A number of changes to business taxation have been announced.
Small business support – $20,000 instant asset write-off
- The government recently announced the temporary increase in the instant asset write-off threshold, effective from July 1, 2023, until June 30, 2024. Under this new measure:
- Small businesses with an aggregated annual turnover of less than $10 million will have the opportunity to immediately deduct the full cost of eligible assets valued at less than $20,000. This deduction applies to purchases first used or installed and ready for use from July 1, 2023, to June 30, 2024. It’s important to note that the $20,000 threshold applies individually to each asset, allowing small businesses to write off multiple assets instantly.
- Assets valued at $20,000 or more, which do not meet the instant deduction criteria, can still be added to the small business simplified depreciation pool. These assets will be depreciated at a rate of 15% during the first income year and 30% in each subsequent income year.
- The provisions that typically prevent small businesses from re-entering the simplified depreciation regime for a period of five years if they choose to opt out will remain suspended until June 30, 2024. Small businesses can freely opt-in and out of the simplified depreciation regime without the five-year re-entry restriction during the specified time frame.
These temporary changes aim to support small businesses by giving them greater flexibility in managing their asset investments and promoting economic growth within the sector.
Help with tax instalments and cash flow
The government has introduced amendments to the tax law that will reduce the GDP adjustment factor for pay-as-you-go (PAYG) and GST instalments. Specifically, for the 2023–24 income year, the GDP adjustment factor will be set at 6 per cent, down from the previous 12 per cent under the statutory formula.
This reduction in the adjustment factor aims to provide cash flow support to small businesses and other taxpayers who make PAYG instalments. It will help alleviate financial burdens and improve liquidity for these entities.
The revised 6 per cent GDP adjustment rate will apply to small businesses and individuals eligible for the relevant instalment methods. This applies to those with an aggregated annual turnover of up to $10 million for GST instalments and $50 million for PAYG instalments. The reduced factor will apply to instalments due after the enabling legislation has received Royal Assent and will apply to instalments relating to the 2023–24 income year.
These amendments aim to provide relief and support to eligible taxpayers, particularly small businesses, by easing their tax payment obligations and enhancing their cash flow during the specified income year.
Small business energy incentive
The government has introduced a new initiative that allows small and medium businesses with an aggregated annual turnover of less than $50 million to claim an additional 20 per cent deduction for eligible depreciating assets that promote electrification and more efficient energy usage. Under the Small Business Energy Incentive, businesses can benefit from a maximum bonus deduction of $20,000, with a total expenditure of up to $100,000 being eligible.
A wide range of depreciating assets and upgrades to existing assets will be eligible for the Small Business Energy Incentive. This includes assets that facilitate the transition to more energy-efficient electrical goods, such as:
- Energy-efficient fridges
- Heat pumps and electric heating or cooling systems
- Demand management assets, including batteries or thermal energy storage.
To qualify for the incentive, eligible assets must be first used or installed and ready for use between July 1, 2023, and June 30, 2024. Upgrades to assets must also occur within this period.
Specific exclusions will apply, including electric vehicles, renewable electricity generation assets, capital works, and assets not connected to the electricity grid and relying on fossil fuels.
This incentive aims to support small and medium businesses in adopting more sustainable and energy-efficient practices. The government encourages businesses to embrace environmentally friendly technologies and contribute to a greener future by providing additional deductions for investments in electrification and energy efficiency.
