The Treasurer, Jim Chalmers, has presented the 2023 Budget, which includes various measures aimed at supporting businesses. Alongside the leaked cost-of-living and welfare initiatives, the government has released new proposals.

The Budget predicts a surplus of $4.2 billion in 2022-23. However, there is an anticipated underlying cash deficit of $13.9 billion for 2023-24 and a $35.1 billion deficit for 2024-25. The global economic outlook is uncertain, with inflation and rising interest rates expected to impact real GDP growth, projected to decrease from 3.25% in 2022-23 to 1.5% in 2023-24 before rising to 2.25% in 2024-25. Inflation, currently at 6%, is expected to decrease to 3.25% in 2023-24 and return to the Reserve Bank of Australia’s target range of 2-3% in 2024-25.

For small businesses, the government proposes a temporary increase in the instant asset write-off threshold from July 1, 2023, to June 30, 2024. Previously, the temporary full expensing initiative replaced the instant asset write-off regime and applied to assets used or installed between October 6, 2020, and June 30, 2023. This allowed eligible businesses to immediately deduct the business portion of an asset’s cost with certain cost limits applying to specific assets like cars.

With the expiration of the temporary full expensing, small businesses with an aggregated annual turnover below $10 million will be able to immediately deduct the full cost of eligible assets valued below $20,000. This deduction applies to assets first used or installed between July 1, 2023, and June 30, 2024, with the $20,000 limit applicable per asset. Assets valued at $20,000 or more can be added to the small business simplified depreciation pool and depreciated at 15% in the first year and 30% each subsequent year. Additionally, the “lock-out” rule, which restricts re-entry into the simplified depreciation regime for five years if opted out, will remain suspended until June 30, 2024.

The government has also introduced a lodgement penalty amnesty program for small businesses with an annual turnover below $10 million. The amnesty will waive failure-to-lodge (FTL) penalties for outstanding tax statements originally due between December 1, 2019, and February 29, 2022, and lodged between June 1, 2023, and December 31, 2023. Currently, the FTL penalty is $275 per penalty unit, with small entities liable for one penalty unit for each 28-day period (or part thereof) that the return or statement is overdue, up to a maximum of five penalty units. Medium entities face double the penalty unit rate. The amnesty aims to encourage small businesses to engage with the tax system.

Alongside the amnesty, the government will allocate funding to the Australian Taxation Office (ATO) from July 1, 2023, over a four-year period. This funding will support the ATO in engaging more effectively with businesses to address tax and superannuation liabilities. Specifically, the funding will enable the ATO to engage with taxpayers who have high-value debts exceeding $100,000 and aged debts (over two years) held by public/multinational groups with aggregated turnover greater than $10 million, privately owned groups, or individuals controlling over $5 million in net wealth.

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