The Federal Treasurer, Dr Jim Chalmers, handed down his second Federal Budget on 9 May 2023 which contained the first surplus in 15 years.

Announcing a budget surplus of $4.2 billion in 2022–23, Dr Jim Chalmers budget is expected to return to a forecast deficit of $13.9 billion in 2023–24 based on an expected reduction in economic growth.

Dr Jim Chalmers noted to inflation as the primary challenge and the importance of striking the right balance between easing the cost of living pressure without further increasing inflation within the economy.

The business, tax, superannuation and Individual highlights of the Budget are set out below:

BUSINESS

Temporarily Increasing The Instant Asset Write-Off

• The instant asset write-off threshold for small businesses applying the simplified depreciation rules will be $20,000 for the 2023–24 income year.

Small Business Energy Incentive

• An additional 20% deduction will be available for small and medium business expenditure supporting electrification and energy efficiency. The additional deduction will be available to businesses with aggregated annual turnover of less than $50 million. Examples of expenditure the measure will apply to include assets that upgrade to more efficient electrical goods (eg energy-efficient fridges), assets that support electrification (eg heat pumps & electric heating or cooling systems) and demand management assets (eg batteries or thermal energy storage).

FBT – Electric Cars

• The FBT exemption for eligible plug-in hybrid electric cars will end from 1 April 2025.

Uplift Factor For Small Business PAYG & GST Instalments Halved

• The GDP adjustment factor for PAYG and GST instalments has halved from 12% to 6% for the 2024 financial year. The GDP adjustment rate will apply to small businesses and individuals who are eligible to use the relevant instalment methods ($10 million aggregated annual turnover for GST instalments & $50 million annual aggregate turnover for PAYG instalments).

Franked Distributions Funded By Capital Raisings – Start Date Postponed

• 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. Certain distributions funded by capital raisings made on or after 15 September 2022 will be prevented from being frankable. The measure ensures such arrangements cannot be put in place to release franking credits that would otherwise remain unused where they do not significantly change the financial position of the entity.

INDIVIDUALS

Income Support

• Income support payment base rates will be increased by $40 per fortnight. This increase will apply to Jobseeker payment, Youth allowance, Parenting Payment, Austudy, Abstudy, Disability Support Pension (Youth) and Special benefit.

 Medicare Levy thresholds for 2022-23

• The CPI indexed Medicare levy low income threshold amounts for singles, families, seniors and pensioners for the 2022-23 year of income have slightly increased as announced.

Medicare levy low income threshold (at or below which no Medicare levy payable)

 Jobseeker

• The minimum age for which older people qualify for the higher JobSeeker Payment rate will be reduced from 60 to 55 years.

Workforce Participation Incentive

• 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.

Parenting Payment

• Eligibility for Parenting Payment (Single) will be extended to support single principal carers with a youngest child under 14 years of age.

Multinationals

Global Minimum Tax And A Domestic Minimum Tax

• Australia will implement the OECD/G20 BEPS Two Pillar Solution to tackle tax challenges arising from digitalisation of the economy, meaning certain large multinationals will be subject to a 15% minimum tax in the jurisdictions in which they operate. These minimum tax rules will apply to companies with annual global revenue of at least $1.2 billion.

 Superannuation

The $3 Million Superannuation Gap

• Superannuation earnings tax concessions will be reduced for individuals with total superannuation balances in excess of $3 million from 1 July 2025. It will bring the headline tax rate to 30% (up from 15%) for earnings corresponding to the proportion of an individual’s total superannuation balance that is greater than $3 million. Individuals with a total superannuation balance of under $3 million will not be effected.

 Employers To Be Required To Pay Superannuation Guarantee On Payday

• 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. Currently, employers are only required to pay their employees SG on a quarterly basis.

 Tax administration

Small Business Tax Compliance Administrative Burden Reduced

• 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 businesses spend doing taxes.

GST Compliance Program / Personal Income Tax Compliance Program

• Funding for GST compliance will be extended for a further 4 years to the ATO to address emerging risks to GST revenue and a further 2 years for the Personal Income Tax Compliance Program.