It seems like just yesterday we were writing the last Federal Budget update! As usual the team ordered Pizza and settled in for a mad night of yelling at the TV and budget paper reading.

As a team, we usually gather a ton of notes - like, a whole hundred pages worth of stuff - on everything small businesses need to know. But, get this: last night we were hunting through the budget papers and found diddly-squat about small businesses or startups. Zip. Nada.

Anyway, Alan and Steph didn't let that get them down, bless 'em. They still got together this morning to have a good ol' chinwag about the teeny-tiny scraps of info that actually apply to businesses.

the economy

We are headed towards a budget surplus of $4bn

GDP growth is expected to slow to 1.5% in 2023-2024 from 3.25% in the current year

Inflation is expected to fall to 3.25% in 2023-2024

The gov announced the top 5 priorities areas as :

- Cost-of-living relief
- Strengthening the Health Care system and Medicare
- Growing a more secure economy
- Becoming a renewable energy superpower
- Ensuring Australia is more resilient to international shocks

for small businesses

Certainly not much to be excited about for small businesses, in fact they were barely mentioned again in the budget. Couple of quick points to note…..

TEMPORARY FULL EXPENSING

Okay, hold on to your hats, small business owners, 'cause I've got some news that might make you want to do a happy dance... or cry, depending on your mood, and whether your business needs to invest in additional assets or not.

Right now you can claim the full "depreciation" on an asset you buy for your business in the year you buy it. Unfortunately, that sweet deal is ending on June 30th, 2023.

BUT, don't despair just yet. From July 1st, 2023 to June 30th, 2024, you'll be able to claim depreciation straight away on any assets that cost less than $20,000. Of course, anything over that amount will have to go into the small business simplified depreciation pool (that means you can claim 15% of the cost in the first year, and 30% each year after that), or be depreciated based on the effective life of the asset.

But, and this is a big ol' "but", that $20k amount doesn't mean you get $20k in your pocket. It's just a tax deduction you can claim now, instead of spreading it out over a bunch of years AND you’ve still got to be making profit if you want to see any real benefit. Sorry, folks, no free rides here!

SMALL BUSINESS ENERGY INCENTIVE

As usual this is another announcement that seems exciting however the full eligibility requirements are yet to be finalised. What we know so far…….

This incentive is all about helping us save on energy bills by encouraging us to electrify our assets and improve energy efficiency. Sounds pretty sweet, right? Well, for businesses with a turnover under $50 million, any assets purchased between July 1st, 2023 and June 30th, 2024 (and are ready to use) will be eligible for an extra 20% tax deduction. That's up to a max of $100k worth of assets, meaning you could snag an extra $20k in bonus tax deductions.

Now, before you start going on a shopping spree for energy-efficient fridges or electric heating systems, there are a few things to keep in mind. This incentive won't cover electric vehicles, renewable electricity generation assets, or capital works. But, demand management assets like batteries and stuff that supports electrification is all fair game.

We're still waiting on more details to emerge, but as soon as we know what this means for us in practical terms, we'll be sure to fill you in.

Of note on this topic as well though is the Energy Efficiency Grants that were announced in March. Despite the fact Round 1 applications are closed we should have further rounds of this grant. No word on when it'll open up yet, but make sure you're ready with all your application info as those grants go fast. As always, we'll keep you in the loop with all the latest in Ninja News.

PAYG INSTALMENT INCREASE HALVED

There is a lot of media talk about the PAYG and GST instalment increase being halved as a great cash boost for small businesses. But in reality there is actually no benefit at all for businesses.

When you make profit in your business you have to pay tax in quarterly instalments towards your next year's tax. This is always based on the overall tax you paid last year multiplied by a GDP uplift BUT… in reality the instalments you pay just go towards your actual tax bill. So whilst the increase is now only going to be 6% instead of 12% you aren't getting a reduction in the actual overall amount you need to pay. So really, this is a media story not an actual benefit.

SOME OTHER THINGS TO NOTE……

The Loss carry-back scheme was not extended

R&D Tax Incentive wasn’t mentioned at all

If you are behind on your lodgements the ATO aren’t going to fine you late lodgement penalties if you get your lodgements up to date now

The ATO has more money to chase those with big debts (greater than $100k) as well as a bunch of additional money to ensure compliance in general

Small Business Technology Investment Boost and Training & Skills Boost was supposed to allow a claim of a 120% deduction for spending between 29 March 2022 and 30 June 2024 for training and 29 March 2022 and 30 June 2023 for technology upgrades. This was announced way back in 2022 however legislation hasn’t passed parliament yet! We will keep you updated as this progresses. Again it’s not a rebate, just an extra 20% tax deduction on those expenses.

spending in general

As usual there are a tonne of spending measures announced in the budget. BUT, no detail on how this will be spent yet. Of note…..

INDUSTRY GROWTH PROGRAM

$392m Industry growth program to support small- medium size businesses and startups to commercialise their ideas and grow their operations. Targeted towards businesses operating in the priority areas of the National Reconstruction Fund.

Key areas are:

1. renewables and low emissions technologies
2. medical science
3. transport
4. value-add in the agriculture, forestry and fisheries sectors
5. value-add in resources
6. defence capability
7. enabling capabilities.

NATIONAL RECONSTRUCTION FUND

$15bn is earmarked for this however only $61.4m was announced to support the establishment & operation of it.

for smsf and super

The budget was certainly light on in terms of Superannuation changes (Super was barely mentioned at all)

SUPER PAYABLE ON PAY DAY

At the moment employers have to pay Super for employees on a Quarterly basis. Starting from 1 July 2026 (yep thankfully a few years away) employers will be required to pay super on the same day wages are paid. So if you pay wages weekly you will need to pay Super weekly. This requires a lot of back office changes for the ATO and software providers hence the start date.

This will require businesses to be all over their cash flow requirements.

Also important to note, Super increases from 10.5% to 11% on the 1st July 2023 (i.e. in 2 months), then to 11.5% on 1st July 2024 and finally 12% on 1st July 2025. An additional 1.5% on top of your wages bill compared to now. And cash flow wise this also means higher workers compensation (as Super is included) as well as payroll tax for those businesses above the threshold.

SUPER TAX ON THOSE WITH BALANCES OVER $3MILL

So, the government is making a change to the way taxes work for people who have a lot of money in their superannuation accounts. If you have more than $3 million in Super, you'll have to pay 30% tax on earnings on the assets above that amount. You will still pay 15% on the earnings below the $3mill threshold. This will start July 1, 2025.

But don't worry, if you have less than $3 million in Super, this change won't affect you. For our SMSF clients that’s per member not per fund.

This change will affect around 80,000 people in the first year, but it's estimated to bring in an extra $950 million for the government over the next five years. However, there won't be any limit on how much money you can have in your superannuation account.

PENSIONS

Not announced in the budget but important to note. We’ve had a reduction in the amount you needed to draw as your minimum pension each year for the last 4 years. This reduction meant you only needed to draw down on 50% of the minimum not the entire 100%. This isn’t being extended which means from 1 July 2023 those in pension mode will need to go back to drawing down the full minimum pension amount which ranges from 4% to 11% depending on your age.

We will let you know what that amount is as we prepare your 2023 Compliance.

for individuals

Again, not much to report here

INCOME TAX CUTS

There has been a lot of speculation in the media on whether the previously announced stage 3 income tax cuts would go ahead. Note this isn’t due to start until 1 July 2024. As a reminder here are the differences (note this doesn’t include Medicare Levy)

Stage 3 of the tax cuts are due to commence on 1 July 2024 (ie next year)

Assuming you earn $199,000 for the year the tax saving is $11,124.27 per year.

This was already legislated and at this stage is going ahead.

PAID PARENTAL LEAVE

This was announced last year but comes into play now. From 1 July 2023 Parental Leave Pay and Dad and Partner Pay will be combined into one 20 week payment that can be shared between parents. The leave will be available to both parents, and can be claimed at the same time. This also includes building in some flexibility to allow the 20 weeks to be taken when suits the parents, i.e. one parent can take 2 days per week and the other 3 days per week, as long as the combination only adds to a total of 20 weeks.

This will increase again in July 2024 to 22 weeks, again in July 2025 to 24 weeks and finally 26 weeks in July 2026.

HELP DEBTS

Again not announced in the budget however worth mentioning as there have been numerous media articles floating around. Anyone with HELP debts (HECS for those of us oldies) will see balances increase on the 1st June by 7%. Whilst these debts are technically ‘interest free’ they are increased each year by indexation which is normally 2% but for this year will be 7%.

For some of you depending on individual circumstances it might be beneficial to make a voluntary contribution before 31st May this year to reduce the indexation.

what next

As usual anything announced still needs to be legislated, although there really isn’t a lot in here at all from a business perspective. We will keep you updated via Ninja News as more details in the spending announcements come to light.

Don’t forget Friday Drinks May 26th. RSVP here Any questions you have in relation to the budget feel free to shoot these through to one of the team or post up on our socials. We will keep the answers coming on Facebook, Instagram and in Ninja News.