2023-24 Federal Budget – Businesses | Individuals | Superannuation

The Federal Treasurer, Dr Jim Chalmers, handed down the 2023–24 Federal Budget at 7:30 pm (AEST) on 9 May 2023.

The full Budget papers are available at www.budget.gov.au. The following provides the key points in relation to business, individuals and superannuation:

Business

Small business depreciation — instant asset write-off threshold of $20,000 for 2023–24

The instant asset write-off threshold for small businesses applying the simplified depreciation rules will be $20,000 for the 2023–24 income year.

Small businesses (aggregated annual turnover less than $10 million) may choose to calculate capital allowances on depreciating assets under a simplified regime in Subdiv 328-D of ITAA 1997. Under these simplified depreciation rules, an immediate write-off applies for lowcost depreciating assets. The measure will apply a $20,000 threshold for the immediate write-off, applicable to eligible assets costing less than $20,000 first used or installed 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 low-cost assets. The threshold had been suspended during the operation of temporary full expensing from 6 October 2020 to 30 June 2023.

Assets costing $20,000 or more will continue to be placed into a small business depreciation pool under the existing rules.

The provisions that prevent a small business entity from choosing to apply the simplified depreciation rules for 5 years after opting out will continue to be suspended until 30 June 2024.

Source: Budget Paper No 2, pp 27–28.

Increased deductions for small and medium business expenditure on electrification and energy efficiency

An additional 20% deduction will be available for small and medium business expenditure supporting electrification and energy efficiency.

The additional deduction will be available to businesses with aggregated annual turnover of less than $50 million. Eligible expenditure may include the cost of eligible depreciating assets, as well as upgrades to existing assets, that support electrification and more efficient use of energy. Certain exclusions will apply, including for electric vehicles, renewable electricity generation assets, capital works, and assets not connected to the electricity grid that use fossil fuels.

Examples of expenditure the measure will apply to include:

• • assets that upgrade to more efficient electrical goods (eg energy-efficient fridges)
  • assets that support electrification (eg heat pumps and electric heating or cooling systems), and
  • demand management assets (eg batteries or thermal energy storage).

Total eligible expenditure for the measure will be capped at $100,000, with a maximum additional deduction available of $20,000 per business.

When enacted, the measure will apply to eligible assets or upgrades first used or installed ready for use between 1 July 2023 and 30 June 2024. Full details of eligibility criteria will be finalised in consultation with stakeholders.

Sources: Budget Paper No 2, p 28; Treasurer’s press release Small Business Energy Incentive”, 30 April 2023

FBT exemption for eligible plug-in hybrid electric cars to end

The FBT exemption for eligible plug-in hybrid electric cars will end 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 exemption.

This measure was originally introduced in the Treasury Laws Amendment (Electric Car Discount) Act 2022.

Source: Budget Paper No 2, p 25.

Franked distributions funded by capital raisings — start date postponed

The start date of a measure to prevent franked distributions funded by certain capital raisings announced in the 2016–17 Mid-Year Economic and Fiscal Outlook (MYEFO) has been postponed to 15 September 2022.

Certain distributions funded by capital raisings made on or after 15 September 2022 will be prevented from being frankable. The measure ensures such arrangements cannot be put in place to release franking credits that would otherwise remain unused where they do not significantly change the financial position of the entity.

When originally announced, the 2016–17 MYEFO measure was to apply for distributions made after 12:00 pm (AEDT) on 19 December 2016.

The measure was introduced in sch 5 to the Treasury Laws Amendment (2023 Measures No 1) Bill 2023 with a revised application date of 15 September 2022, to align with the release of the exposure draft legislation for the measure on 14 September 2022. The Bill is currently before the Senate.

Source: Budget Paper No 2, p 13.

Individuals

Increased rate for income support payments

Income support payment base rates will be increased by $40 per fortnight.

The increase will apply to JobSeeker Payment, Youth Allowance, Parenting Payment (Partnered), Austudy, ABSTUDY, Disability Support Pension (Youth) and Special Benefit from 20 September 2023.

Sources: Budget Paper No 2, p 199; Budget Factsheet — Stronger foundations for a better future, p 17.

Expanded eligibility for higher Jobseeker Payment rate

The minimum age for which older people qualify for the higher JobSeeker Payment rate will be reduced from 60 to 55 years. This applies to those who have received the payment for 9 or more continuous months.

Eligible recipients will receive an increase in their base rate of payment of $92.10 per fortnight.

Sources: Budget Paper No 2, p 199; Budget Factsheet — Stronger foundations for a better future, p 17.

Workforce participation incentive measures extended

The workforce participation incentive measures to support pensioners who want to enter the workforce, or work more hours, without impacting their pension payments will be extended for another 6 months to 31 December 2023.

Originally announced in the Labor government’s 2022–23 Budget, the measure provides age and veterans pensioners a once-off credit of $4,000 to their Work Bonus income bank and temporarily increases the maximum income bank.

Under this measure, pensioners can earn up to $11,800 before their pension is reduced.

Source: Budget Paper No 2, p 201

Improved support for single parents

Eligibility for Parenting Payment (Single) will be extended to support single principal carers with a youngest child under 14 years of age.

The existing eligibility provides support to single principal carers with a child aged under 8 years of age.

Improved support for single parents will provide wellbeing benefits particularly for single mothers, who are overwhelmingly the recipients of this payment, and their children. This measure recognises that caring responsibilities can act as a barrier to employment while also recognising that connections with the labour force are likely to improve economic outcomes throughout a carer’s lifetime.

Source: Budget Paper No 2, p 202.

Increasing the supply of social and affordable housing and making it easier to buy a home

A number of housing measures will be introduced to increase support for social and affordable housing and improve access for home buyers, including:

• • increasing the Government-guaranteed liability cap of the National Housing and Finance Investment Corporation (NHFIC) by $2.0 billion to $7.5 billion to enable NHFIC to increase its support for social and affordable housing through loans from the Affordable
  • Housing Bond Aggregator
  • amending NHFIC’s Investment Mandate to require NHFIC to take reasonable steps to allocate a minimum of 1,200 homes to be delivered in each state and territory within 5 years of the Housing Australia Future Fund commencing operation
  • expand the eligibility of the Home Guarantee Scheme to:
  • allow any 2 eligible people to be joint applicants for a guarantee beyond spouses and de facto partners
  • allow non-first home buyers who have not owned a property in Australia for at least 10 years to access the First Home Guarantee and Regional Home Guarantee
  • allow a single legal guardian of children to access the Family Home Guarantee
  • allow Australian permanent residents to access the Scheme
  • redirecting interest earnings on unallocated NHFIC funds to support more social and affordable housing and delivery of housing priorities.

This measure expands on the Labor government’s 2022–23 Budget measure titled “Safer and More Affordable Housing”.

Source: Budget Paper No 2, p 212.

Increased support for Commonwealth rent assistance recipients

The maximum rates of the Commonwealth Rent Assistance (CRA) allowances will be increased by 15% to help address rental affordability challenges for CRA recipients.

Source: Budget Paper No 2, p 200.

Medicare low-income thresholds for 2022–23

The CPI indexed Medicare levy low-income threshold amounts for singles, families, and seniors and pensioners for the 2022–23 year of income have been announced. The new thresholds are:

Medicare levy low income threshold (at or below which no Medicare levy payable)

Source: Budget Paper No 2, p 22.

Exempting lump sum payments in arrears from the Medicare levy

Eligible lump sum payments in arrears will be exempt from the Medicare levy from 1 July 2024.

This measure will ensure low-income taxpayers do not pay higher amounts of the Medicare levy as a result of receiving an eligible lump sum payment, eg 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 2 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.

Source: Budget Paper No 2, p 22.

Superannuation

Reducing tax concessions for superannuation balances exceeding $3 million

Superannuation earnings tax concessions will be reduced for individuals with total superannuation balances in excess of $3 million.

From 1 July 2025, earnings on balances exceeding $3 million will incur a higher concessional tax rate of 30% (up from 15%) for earnings corresponding to the proportion of an individual’s total superannuation balance that is greater than $3 million. The change does not impose a limit on the size of superannuation account balances in the accumulation phase and it applies to future earnings, ie it is not retrospective.

Earnings relating to assets below the $3 million threshold will continue to be taxed at 15%, or zero if held in a retirement pension account.

Interests in defined benefit schemes will be appropriately valued and will have earnings taxed under this measure in a similar way to other interests.

Sources: Budget Paper No 2, p 15; Budget Factsheet — Stronger foundations for a better future, p 63; Treasurer’s press release “Superannuation tax breaks”, 28 February 2023.

Employers to be required to pay super guarantee on payday

Employers will be required to pay their employees’ superannuation guarantee (SG) entitlements at the same time as they pay their salary and wages from 1 July 2026.

Employers are currently required to make SG contributions for an employee on a quarterly basis to avoid incurring a superannuation guarantee charge.

The proposed commencement date of 1 July 2026 is intended to provide employers, superannuation funds, payroll providers and other stakeholders sufficient time to prepare for the change.

Changes to the design of the superannuation guarantee charge will also be required to align with the increased payment frequency. The government will consult with relevant stakeholders on the design of these changes, with the final framework to be considered as part of the 2024–25 Budget.

In addition, funding will be provided to the ATO to, among other things, improve data matching capabilities to identify and act on cases of SG underpayment.

Sources: Budget Paper No 2, p 26; Budget Factsheet — Stronger foundations for a better future, p 62; Assistant Treasurer’s press release “Introducing payday super”, 2 May 2023.

Non-arm’s length income (NALI) amendments

The non-arm’s length income (NALI) measure announced by the Coalition government in 2022 will be amended to provide greater certainty to taxpayers.

The Coalition government announced on 22 March 2022 that the non-arm’s length expense provisions would be amended to ensure they operated as intended from 1 July 2022.

On 24 January 2023, Treasury released a consultation paper on the following potential amendments to the NALI provisions:

• • self-managed superannuation funds (SMSFs) and small APRA funds would be subject to a factor-based approach which would set an upper limit on the amount of fund income taxable as NALI due to a general expenses breach. The maximum amount of fund income taxable at the highest marginal rate would be 5 times the level of the general expenditure breach, calculated as the difference between the amount that would have been charged as an arm’s length expense and the amount that was actually charged to the fund. Where the product of 5 times the breach is greater than all fund income, all fund income will be taxed at the highest marginal rate, and
  • large APRA-regulated funds would be exempted from the NALI provisions for general expenses of the fund.

To provide greater certainty to taxpayers, the NALI provisions which apply to expenditure incurred by superannuation funds will be amended by:

• • limiting income of SMSFs and small APRA regulated funds that are taxable as NALI to twice the level of a general expense.
  • Additionally, fund income taxable as NALI will exclude contributions
  • exempting large APRA regulated funds from the NALI provisions for both general and specific expenses of the fund, and
  • exempting expenditure that occurred prior to the 2018–19 income year.

Source: Budget Paper No 2, pp 13–14

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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2023. Please do not reproduce without the expressed written consent of the author.