The Federal Budget details small business initiatives with changes to instant asset write off rules, new energy efficient benefits and reduced compliance to cut back on paperwork.
$20,000 small business instant asset write-off
Date 1 July 2023 to 30 June 2024
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 are first used or installed ready for use between 1 July 2023 and 30 June 2024.
“Immediately deductible” means a tax deduction for the asset can be claimed in the same income year that the asset was purchased and used (or installed ready for use).
If the business is registered for GST, the cost of the asset needs to be less than $20,000 after subtracting the GST credits that can be claimed for the asset. If the business is not registered for GST, it is $20,000 including GST.
The write-off applies per asset, so a small business can deduct the cost of multiple assets.
The rules only apply to assets that fall within the scope of the depreciation provisions. Expenditure on capital improvements to buildings that falls within the scope of the capital works rules is not expected to qualify.
Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to
be placed into the small business simplified depreciation 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. This will be particularly relevant to small business entities that chose to leave the simplified depreciation system in order to opt-out of applying the temporary full expensing rules to one or more specific assets.
This announcement effectively confirms that the temporary full expensing rules, which have provided an immediate deduction for the full cost of assets acquired from 6 October 2020, will come to an end on 30 June 2023. Small business entities that are considering acquiring depreciating assets with a cost of $20,000 or more and business entities with aggregated turnover of $10 million or more should keep this cut-off date in mind as 30 June 2023 approaches.
$20,000 small business incentives for energy efficiency
Date 01 July 2023 to 30 June 2024
As previously announced, the Small Business Energy Incentive provides an additional deduction of 20% of the cost of eligible depreciating assets that support electrification and more efficient use of energy.
Up to $100,000 of total expenditure will be eligible, with a maximum bonus deduction of $20,000.
The incentive is available to small and medium businesses with aggregated annual turnover of less than $50 million.
While the full detail of what qualifies for the incentive is not yet available, it is expected to apply to a range of depreciating assets and upgrades to existing assets such as electrifying heating and cooling systems, upgrading to more efficient fridges and induction cooktops, and installing batteries and heat pumps.
Some exclusions will apply including electric vehicles, renewable electricity generation assets, capital works, and assets that are not connected to the electricity grid and use fossil fuels.
Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024 to qualify for the bonus deduction.
‘Payday’ super - Increasing payment frequency of employee super
Date |
1 July 2026 |
As previously announced, from 1 July 2026, employers will be required to pay their employees’ super guarantee entitlements on the same day that they pay salary and wages.
Currently, SG is paid quarterly.
The Government will undertake a consultation process with the aim of providing details of the final design of the measure in the 2024-25 Federal Budget.
Hybrid cars excluded from FBT exemption for electric cars
Date |
1 April 2025 |
As previously announced, plug-in hybrid electric cars will be excluded from the fringe benefits tax (FBT) exemption for eligible electric cars from 1 April 2025.
Arrangements entered into between 1 July 2022 and 31 March 2025 can remain eligible for the FBT exemption as long as the exemption applied to the car before 1 April 2025 and the employer has a financially binding commitment to continue providing private use of the car on and after this date.
Tax breaks for build-to-rent developments
As previously announced, the Government is actively sweetening the deal for build-to-rent developments.
For eligible new build-to-rent projects where construction commences after 7:30pm AEST on 9 May 2023, the Government will:
- Increase the rate for the capital works tax deduction (depreciation) from 2.5% to 4% p.a.
- Reduce the final withholding tax rate on eligible fund payments from managed investment trust (MIT) investments from 30% to 15%.
The measure applies to build-to-rent projects where 50 or more apartments are made available to rent to the general public. The dwellings must be retained under single ownership for at least 10 years before being able to be sold and landlords must offer a lease term of at least 3 years for each dwelling.
Small business ATO compliance
Among the programs to reduce the compliance burden on small business is a series of initiatives to cut paperwork. These include:
- From 1 July 2024, small businesses will be permitted to authorise their tax agent to lodge multiple Single Touch Payroll forms on their behalf.
- From 1 July 2024, the Australian Taxation Office (ATO) will reduce the use of cheques for income tax refunds.
- From 1 July 2025, small businesses will be permitted up to 4 years to amend their income tax returns (generally 2 years).
