The Australian Government’s budget for 2023 has been announced, and it includes several measures that could potentially affect small businesses and startups.
We’ll take you through a comprehensive look at the key changes, what is not included, and how these changes are likely to impact small businesses.
Omissions from the Budget
Before we begin discussing the changes, it’s important to highlight what is NOT in the budget. These include:
– Stage 3 tax cuts for incomes between $45,000 and $200,000,
– loss carry-back rules, low-and-middle-income tax offset (LMITO),
– division 7A reform,
– tax residency rules reform for individuals and companies,
– review of the CGT rollovers and demerger rollover relief,
– CGT concessions for small businesses,
– trust reimbursement integrity rules (section 100A),
– taxation of trusts, and
previously shelved policies such as restricting negative gearing or halving the general 50% CGT discount.
The omissions from the budget, such as the CGT concessions for small businesses and loss carry-back rules, mean that small businesses may not have access to some tax benefits they were previously expecting. Additionally, the lack of reform in areas like division 7A and trust reimbursement integrity rules could mean that small businesses may face more complex tax rules and compliance requirements. Overall, the omissions may have an impact on the tax planning strategies of small businesses and their ability to manage cash flow.
Instant Asset Write-Off for Small Businesses
The instant asset write-off scheme will be extended to $20,000, with an increased write-off set at $20,000. This will enable small businesses with an annual turnover of less than $10 million to immediately deduct the full cost of eligible assets that are first used or installed between 1 July 2023 and 30 June 2024. This will be applied on a per-asset basis, meaning that multiple assets can be instantly written off.
Energy Incentive for Small Businesses
Small businesses with an annual turnover of less than $50 million will be eligible for a tax discount of 20% for expenses that support electrification or more efficient energy use. The maximum that can be claimed through the incentive is $20,000, which means up to $100,000 worth of spending will be eligible for the incentive. Eligible expenses include electrified heating and cooling, more efficient white goods, induction cooktops, and installing batteries and heat pumps. The government expects that up to 3.8 million small and medium-sized businesses will benefit from this measure, with a cost of $314 million over the next four years.
Measures Regarding On-Time Payment of Tax and Superannuation Liabilities
Additional funding over four years from 1 July 2023 will be used to facilitate ATO engagement with taxpayers who have high-value debts over $100k and aged debts older than two years. This measure will apply to public and multinational taxpayers with more than $10 million in turnover, private groups, and individuals controlling more than $5 million net wealth.
Clarifying Non-Arm’s Length Income (NALI)
The definition of Non-Arm’s Length Expenditure (NALE) created issues when the definition of Non-Arm’s Length Income (NALI) was amended in 2019. As a consequence, some or all income in the superfund was “tainted” as NALI and taxed at a higher rate of 47% instead of the concessional rate of 15%. The NALI provisions will be amended to limit the amount of income treated as NALI, exclude member contributions from being treated as NALI, exempt large APRA-regulated funds from the NALI provisions for both general and specific expenses of the fund, and exempt expenditure incurred before the 2018-2019 income year. The amendment will apply to self-managed superfunds and APRA-regulated funds, although the date of effect is unknown.
Aligning Super Guarantee with Take-Home Pay
From 1 July 2026, employers will be required to pay their employees’ super guarantee entitlements on the same day that salary and wages are paid. This measure will apply to employers, employees, and tax agents
It’s essential for businesses to understand and navigate these regulations to ensure they are compliant and can take advantage of any benefits they may offer. If you require guidance on how to navigate these changes and regulations, it may be beneficial to seek the assistance of a professional advisory service such as Fullstack Advisory. We can provide you with comprehensive advice and support tailored to your specific needs and circumstances to help you make informed decisions and stay ahead of the curve.