Overall the budget will not have a significant effect for most businesses.
The area’s of interest for small business are:
- Small Business Support – $20,000 instant asset write-off
- Small Business Support – Small Business Energy Incentive
- Hybrid and Fringe Benefits Tax Exemption
- Payday Superannuation
- Managing Tax Instalments
- Apprentice programs
- Increased Tax on Superannuation Balances in excess of $3 million
Small Business Support – $20,000 instant asset write-off
With the ending of the current temporary full expensing write off of depreciable assets, the government has proposed to reintroduce the instant asset threshold of $20,000.
Small businesses, 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.
For assets costing over $20,000 for businesses eligible for the small business will be able to use the simplified depreciation small business pool where they can deduct 15% of the cost the 1st year and 30% the following years.
For businesses with an aggregated annual turnover over $10 million the deduction will be reduced to assets of $1,000.
Small Business Support – Small Business Energy Incentive
This incentive is focussed at supporting businesses with a turnover under $50 million to save on energy costs by incentivising improvements to energy efficiency and electrification of assets.
When purchasing these assets businesses will have an additional deduction of 20% of the cost of the depreciating assets. This is up to $100,000 in total expenditure therefore a total maximum bonus per business of $20,000.
A range of depreciating assets, as well as upgrades to existing assets, will be eligible for the Small Business Energy Incentive. 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. Full details of eligibility criteria will be finalised in consultation with stakeholders.
Eligible assets will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024. Eligible upgrades will also need to be made in this period.
Certain exclusions will apply such as electric vehicles, renewable electricity generation assets, capital works, and assets that are not connected to the electricity grid and use fossil fuels.
Hybrid and Fringe Benefits Tax Exemption
The government is sunsetting the eligibility of plug-in hybrids to receive the fringe benefit tax exemptions for electric cars. If your business is looking to purchase a plug-in hybrid you will need to ensure this is prior to 2025.
From 1 July 2026 employers will be required to pay superannuation when they pay wages rather then on a quarterly basis. For small business owners this will be an additional administration burden if they do not currently have efficient payroll systems to account for this.
In addition to cost of not paying on time and the requirement to lodge SGC forms and pay the penalties if not lodged will be an additional cost to business.
Managing Tax Instalments
The government acknowledges the changing economic climate and are halving the GDP increase in the PAYG Instalments payable by small businesses each quarter.
As is always the case if you are unsure about your tax position through the year or if you have a change in your business that your instalments are no longer appropriate, please pick up the phone to discuss with MJJ. There is the option to vary instalments through the year based on your current trading positions as often these instalments are based on your trading position 2 years earlier. Don’t loose sleep worrying about your tax position.
The budget has mentioned a review and change to the current apprenticeship programs. However, there was not further details then to watch this space for the legislation. We await further details.
Increased Tax on Superannuation Balances in excess of $3 million
As has been discussed significantly in the media in the lead up to the budget the government intends to reduce the tax concessions for individual members with a total superannuation balance of more than $3 million. This is set to be effective from 1 July 2025. At present there is not indication that this will be indexed so whilst for the 2025-26 year this measure is expected to affect 80,000 individuals in the future as fund balances increase this will have an impact of many individuals.
At present there has been insufficient information provided as to how this tax will be applied in practice. We await the legislation to provide further guidance to those currently affected.