Taxation Changes for Business Owners – What’s New This 2023?
On Tuesday, May 9, 2023, the 2023 Federal Budget was released, with a focus on cost-of-living relief and updating our economic system.
It’s reassuring to know that there won’t be many changes to tax and superannuation laws. But there was no mention about using the previously stated Stage 3 Income Tax Cuts, set to start on July 1, 2024, and many individuals now ponder whether the government will cancel them next year.
Two Important Things Mentioned in the 2023 Budget
The 2023 Budget left out two crucial items that could have an impact on you as a business owner:
1. Temporary Full Expensing will end on June 30, 2023, and a Small Business Instant Write-off will take its place. A company or business that sells or trades in motor vehicles would be eligible for the $20,000 maximum Instant Asset Write-off. If it completely expensed its purchase in the year it was sold, 100% of the sale price would be included in taxable income.
2. The government did not extend the Low- and Medium-Income Tax Offset. This implies that anyone who receive additional tax refunds of up to $1,500 in 2022 won’t get them in 2023.
Brief Summary of the Changes in Business Taxation
Here is a quick rundown of the Budget updates that most business owners should be aware of:
Major Change |
How This Will Impact You |
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The End of Temporary Full Expensing. Most companies can currently deduct 100% of the cost of business assets in the year that they are purchased and ready for use. This will end on June 30, 2023. |
Buy company assets before June 30, 2023. To be eligible to deduct 100% of the cost of an item you need to buy for your business and you have the cash flow to do so, we advise doing so BEFORE JUNE 30, 2023. |
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Low- and Middle-Income Tax Offset (LMITO) is no longer available. In the 2019 Budget, the temporary LMITO was first established, and it was later extended during the COVID-19 pandemic. Individuals received additional tax refunds ranging from $675 to $1,500 (depending on your income level). The LMITO expired on June 30, 2022, because the government chose not to extend it. |
2023 Tax Refund Will Be Smaller. Those who earned an additional tax refund of up to $1,500 in 2022 won’t be eligible for one in 2023. |
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Instant Asset Write-Off for Small Businesses.Small firms can instantly deduct the full cost of qualified assets costing less than $20,000 inc. if their annual revenue is less than $10 million. GST that are installed and ready for use on or before July 1, 2023, and June 30, 2024. |
Reduced Tax Deductions for Asset Write-Offs. From July 1, 2023, a small business can only claim up to $20,000 inc. in comparison to earlier years. GST as an immediate tax deduction. Any assets that cost more than this sum will be included in the pool for small businesses with simplified depreciation, where they will be depreciated at a rate of 15% the first year and 30% the following year. Keep in mind that this is a tax deduction rather than receiving $20,000 in cash. |
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Energy Incentive for Small Businesses. To encourage electrification and lower energy costs for small enterprises, the government is proposing a tax incentive. From 1 July 2023 through 30 June 2024, businesses with annual sales of less than $50 million will be eligible for an extra 20% tax deduction for qualified investments supporting electrification and more efficient energy consumption. |
$20,000 More in Tax Deductions.Companies will be able to invest in things like: • putting electricity into your HVAC systems • switching to more energy-efficient refrigerators and induction cooktops • putting in heat pumps and batteries. The maximum bonus tax deduction will be $20,000 per business, with a maximum total expenditure cap of $100,000. |
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Amnesty for Small Business Tax Lodgement Penalties.Small enterprises with a turnover of less than $10 million will be eligible for this new amnesty, which is intended to motivate them to get back into the tax system. |
No Penalties for Some Delinquent Tax Filings.For unfiled tax lodgements that are filed between 1 June 2023 and 31 December 2023 but were initially required to be filed between 1 December 2019 and 29 February 2022, a small firm will not be assessed failure-to-lodge penalties. |
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Uplift Factor for Pay As You Go (PAYG) Instalments.If you make PAYG instalment payments for the upcoming tax year, the government bases these payments on the tax from the prior year, raised by the GDP “uplift.” The government was pleased to reveal that the GDP increase for 2024 will only be 6% rather than the 12% that was required by law. |
Prepare for Higher PAYG Installments in 2024.Due to strong inflation, the 6% increase for your 2024 PAYG tax instalments is higher this year. You will need to prepare for significantly larger PAYG instalments in 2024 if you continue to generate strong business earnings with tax due. |
To get the maximum benefits from the new measures announced in the 2023 Federal Budget, please contact us immediately to book in your 2023 Tax Planning meeting with us.
We look forward to assisting you!
About Lan Nguyen
Lan is the Founder and Chief Strategist at Success Accounting Group, Melbourne based CA firm. In a matter of short 8 years she has built up a reputable Chartered accounting firm with 3 offices and a team of 6 professional accountants and support team members. Her mission is to provide Innovative and Strategic Financial advice to help her customers make smarter financial decisions today for a brighter future.
Success Accounting Group is for established business owners who would like help to grow a sustained business. As a business owner you understand what drives your business success with our accounting team taking care of the rest.
Success and Wealth
Success Accounting Group Pty Ltd
Oakleigh, VIC, 3166
