in the second half of 2023. The final design will be considered as part of the 2024-25 Budget.
- Super pensions: No reduction in minimum drawdowns for 2023-24
The Budget did not announce a further extension to 2023-24 of the temporary 50% reduction in the minimum annual payment amounts for superannuation pensions and annuities. As a result, the 50% reduction in the minimum pension drawdowns, which has applied for the 2019-20, 2020-21 and 2021-22 and 2022-23 income years, is set to end on 30 June 2023.
Accordingly, superannuation trustees and members will need to start planning for the additional cash flow requirements to satisfy the minimum annual payment amounts for 2023-24 in relation to account-based, allocated and market-linked pensions.
Minimum drawdowns for 2023-24
Minimum payments are determined by the age of the beneficiary and the value of the account balance as of 1 July each year under Sch 7 of the SIS Regs.
The relevant percentage factor is based on the age of the beneficiary on 1 July in the financial year in which the payment is made (or on the commencement day if the pension commenced in that year).
|Age of beneficiary (years)||Standard percentage factor (%) 2023-24|
No maximum annual payments apply, except for transition to retirement pensions, which have a maximum annual payment limit of 10% of the account balance at the start of each financial year
- Personal tax rates unchanged for 2023-24; Stage 3 start from 2024-25 unchanged
Rates and thresholds – summary
|Rate||2022-23 and 2023-24 (unchanged)||From 1.7.2024 (unchanged)|
|Nil||$0 – $18,200||$0 – $18,200|
|19%||$18, 201 – $45,000||$18,201 – $45,000|
|30%||N/A||$45,001 – $200,000|
|32.5%||$45,001 – $120,000||N/A|
|37%||$120,001 – $180,000||N/A|
|Low and middle income tax offset (LMITO)||N/A||N/A|
|Low income tax offset (LITO)||Up to $700||up to $700|
- Low-income tax offsets – LMITO not extended beyond 2021-22
The 2023-24 Budget did not announce any extension of the low and middle-income tax offset (LMITO) beyond the 2021-22 income year. The LMITO has now ceased and been entirely replaced by the low-income tax offset (LITO) – see below.
With no extension of the LMITO announced in the Budget, the LMITO remains legislated to only apply until the end of the 2021-22 income year. As a result, low-to-middle income earners may see their tax refunds from July 2023 reduced by between $675 and $1,500 (for incomes up to $90,000 but phasing out up to $126,000), all other things being equal.
- Low income tax offset for 2023-24 (unchanged)
The LITO will continue to apply for the 2023-24 income year and beyond. The LITO was intended to replace the former low-income and low and middle-income tax offsets from 2022-23, but the new LITO was brought forward in the 2020 Budget to apply from the 2020- 21 income year.
- Medicare levy low-income thresholds for 2022-2023
For the 2022-23 income year, the Medicare levy low-income threshold for singles will be increased to $24,276 (up from $23,365 for 2021-22). For couples with no children, the family income threshold will be increased to $40,939 (up from $39,402 for 2021-22).
The additional amount of threshold for each dependent child or student will be increased to $3,760 (up from $3,619). For single seniors and pensioners eligible for the SAPTO, the Medicare levy low-income threshold will be increased to $38,365 (up from $36,925 for 2021-22).
The family threshold for seniors and pensioners will be increased to $53,406 (up from $51,401), plus $3,760 for each dependent child or student.
- Medicare levy exemption for lump sum payments in arrears from 1 July 2024
The Government will exempt eligible lump sum payments in arrears from the Medicare levy from 1 July 2024. The measure seeks to ensure low-income taxpayers do not pay higher amounts of the Medicare levy as a result of receiving an eligible lump sum payment, for example as compensation for underpaid wages.
Eligibility requirements will ensure that relief is targeted to taxpayers who are genuinely low-income and should be eligible for a reduced Medicare levy. To qualify, taxpayers must be eligible for a reduction in the Medicare levy in the two most recent years to which the lump sum accrues. Taxpayers must also satisfy the existing eligibility requirements of the existing lump sum payment in arrears tax offset, including that a lump sum accounts for at least 10% of the taxpayer’s income in the year of receipt.
Date of effect will be on 1 July 2024.
The information above is sourced from IFPA Federal Budget Report
The full Budget Papers can be found at www.budget.gov.au