On Tuesday, 9 May 2023, Treasurer Jim Chalmers handed down the 2023-24 Federal Budget, his second Budget, which follows the October 2022 Budget.

A Budget surplus of $4.2 billion is forecast in 2022-23, but an underlying cash deficit of $13.9 billion is expected in 2023-24 and a $35.1 billion deficit for 2024-25. The Budget notes the global economic outlook has deteriorated and is uncertain with persistent inflation and rising interest rates expected to slow 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.

With government revenue, they 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 $3 million, more timely payments of tax and superannuation, and reforms to the tax settings for offshore liquefied natural gas projects.

The Key Takeaways from this budget:

• Budget surplus expected.
• Small business asset write-off has been extended for one-year for assets up to $20,000.
• Small business energy incentive with a One-year Small Business Energy Incentive to switch to efficient energy sources.
• $1.3 billion Household Energy Upgrade Fund for home upgrades that save energy.
• $23.4 million “Cyber Wardens” program to boost cyber skills in small businesses.
• 15 per cent global minimum tax and a domestic minimum tax from 1 January 2024 for multinational groups with global turnover of $1.2 billion or more.
• Future earnings on super balances over $3 million will be taxed at an additional 15 per cent from 1 July 2025
• Employers will be required to pay compulsory super guarantee contributions on payday rather than quarterly (from 1 July 2026).
• $3.5 billion over five years to increase the bulk-billing incentive for general practitioners.
• $11.3 billion wage increase for aged care workers.
• Targeted relief for vulnerable members of the community – including JobSeeker recipients and Commonwealth Rent Assistance

For 2023-2024 the budget didn’t have a major focus on small business but the main points of attention that impact small business centred around the following points:

• A temporary increase in the instant asset write-off threshold to $20,000 for one year from 1 July 2023.
• An amendment to the tax law to set the GDP adjustment factor for pay as you go (PAYG) and GST instalments at 6 per cent for the 2023–24 income year.
• No renewal of the loss carry back tax offset and the SME technology investment boost.
• Businesses with annual turnover of less than $50 million 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.
• From 1 July 2026, employers will be required to pay their employees’ super guarantee at the same time as their salary and wages.

At the same time, businesses can expect greater scrutiny from the Australian Taxation Office, which will receive just under $600 million over four years to boost resources to promote GST compliance. This additional funding will also be used to help the ATO develop more sophisticated analytical tools to combat      emerging risks to GST collections. Additional funding will also be provided from 1 July 2023 to assist the ATO to engage with taxpayers who have high-value debts.

For individual taxpayers In the 2023-24 Budget, the Government did not announce any personal tax rates changes. The Stage 3 tax changes commence from 1 July 2024, as previously legislated.

The Budget did not announce any extension of the low and middle income tax offset (LMITO) beyond the 2021-22 income year. The LMITO has now ceased and been fully replaced by the low income tax offset (LITO). As a result, low-to-middle income earners may see their tax refunds from July 2023 reduced by between $675 and $1,500 (for incomes up to $90,000 but phasing out up to $126,000), all other things being equal.

For a quick snapshot at the major Budget announcements please refer to “May 2023 Budget Snapshot