The Australian Federal Budget for 2023-24 came as a surprise to many, marking the first surplus in 15 years, thanks to low unemployment, wage growth, and surging commodity prices. In this blog post, we delve into the key tax changes and discuss their potential impact on various sectors.
A Surprising Surplus and Its Allocation
The Budget recorded a $4.2 billion surplus, a massive turnaround attributed to a $40.7 billion increase in revenue. With expectations of commodity prices returning to long-term levels, the Government has prudently banked 87% of the surplus for debt reduction and future interest payments.
Cost of Living Relief and Taxation
The Government has chosen to provide cost of living relief through the social security system rather than the tax system to avoid triggering further interest rate rises amid inflation concerns. Notably, the low and middle income tax offset (LMITO) has not been extended, indicating a likely increase in the tax bill for many individuals.
Revenue Raising Measures
Significant revenue is expected from increased ATO compliance funding and hikes in tobacco taxes. The ATO is set to focus on taxpayers with tax debt of $100,000 or more, large corporates, and high wealth individuals with over two-year-old debts. Additionally, the general anti-avoidance rule (Part IVA) is being expanded to apply to schemes that aim to reduce tax in Australia or achieve an Australian income tax benefit, effective from 1 July 2024.
Higher Taxes for Tobacco and Multinationals
Tobacco excise is set to rise by 5% for three years from 1 September 2023, expected to raise $3.3 billion. Large multinationals with annual global revenue of EUR750M or more will now face a 15% minimum domestic tax rate from 1 January 2024, in line with the OECD’s base erosion and profit shifting (BEPS) project.
Small Businesses Are Winners
Small businesses can look forward to the instant asset write-off for assets costing less than $20,000 and an additional 20% deduction for depreciable assets supporting energy efficiency. A lodgement penalty amnesty program is also on offer. However, note that the temporary full expensing and loss carry back provisions have not been extended.
Other Major Changes
In response to the housing crisis, property developers are being incentivised to create build-to-rent properties. Changes to the Petroleum Resource Rent Tax (PRRT) are also announced, and a future consultation is expected in 2024. Electric cars face changing FBT exemptions, and the patent box regime, previously announced for certain sectors, will no longer be proceeding.
Minor Changes
Minor changes include deferring the start date for streamlining excise administration for fuel and alcohol, clarifying rules around mining, quarrying, and prospecting rights, expanding the clean building managed investment trust withholding tax concession, exempting some lump sum payments in arrears from the Medicare Levy, and increasing the Product Stewardship for Oil Scheme levy.
In summary, the Federal Budget 2023-24 brings a mix of changes for individuals, small businesses, and large corporations. As we navigate through these changes, it is crucial to stay informed and plan accordingly. As always, feel free to reach out to us for any assistance or clarifications regarding these changes and their impact on you.
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