2023 Federal Budget Highlights

The Federal Treasurer Jim Chalmers handed down the 2023 Federal Budget on 9 May 2023. The following is a list of highlights from a tax and superannuation perspective.

Businesses

• The instant asset write-off threshold for small businesses applying the simplified depreciation rules will be $20,000 for the 2023-24 income year.
• An additional 20% deduction will be available for small and medium business expenditure supporting electrification and energy efficiency.
• FBT exemption for eligible plug-in hybrid electric cars will end from 1 April 2025.
• An increased capital works deduction rate and reduced withholding on managed investment trust (MIT) payments will apply to new build-to-rent projects.
• The clean building managed investment trust (MIT) withholding tax concession will be extended from 1 July 2025 to eligible data centres and warehouses, where construction commences after 7:30pm (AEST) on 9 May 2023.
• 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 has been postponed from 19 December 2016 to 15 September 2022.
• The patent box regime announced in the Coalition government’s 2021-22 Budget, and expanded in the 2022-23 Budget, will not proceed.The introduction of tradeable biodiversity stewardship certificates issued under the Agriculture Biodiversity Stewardship Market scheme will be delayed to 1 July 2024.
• The Location Offset rebate and the Qualifying Australian Production Expenditure thresholds will be increased to boost investment in film production in Australia.
• Deductible gift recipients list to be updated.

Individuals

• Income support payment base rates will be increased by $40 per fortnight.
• The minimum age for which older people qualify for the higher JobSeeker Payment rate will be reduced from 60 to 55 years.
• The workforce participation incentive measures to support pensioners who want to work without impacting their pension payments will be extended for another 6 months to 31 December 2023.
• Eligibility for Parenting Payment (Single) will be extended to support single principal carers with a youngest child under 14 years of age.
• Housing measures will be introduced to increase support for social and affordable housing and improve access for home buyers.
• The maximum rates of the Commonwealth Rent Assistance (CRA) allowances will be increased by 15% to help address rental affordability challenges for CRA recipients.
• CPI indexed Medicare levy low-income threshold amounts have been announced for the 2023-24 income year.
• Eligible lump sum payments in arrears will be exempt from the Medicare levy from 1 July 2024.

Multinationals

• Australia will implement key aspects of the Pillar Two solution of the OECD/G20 BEPS Project, meaning certain large multinationals will be subject to a 15% minimum tax in the jurisdictions in which they operate.
• The scope of the general anti-avoidance rules in Pt IVA of ITAA 1936 will be expanded from 1 July 2024.
• Changes will be made to petroleum resource rent tax (PRRT), including the introduction of a cap on deductible expenditure at 90% of assessable income for projects that produce liquefied natural gas from 1 July 2023.
• The meaning of “exploration for petroleum” in the petroleum resource rent tax legislation will be amended to reflect the government’s intent and ATO guidance.
• Taxation legislation will be amended to realign the taxation law with the reissued AASB 17: Insurance contracts for income years beginning from 1 January 2023.

Superannuation

• Superannuation tax concessions will be reduced for individuals with total superannuation balances in excess of $3 million from 1 July 2025.
• Employers will be required to pay their employees’ superannuation guarantee entitlements at the same time as they pay their salary and wages from 1 July 2026.
• The non-arm’s length income (NALI) provisions will be amended to provide greater certainty to taxpayers.

Tax administration

• Funding will be provided to the ATO over 4 years to lower the tax-related administrative burden for small and medium businesses, cut paperwork and reduce time small business spend doing taxes.
• Reduction in GDP adjustment factor for pay-as-you-go and GST instalments.
• Funding to improve the administration of student loans will be implemented.
• Additional funding will be provided to address the growth of businesses’ tax and superannuation liabilities, and a temporary lodgment penalty amnesty program will be provided to small businesses.
• The Personal Income Tax Compliance Program will be extended for 2 years from 1 July 2025 and its scope expanded from 1 July 2023.

GST and indirect taxes

• Funding for GST compliance will be extended for a further 4 years to address emerging risks to GST revenue.
• The Heavy Vehicle Road User Charge rate will increase 6% per year from 2023-24 to 2025-26.
• Indirect Tax Concession Scheme: diplomatic and consular concessions extended.
• The start date for streamlining of excise administration measures announced in the Coalition government’s 2022-23 Budget will be amended.
• Tobacco excise measures to improve health outcomes and align the treatment of stick and non-stick tobacco tax.

If you would like to know more information about any of these measures, please do not hesitate to contact our office.