The Treasurer, Dr Jim Chalmers, has handed down the 2023-24 Federal Budget. 

Below, we’ve provided a snapshot of the key tax and superannuation measures announced in the 2023-24 

• Amendments to reduce compliance costs for general insurers by aligning the tax law with AASB 17 Insurance Contracts. This amendment, with effect from income years commencing on or after 1 January 2023, will allow general insurers to continue to use audited financial reporting information calculated in accordance with the new standard as the basis for their tax returns.
• New tax incentives for eligible build-to-rent projects where construction commences after 7:30pm (AEST) on 9 May 2023:
• Increasing the rate for capital works deductions from 2.5% to 4%, and 
• Reducing the withholding tax rate for eligible fund payments from managed investment trusts (MITs) to foreign residents from 1 July 2024 from 30% to 15%, subject to further consultation on eligibility criteria. 

These measures will apply to build-to-rent projects consisting of 50 or more apartments or dwellings made available for 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. 

• Extend the clean building MIT withholding tax concession to data centres and warehouses that meet the relevant energy efficiency standard, where construction commences after 7:30pm (AEST) on 9 May 2023. This measure will apply from 1 July 2025. 
• Clarify that mining, quarrying and prospecting rights (MQPRs) cannot be depreciated for income tax purposes until they are used (not merely held) and will limit the circumstances in which the issue of new rights over areas covered by existing rights lead to tax adjustments. These amendments will apply in respect of all MQPRs acquired or started to be used after 7:30 PM (AEST) on 9 May 2023. 

• Implementation of the following key aspects of Pillar Two of the OECD/G20 Two-Pillar Solution to address the tax challenges arising from digitalisation of the economy: 

1. A 15% global minimum tax for large multinational enterprises with the income inclusion Rule applying to income years starting on or after 1 January 2024 and the undertaxed Profits Rule applying to income years starting on or after 1 January 2025. 
2. A 15% domestic minimum tax applying to income years starting on or after 1 January 2024. 

The global minimum tax and domestic minimum tax will apply to large multinationals with annual global revenue of EUR750 million (approximately $1.2 billion) or more. 

• Introduction of a new Small Business Energy Incentive, an additional 20% tax deduction on spending (capped at $100,000) that supports electrification and more efficient use of energy. This will be available to small and medium businesses with aggregated turnover of less than $50 million, in respect of eligible assets or upgrades first used or installed ready for use between 1 July 2023 and 30 June 2024. Full details of eligibility criteria will be finalised in consultation with stakeholders. 
• Temporarily increase the instant asset write-off threshold to $20,000 for assets that are first used or installed ready for use between 1 July 2023 and 30 June 2024. This will be available for small businesses (those with aggregated turnover of less than $10 million) that elect to use the simplified depreciation regime, and 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. 
• A lodgment penalty amnesty program for small businesses with aggregated turnover of less than $10 million to encourage them to re-engage with the tax system. The amnesty will remit failure-to-lodge penalties for outstanding tax statements lodged in the period from 1 June 2023 to 31 December 2023 that were originally due during the period from 1 December 2019 to 29 February 2022. 
• Funding to the ATO to lower the tax-related administrative burden for small businesses. This includes trialing an expansion of the ATO independent review process to small businesses (with aggregated turnover between $10 million and $50 million) subject to an ATO audit, 5 new tax clinics to improve access to tax advice and assistance for small businesses, and a range of other reforms to cut paperwork and reduce the time small businesses spend doing taxes. 
• Reduce the GDP adjustment factor for Pay-As-You-Go (PAYG) and Goods and Services Tax (GST) instalments to 6 per cent for the 2023-24 income year, from 12% under the statutory formula, to provide cash flow support to small businesses and other PAYG instalment taxpayers. 

• The Government will proceed with 8 recommendations from the recently released Treasury Gas Transfer Pricing Review, and 8 recommendations from the earlier Callaghan Review that were accepted but not implemented by the previous government. Key changes include the introduction of a cap on deductible expenditure of 90% of assessable receipts derived from LNG projects from 1 July 2023. 
• Amendments will be made to clarify that ‘exploration for petroleum’ is limited to the ‘discovery and identification of the existence, extent and nature of the petroleum resource’ and does not extend to ‘activities and feasibility studies directed at evaluating whether the resource is commercially recoverable’. This amendment will apply to all expenditure incurred from 21 August 2013. 

• From 1 July 2026, requiring employers to pay their employees’ superannuation guarantee (SG) entitlements on the same day that they pay their salary and wages. The Government will consult on changes to the design of the SG charge to align with the increased payment frequency, with the final design to be considered as part of the 2024-25 Budget. The Government will also provide additional funding to the ATO to improve data matching capabilities to identify and act on cases of SG underpayment by employers, and for consultation and co-design. 

• Exempt eligible lump sum payments in arrears from the Medicare levy from 1 July 2024. 
• Amend the non-arm’s length income (NALI) provisions which apply to expenditure incurred by superannuation funds by: 

1. Limiting income of self-managed superannuation funds and small APRA regulated funds that are taxable as NALI to twice the level of a general expense. Additionally, fund income taxable as NALI will exclude contributions. 
2. Exempting large APRA regulated funds from the NALI provisions for both general and specific expenses of the fund, and 

     2.1 Exempting expenditure that occurred prior to the 2018-19 income year.

This is an amendment to a measure announced by the former Government. 

• Expanding the scope of the general anti-avoidance rule for income tax (Part IVA of the Income Tax Assessment Act 1936) to apply to schemes that reduce tax paid in Australia by accessing a lower withholding tax rate on income paid to foreign residents and schemes that achieve an Australian income tax benefit, even where the dominant purpose was to reduce foreign income tax. This measure will apply to income years commencing on or after 1 July 2024, regardless of whether the scheme was entered into before that date. 
• Increasing tobacco excise by 5% per year for 3 years, in addition to normal indexation, from 1 September 2023 and progressively aligning the tax treatment of loose-leaf products with manufactured sticks between 1 September 2023 and 1 September 2026. 
• Additional funding for:

1. The ATO to facilitate engagement with taxpayers who have high-value
   debts over $100,000 and aged debts older than two years where those
   taxpayers are either public and multinational groups with an aggregated turnover of greater than $10 million, or privately owned groups or individuals controlling over $5 million of net wealth. 
2. The ATO and Treasury to extend the Personal Income Tax Compliance
   Program for 2 years from 1 July 2025 and expand its scope from 1 July 2023.
3.  The ATO over 4 years from 1 July 2023 to continue its GST compliance program. 
4. The ATO over 2 years from 2023-24 to establish a public register of beneficial ownership of companies and other legal vehicles. 

In addition to the new or updated measures outlined above, the Government has announced that it will not proceed with, or defer the start date of, the following measures: 

• Not proceeding with 3 separate Patent Box measures announced by the former government in the 2021-22 and 2022-23 March Budgets. 
• Defer the start date for some components of the 2022-23 March Budget measures relating to streamlining excise administration for fuel and alcohol from 1 July 2023 to 1 July 2024. 
• Defer the start date of the measure announced in the 2022–23 March Budget to amend the tax treatment of biodiversity certificates from 1 July 2022 to 1 July 2024. 

There are several tax measures announced by the former Government that are outstanding with no indication of whether the current Government intends to proceed with them, including the previously announced changes to the tax residency rules for individuals and companies, and reforms to Division 7A (relating to private company deemed dividends). 

For further information on any of the measures announced in this updated 2023-24 Federal Budget and the potential impact on you and your business, please contact. [email protected]