2023-24 Federal Budget

Learn what the 2023-24 Federal Budget means for small to medium businesses (SMEs) and superannuation

On Tuesday, 9 May 2023, Treasurer Jim Chalmers handed down the 2023-24 Federal Budget, his 2nd Budget (following the October 2022 Budget).

The Treasurer announced a package of cost-of-living measures, including up to $3bn in energy bill relief (expected to reduce power bills by up to $500 for 5 million households) and $1.3bn for home energy upgrades. These measures have been designed to provide relief without adding inflationary pressures (which would make the Reserve Bank’s job even harder). Access to the Parenting Payment (Single) will also be extended along with increased payments for JobSeeker, Youth Allowance and rent assistance. Small businesses will also benefit from a temporary increase in the instant asset write-off threshold to $20,000 for 2023-24.

A Budget surplus of $4.2bn is forecast in 2022-23, but an underlying cash deficit of $13.9bn is expected in 2023-24 (and a $35.1bn deficit for 2024-25). The Budget papers note that the global economic outlook has deteriorated and is highly uncertain with persistent inflation and rising interest rates expected to slow real GDP growth from 3.25% in 2022-23 to 1.5% in 2023-24, before rising to 2.25% in 2024-25. While inflation remains elevated at 6% for this year, it is expected to fall to 3.25% in 2023-24 and return to the RBA’s target band of 2-3% in 2024-25. The Government also believes that its cost-ofliving measures will take 0.75 of a percentage point off inflation in 2023-24.

On the revenue side, the Government said it is taking action to improve the sustainability of the tax system. This includes measures to reduce the tax concessions for superannuation balances above $3m, more timely payments of tax and superannuation, and reforms to the tax settings for offshore liquefied natural gas projects.

Key tax-related measures

  • Small businesses instant asset write-off threshold – to be increased to $20,000 for 2023-24 for businesses with aggregated annual turnover of less than $10m. The $20,000 threshold will apply on a per asset basis.
  • Small Business Energy Incentive – businesses with annual turnover of less than $50m will be able to claim an additional 20% deduction on spending that supports electrification and more efficient use of energy. 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 – will be provided for small businesses with aggregate turnover of less than $10m 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 between 1 December 2019 to 29 February 2022.
  • Small business unpaid tax and super – additional funding from 1 July 2023 to assist the ATO to engage with taxpayers who have high-value debts over $100,000 and aged debts older than 2 years where those taxpayers are either public and multinational groups with an aggregated turnover of greater than $10m, or privately owned
    groups or individuals controlling over $5m of net wealth.
  • PAYG and GST instalment uplift factor – 6% for 2022-23 (being lower than the 12% rate that would otherwise have applied under the statutory formula).
  • Part IVA – scope to be expanded to catch 2 additional types of scheme from 1 July 2024, regardless of whether the scheme was entered into before that date.
  • FBT rules for Electic Vehicles – the eligibility of plug-in hybrid  electric cars will sunset from 1 April 2025 from the FBT exemption for eligible electric cars.
  • MIT withholding tax concession for data centres and warehouses – the “clean building” managed investment trust withholding tax concession will be extended to data centres and warehouses that meet the relevant energy efficiency standard, where construction commences after 7:30 pm (AEST) on 9 May 2023.
  • Build-to-rent properties – for eligible new build-to-rent projects where construction commences after 7:30 PM (AEST) on 9 May 2023 (Budget night), the Government will: (i) increase the rate for the capital works tax deduction (depreciation) to 4% per year; (ii) reduce the final withholding tax rate on eligible fund payments from managed investment trust (MIT) investments from 30% to 15%.
  • BEPS Tow Pillar Solution: start dates – (i) 15% global minimum tax for large multinational enterprises with the Income Inclusion Rule (IIR) will apply to income years starting on or after 1 January 2024 and the Undertaxed Profits Rule (UTPR) applying to income years starting on or after 1 January 2025; and (ii) 15% domestic minimum tax will apply to income years starting on or after 1 January 2024.
  • PRRT: LNG and gas transfer pricing – the Government has proposed to cap the use of deductions from 1 July 2023 to the value of 90% of each taxpayer’s PRRT assessable receipts in respect of each project interest in the relevant income year and apply after mandatory transfers of exploration expenditure. Projects would not be subject to the cap until 7 years after the year of first production or from 1 July 2023, whichever is later. The cap will not apply to certain classes of deductible expenditure in the PRRT.
  • PRRT – meaning of “exploration” and “mining, quarrying and prospecting rights” to be amended in response to Shell Energy Holdings Australia case, applicable to all expenditure incurred from 21 August 2013. Will also restore the policy intent of the law and apply in respect of all mining, quarrying and prospecting rights (MQPRs) acquired or started to be used after 7:30 pm (AEST) on 9 May 2023.


Key Superannuation Measures

  • Non-arm’s length income (NALI)– tthe amount of non-arm’s length expenses (NALE) taxed at 45% as NALI will be limited to twice the level of a general expense from 1 July 2023 for SMSFs and small APRA funds. In addition, fund income taxable as NALI will exclude contributions to effectively exempt large APRA regulated funds from the NALI provisions for both general and specific expenses of the fund.
  • Super account balances above $3m – the Budget confirmed the Government’s intention to apply an additional 15% tax on total superannuation balances above $3 million from 1 July 2025.
  • Payday super – employers will be required to pay their employees’ super guarantee at the same time as their salary and wages from 1 July 2026.
  • Pension drawdowns: no reduction in minimum – 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.

What Happens Next?

Remember, these are proposed measures, and they could change as legislation passes through parliament.

You can access the 2023-24 Budget Papers here:

Budget.gov.au | 2023-24 Budget

Get in touch if you’d like to find out more about how these measures impact your business and superannuation.

Give us a call on 07 5649 7650.

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