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Three Key Tax Measures for Small & Medium Businesses in the 2023 - 2024 Federal Budget

Posted 29 May '23

On the 9th Of May 2023, the Treasurer delivered the Federal Budget. Its main focus is alleviating inflation’s impact on the cost of living. Interestingly, although inflation peaked as high as 7.8% in December 2022, the government is expecting inflation to fall to 3.75% by June 2024 and further to 2.75% by the June 2025 quarter.

The Budget contained a few measures to help small and medium businesses. Here are three key measures announced in the 2023/24 Federal Budget.

Instant Asset Write Off

The small business instant asset write-off threshold will be increased to $20,000, from 1 July 2023 until 30 June 2024. Without this measure, the threshold would have reverted to the standard legislation threshold of $1,000 from 1 July 2023.

Small businesses, with an aggregated turnover of less than $10 million, will be able to immediately deduct the full cost of eligible depreciating assets costing less than $20,000 that is first used or installed ready for use between 1 July 2023 and 30 June 2024. The $20,000 threshold will apply on a per-asset basis, so small businesses can instantly write off multiple assets.

Assets valued at $20,000 or more (which cannot be immediately deducted) can be placed into the small business general use pool and depreciated at 15% in the first income year and 30% each income year thereafter.

The provisions that prevent small businesses from re-entering the simplified depreciation regime for 5 years if they opt out will continue to be suspended until 30 June 2024. 

Just a reminder that temporary full expensing, which allows an immediate deduction for the total cost of eligible depreciating assets, is ending soon on 30 June 2023.   

PAYG & GST Instalments

The GDP-adjustment factor for PAYG and GST instalments will be 6% for the 2023–24 income year (instead of 12% under the statutory formula). This measure may help small businesses that are struggling with cash flow.

The 6% uplift factor will apply to small businesses and individuals who are eligible to use the relevant instalment methods (aggregated turnover up to $10 million for GST instalments and aggregated turnover up to $50 million for PAYG instalments), in respect of instalments that relate to the 2023–24 income year and fall due after the enabling legislation receives Royal Assent.

The PAYG and GST uplift factors for 2022–23 are 2%.

Energy Incentive

The Government will introduce the Small Business Energy Incentive to help small and medium-sized businesses save on their energy bills.

The Small Business Energy Incentive will provide businesses with an aggregated turnover of less than $50 million with an additional 20% deduction on spending that supports electrification and more efficient use of energy. This will help small and medium businesses make investments like electrifying their heating and cooling systems, upgrading to more efficient fridges and induction cook tops and installing batteries and heat pumps.

Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business.

Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024.

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