The budget announced no new tax measures for most medium-sized businesses and only a limited one year extension to the current asset write-off concession for small businesses.  In particular, there were no new announcements in relation to the private company loan rules or taxation of trust distributions.

The central piece of the ‘business’ budget relates to the government’s ‘Future Made in Australia’ package.  Businesses operating in hydrogen and critical minerals industries can expect new tax incentives through this program.

Here we highlight some of the key measures affecting Australian businesses, which include:

MEASURES FOR SMALL & MEDIUM BUSINESS

MEASURES FOR LARGE BUSINESS & INTERNATIONAL

R&D AND INCENTIVES FOR BUSINESS

If you have any questions as to how this budget impacts you and your business, please contact your local Bentleys advisor. We are here to help you get where you want to be.

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SMALL & MEDIUM BUSINESS


Small businesses with an aggregated annual turnover of less than $10 million will continue to be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use by 30 June 2025.  The asset threshold applies on a per asset basis, so small business can instantly write off multiple assets.   However, you need to be careful to purchase the asset in the right group entity as a purchase in an entity which leases to other group business entities may not be eligible.

Businesses in the $10 million to $50 million income range are currently in limbo with measures before parliament which propose to extend the current concession (including an increase in the threshold to $30,000) which is available until 30 June 2024.  The changes are not guaranteed to pass in their current form, so medium sized businesses ordering assets to meet the 30 June 2024 deadline will be taking a gamble.

For small businesses applying the simplified depreciation regime, assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each subsequent income year.

The federal budget has set aside $3.5 billion over three years from 2023–24 to extend the Energy Bill Relief Fund. That will include a $325 rebate for eligible small businesses for a year from 1 July.

The provisions that prevent small business from re-entering the simplified depreciation regime for five years if they opt-out will continue to be suspended until 30 June 2025.

LARGE BUSINESS & INTERNATIONAL


Since 2016, the federal government has been funding the ATO’s Tax Avoidance Taskforce aimed at targeting tax avoidance activities which has a focus on multinationals, large business and high net wealth individuals. This has been successful in generating additional government revenues of over $20 billion since its inception.

The government has announced that the operation of the Tax Avoidance Taskforce will be extended for a further two years from 1 July 2026 with additional projected revenues of approximately $2.4 billion during the extended period.

The role of the Taskforce is to monitor tax compliance activities at the larger end of town. Such activities have included the Top 1000 Public Groups Performance Program and Next 5000 Private Groups Tax Performance Program.


Broadly, under current rules, non-residents are afforded a CGT concession where they are not subject to capital gains tax (CGT) on disposal of certain assets in Australia (e.g. shares in Australian companies) provided such assets do not have a connection to underlying Australian real property.

The federal government is proposing to tighten the above CGT concession for non-residents for CGT events occurring after 1 July 2025 by introducing three key changes:

  • Changing how the CGT concessions operate in determining whether an asset has connection to underlying Australian real property. This is to be achieved by amending the principal asset test currently measured at a point in time to a 365-day testing period
  • For CGT events relating to shares or membership interests that have a value of $20 million or more to require such transactions being notified to the ATO prior to being executed
  • Clarifying and broadening the types of assets that foreign residents will be subject to CGT on

At this stage it remains to be seen what additional assets are to be captured under the new rules.


The federal government has announced that it will not continue with its previously announced measures relating to denial of deductions for intangible payments made to low tax jurisdictions. Rather, the government indicated that these integrity measures are to be addressed by the Global Minimum Tax and Domestic Minimum Tax Rules currently being implemented.

Another measure announced relates to Australian plantation forestry entities and debt funding. These entities will be permitted to apply the former ‘asset-based’ thin capitalisation rules rather than the new earnings-based rules.

R&D AND INCENTIVES 


The budget is good news for businesses with planned or committed investments in innovative developments.  There is continuity with the R&D Tax Incentive program and no change to its current structure. This program stability should allow businesses to budget confidently and plan long-term R&D projects.  It also strengthens the attractiveness of R&D for investors and lenders.

In a further boost to investments in R&D, the government will launch a strategic review with a focus on getting the most value out of research investments and maximising the contribution of science and innovation to businesses.  This signals a strong policy commitment to creating a supportive environment for R&D.

A $22.7 billion “Future Made in Australia package” was announced to attract investment in priority industries. Specifically, this package is targeted at enhancing Australia’s renewable energy capability, increasing sovereign capability in processing and refining of critical minerals, and modernising local industries for advanced manufacturing.

Some measures announced are a rehash of existing programs such as the $15 billion National Reconstruction Fund Corporation and the $392 million Industry Growth Program.

The package also includes new future production tax incentives earmarked for 2027–28 to 2040–41 to support downstream refining and processing of critical minerals to improve Australia’s supply chain resilience, and to support the growth of a competitive hydrogen industry and Australia’s decarbonisation.


Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.

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