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Federal budget 2023–24 to boost small business opportunities
The focus of the 2023-24 Australian Federal Budget was firmly on addressing the rising cost of living and fixing the housing crisis.
🟠 Initiatives for small businesses
Additionally, accountants should be aware that clients' returns may appear different this year as the Tax Office has resumed offsetting any credits or refunds to settle debts that were deferred during the pandemic.
🟠 Companies:
The ATO has highlighted three significant changes that accountants should be aware of regarding Individual Tax Returns, as these alterations can impact clients' tax returns for the year 2023.
Great news for small businesses! The government has introduced several programs and initiatives aimed at boosting the backbone of our economy – the small business sector.
One such initiative is the announcement by Federal Treasurer Jim Chalmers that a whopping million small businesses will enjoy a one-off $650 reduction in their power bills. This financial relief will provide much-needed support to small business owners.
Additionally, small businesses can benefit from the extension of the instant asset tax write-off. Starting from 1 July 2023 until 30 June 2024, the instant asset write-off threshold will be temporarily increased to $20,000. To qualify for this opportunity, small businesses need to meet the following criteria:
Aggregated annual turnover of less than $10 million
$20,000 threshold applies per asset, allowing multiple asset write-offs
Assets valued at $20,000 or more can be placed into simplified depreciation pool
Provisions preventing re-entry into simplified depreciation regime remain suspended until 30 June 2024
Federal Treasurer Chalmers also unveiled the following initiatives specifically tailored for small businesses:
A $14.6 billion cost-of-living package
$1.5 billion energy price relief
Help for small businesses to adopt digital technology
A new Small Business Energy Incentive to support investments in power-saving assets
A $392.4 million industry grants program for commercialisation of early stage ventures
An investment of $21.8 million to lower tax-related administrative burdens for small businesses
🟠 Technology and manufacturing sector
A range of other measures designed to boost Australia’s tech skills and manufacturing sector were also announced. These include:
A Powering Australia Industry Growth Centre to boost manufacture of renewable technologies
Funding for quantum computing and AI
$286 million for investment in the creative sector
$3.7 billion for a five year national skills agreement with states and territories
300,000 fee-free TAFE places to train people in critical and emerging sectors
A new Australian Skills Guarantee to encourage more women to take-up apprenticeships
However, there were a number of initiatives relating to technology and digitising Australia’s small businesses missing from the Budget:
No changes to Skills and Training Boost and Technology Investment Boost
Small Business Technology Investment Boost is yet to pass the Senate, expiring on June 30
No incentives for e-invoicing, improving payment times, or enhancing support from Australian Small Business and Family Enterprise Ombudsman
No improvements to Research & Development Tax Incentive for SMEs.
🟠 Additional support for businesses
As part of his Budget speech, the Treasurer unveiled further measures aimed at providing support to businesses and fostering economic growth. These initiatives are designed to enhance cash flow, simplify tax compliance, and promote energy efficiency within the small business sector. The specific measures announced are as follows:
Tax Instalment Adjustments for Improved Cash Flow:
GDP adjustment factor for PAYG and GST instalments reduced from 12% to 6%
Cash flow support provided to small businesses and PAYG instalment taxpayers
New rate applies to eligible businesses and individuals
Reducing Tax Compliance Burden for Small Businesses:
$12.8 million allocated for trial expansion of ATO independent review process
$9 million allocated for establishing 5 new tax clinics
Reforms include allowing tax agents to lodge multiple Single Touch Payroll forms, reducing use of cheques, and permitting up to 4 years to amend income tax returns
Small Business Energy Incentive:
Government incentives for small and medium businesses to improve energy efficiency
Additional 20% tax deduction for eligible depreciating assets up to $100,000
Eligible assets include energy-efficient appliances, electrification supporting assets, and demand management assets
Incentive period runs from 1 July 2023 to 30 June 2024
Exclusions include electric vehicles, renewable electricity generation assets, capital works, and off-grid fossil fuel assets.
🟠 Retirement savings also in focus
Retirement savings are also receiving significant attention, with various measures unveiled in this year's Budget to bring about changes in the superannuation system.
Starting in 2025, earnings generated from superannuation funds holding balances exceeding $3 million will be subject to a higher tax rate of 30%, an increase from the previous 15%.
Additionally, commencing on July 1, 2026, employers will be obligated to make superannuation contributions to their employees' accounts on every payday. This change aims to ensure timely and consistent contributions to workers' superannuation fund.
🟠 Numbers tell the story
Let's dive into the numbers that paint a picture of this year's Budget. Presented in Parliament amid a relatively sluggish economic environment, the Federal Treasurer's projections anticipate a decline in economic growth to 1.5% in the 2024 financial year, followed by a gradual rise to 2.25% in the subsequent financial year.
On the bright side, inflation is expected to decrease to 3.25% next year, down from its current high levels of around 7.0%. By the 2024/25 financial year, it is projected to fall within the target range of 2% to 3% set by the Reserve Bank of Australia. The unemployment rate is forecasted to remain low at 4.25% in 2023/24.
Overall, the Budget takes a more cautious approach, aligning with the conservative economic outlook and aiming to reflect the restrained conditions.
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