I write this a week after the budget has been presented. I am not sure if I am more in shock or still rejoicing with the very little change regarding income tax for the next year. Below is a summary that impact my client base and things to think about before 30 June.

Personal Taxation Measures

  • Stage 3 tax cuts – The Government did not announce any personal tax rates changes. The Stage 3 personal income tax cuts will commence from 1 July 2024 as previously legislated. From 1 July 2024 the 32.5% marginal tax rate will be cut to 30% for the $45,000 to $200,000 tax bracket. The 37% tax bracket will be entirely abolished at this time.
  • Medicare levy thresholds – The Medicare levy thresholds across all categories have been increased for the 2022-23 and later income years.
  • Medicare levy exemption – Eligible lump sum payments in arrears will be exempt from the Medicare levy for low-income taxpayers provided they satisfy the eligibility requirements for the existing lump sum payment in arrears tax offset. This change will commence from 1 July 2024.

Small Business Measures

  • Small business instant asset write-off threshold – The threshold will be temporarily increased to $20,000 for small businesses with aggregated annual turnover of less than $10m for assets that are first used or installed ready for use between 1 July 2023 and 30 June 2024. Assets valued at $20,000 or more 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.

Planning tip: For the current year small business can claim an instant asset write-off for any asset they purchase. If you are thinking of purchasing an asset that will cost more than $20,000 and in need of a tax deduction, it may be worth doing before 30/6/23. Remember it must be installed and ready for use by 30/6/23.

  • Small business energy incentive – Businesses with annual turnover of less than $50m will be able to claim an additional 20% deduction on spending that supports electrification and more efficient use of energy. Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024.
  • FBT rules for electric vehicles – The Government confirmed that plug-in hybrid electric cars will not be eligible for the FBT exemption for electric cars from 1 April 2025.

Superannuation Measures

  • Super account balances above $3m – despite pushback from industry, the Government has confirmed its intention to apply an extra 15% tax on total superannuation balances above $3 million from 1 July 2025, including in relation to defined benefit schemes. No further details were released so it is expected the proposed changes will operate as previously announced (ie, unrealised gains will be subject to the extra 15% tax).

We will be looking at this closely in the next twelve months to determine strategies that clients with a super balance of greater than $3m can take. Remember this starts from 1/7/2025.

  • Payday super – employers will be required to pay their employees’ super guarantee at the same time as their salary and wages from 1 July 2026.
  • Pension drawdowns: no reduction in minimum – the Budget did not announce a further extension to 2023-24 of the temporary 50% reduction in the minimum annual payment amounts for superannuation pensions and annuities.

We will advise your 2024 pension after we complete your 2023 financial statements. What needs to be kept in mind is having sufficient cash reserves in place for an increase in pension payments.

If you have any questions regarding the budget and its impact to you, please contact Mark or the team at mark@mcaccg.com.au or 9923 2959.

This is general advice only and not to be interpreted as individual advice specific to your situation. Contact us to discuss the best solutions for your needs.”