The Federal Budget 2023 – Whats in it for SME’s and Business Owners

The Federal Budget for 2023 was handed down on Tuesday 9th May 2023.

1. Australia will post a $4 billion budget surplus in the 2022-23 financial year – the first surplus in 15 years
2. Economic growth is forecast to slow from 3.25% in 2022-23 to 1.5% in 2023-24 before rising to 2.25% in 2024-25
3. More than five million households will receive up to $500 in electricity bill relief in the next financial year.
4. To stimulate the construction of new build-to-rent projects, and put downward pressure on property prices and rents, the managed investment trust withholding tax will be reduced from 30% to 15% .
5. The billion-dollar question –  Was this the right budget for our current economic environment?

What else did the Treasurer announce?  Here are the short form highlights:

Taxation Related Measures

• Quarterly PAYG Tax Instalment relief

For GST instalments and PAYG instalments falling due during the 2023-24 financial year, the GDP adjustment factor will be halved from 12% to 6%. This will apply to both individuals and small businesses who are eligible to pay GST or PAYG by instalments.

• Small Business Energy Incentive

An additional 20% tax deduction will be given to small and medium businesses with an aggregated turnover of less than $50 million for the first $100,000 of expenditure in depreciating assets which support electrification and energy-efficient processes.

• Lodgement penalty amnesties

For small businesses with an aggregated turnover of less than $10 million, failure to lodge (FTL) penalties will be remitted for lodgements taking place in the 7-month period from 1 June 2023 to 31 December 2023 where the original lodgement was due between the period from 1 December 2019 to 28 February 2022.

• Instant Asset Write-off extension

The current Instant Asset Write-off extension was due to finish on 30 June 2023, however it has been given a further 12-month life in a limited form. Under the announced measure, from 1 July 2023 to 30 June 2024, assets up to $20,000 can be immediately deducted. The asset must also be first used or installed ready for use during this same period.

• Reducing regulatory burdens

Time is money, so they say. Now, the federal budget has pledged to give small business owners more time to run their enterprises instead of fiddling with tax measures. Accountants and tax agents will be empowered to file multiple Single Touch Payroll forms on their clients’ behalf from mid-2024, rather than employers having to complete the process each month.

From July 1, 2025, small businesses will also be granted up to four years to amend their income tax returns, “reducing the burden of making revisions.” The ATO has also vowed to minimise the use of cheques, resulting in faster, easier tax refunds.

• $392 million for small business innovation

One of the most eye-grabbing figures contained in the 2023-2024 federal budget is the $392 million assigned to launch the Industry Growth Program. The initiative will help small businesses and startups commercialise their concepts and expand their operations. Eligible businesses will need to focus on priority areas listed in the National Reconstruction Fund.

• Expanding apprenticeship support models 

$54.3 million over five years will introduce “a new non-financial support model” for Australian apprentices, moving past prior attempts to entice apprentices and encourage their employers with direct financial backing. The shake-up will “redesign and refocus key support services”, budget papers say, “to increase apprenticeship completion rates and the diversity of the apprentice workforce.” Notable, given Australia’s lingering skills shortages in key areas. Expect further details in the months ahead.

• Cyber Wardens to boost SME digital resilience

$23.4 million will go towards the Cyber Wardens program, a digital resiliency and cybersecurity program launched by the Council of Small Business Organisations Australia (COSBOA). It aims to provide Australia’s first micro-credential for cybersecurity in the SME sector, providing a pathway for small enterprises to shield themselves from growing digital threats. It’s also not a bad outcome for COSBOA, which has long pushed for federal government support on this initiative.

Significant Legislative changes 

• Pay Day Super

With effect from 1 July 2026, employers will be required to pay their superannuation guarantee (SG) obligations at the same time that they pay their salary and wages. This will replace the current quarterly regime for SG payments. By way of example, an employer with a weekly payroll cycle will be required to make 52 or 53 SG payments each year, rather then four.

• Additional tax on superannuation balances above $3 million

The much-publicised additional tax on individuals with total superannuation balances above $3 million will commence on 1 July 2025. A 30% tax rate will apply to earnings corresponding to the proportion of an individual’s total superannuation balance above $3 million.

Social Welfare Payments  (Cost of Living Support) Increases

• The improved fiscal position has enabled the government to fund a raft of new measures, such as a $14.6 billion cost-of-living plan comprising help with power bills and health costs. There is also a $40 per fortnight increase in JobSeeker, Youth Allowance, Austudy and other income support payments.
• Recipients of the Single Parenting Payment will receive the payment until their youngest child turns 14, up from eight.
• The maximum rate of the Commonwealth Rent Assistance program will be raised by 15 per cent – or up to $31 a fortnight – from September this year, costing the government $2.7 billion over five years.   Budget 2023 also allocates $3.5 billion to boost bulk billing of health services, which should give more people greater access to free visits to GPs.
• Eligible households and small businesses will receive targeted electricity bill relief of up to $500 for households and $650 for small businesses. Eligible households will include pensioners, Commonwealth Seniors Health Card holders and Family Tax Benefit A and B recipients.

What to be wary of

• FBT exemption for plug-in hybrid cars scrapped
  The FBT exemption for eligible electric cars will no longer apply to plug-in hybrid cars from 1 April 2025.
• Expansion of ATO Compliance activities
  Significant further funding will be provided to the ATO to expand compliance programs targeting high-value or aged tax debts for certain taxpayers, superannuation guarantee compliance, GST compliance and financial crimes.
• Personal Income Tax Compliance Program
  Significant further funding will be provided to the ATO to expand compliance programs aimed at ensuring personal income tax obligations are complied with and that emerging areas of risk are addressed.

In summary – share your thoughts

• Will all the welfare stimulus be inflationary and put pressure on interest rates?
• Was enough support provided to Business Owners and SME’s, which keep our economy running?
• Did the cost of living support help the people who need it most, in a timely manner?

We’d love to hear from you.