On the 9th of May, 2023 treasurer Jim Chalmers handed down the 2023-24 Federal Budget, his second Budget, which follows the October 2022 Budget.
This budget has introduced some measures intended to provide relief for individuals and small businesses, as well as increased funding to crack down on tax evasion.
Small business
- The instant asset write-off threshold will be temporarily increased to $20,000 for one year starting from 1 July 2023. (This was previously $150K and there was talk that this was going to be scrapped altogether).
- The tax law will be amended to set the GDP adjustment factor at 6% for pay-as-you-go (PAYG) and GST instalments in the 2023–24 income year.
- The loss carry-back tax offset and SME technology investment boost will not be renewed.
Superannuation
- The severity of the factor-based approach for self-managed super funds (SMSFs) under the non-arm’s length income provisions will be reduced. Income will now be taxable at twice the level of general expense in case of a breach, instead of the previously proposed five times.
- Fund income taxable as non-arm’s length income will exclude contributions. The government is estimated to generate around $2.3 billion in revenue from the $3 million threshold tax for super, indicating its intention to tax unrealised gains.
- The transition to payday super is confirmed.
Medicare levy changes
- Eligible lump sum payments in arrears for low-income taxpayers will be exempt from the Medicare levy.
- The Medicare levy low-income thresholds for singles, families, seniors, and pensioners will be increased from 1 July 2022.
Funding boost for compliance programs
- $90 million will be allocated to the Australian Taxation Office (ATO) and $1.2 million to Treasury to extend the Personal Income Tax Compliance Program for two years, starting from 1 July 2025, with an expanded scope from 1 July 2023.
- The GST compliance program will be extended for four years, with $588.8 million provided to the ATO to undertake various activities to ensure GST compliance. The additional funding will support the development of advanced analytical tools to address emerging risks to the GST system.
- The general anti-avoidance rules for income tax will be expanded to cover schemes that reduce tax paid in Australia by accessing lower withholding tax rates on income paid to foreign residents, as well as schemes that achieve Australian tax benefits, even if the primary purpose is to reduce foreign income tax.
- Extra funding will facilitate ATO engagement with taxpayers who have high-value debts exceeding $100,000 and aged debts older than two years. This will apply to public and multinational groups with an aggregated turnover greater than $10 million, as well as privately owned groups or individuals controlling over $5 million in net wealth.
Multinationals
- A 15% global minimum tax will be implemented for large multinational enterprises to prevent a race to the bottom in corporate tax rates and safeguard Australia’s corporate tax base. Under the global minimum tax rules, Australia can impose an additional tax on a multinational parent or subsidiary company if the group’s income is taxed at a rate below 15% overseas.
- The government intends to introduce a 15% domestic minimum tax for income years starting on or after 1 January 2024.
- Amendments to the Petroleum Resource Rent Tax (PRRT) will be made in response to Treasury’s Review of the PRRT Gas Transfer Pricing (GTP) arrangements.
Should you have any questions about this article and the 2023 Federal Budget generally, don’t hesitate to get in touch with our team.
