Federal Budget | Tax

Analysis and insights 2023-24

Federal Budget 2023-24

Treasurer Dr Jim Chalmers handed down his second budget on 9 May 2023. The 2023-24 Federal Budget contained a wide range of tax and superannuation related measures, with a focus on support for small businesses, encouraging investment in housing and clean buildings, changes to the Petroleum Resource Rent Tax and implementation of Pillar Two of the Organisation of Economic Cooperation and Development / G20 Two-Pillar Solution to address digitalisation of the economy.

Key changes are highlighted below, with links to our in-depth analysis.

There is no extension to Temporary Full Expensing, which will finish on 30 June 2023; however small businesses will have a temporary one year increase of the instant asset write-off threshold to $20,000.
The 2022-23 income year is the final year for which eligible entities can carry-back losses to prior years.
Small and medium businesses will receive an additional 20 per cent bonus tax deduction for spending that supports 'electrification' and more efficient use of energy under the Small Business Energy Incentive.
The tax law will be amended to reduce compliance costs for general insurers by aligning tax outcomes with the newly introduced accounting standard AASB 17 Insurance Contracts, with effect for income years commencing on or after 1 January 2023.
From 1 July 2024, reduced withholding rates for fund payments from Managed Investments Trusts (MITs) holding eligible build-to-rent properties. Increased capital works depreciation rates will also apply to eligible build-to-rent properties.
From 1 July 2025, income from data centres and warehouses can qualify for a reduced withholding rate (of 10 per cent) where a trust qualifies as a Clean Building MIT.
From 1 July 2023, LNG project deductions capped to 90 per cent of income in a year. This sets a minimum net level of PRRT at 2.8 per cent of assessable receipts after allowing an income tax deduction for the PRRT paid, and only applies seven years after a project’s first production.
Amendments will be made to the definition of exploration for PRRT and income tax purposes following the decision of the Full Federal Court in Commissioner of Taxation v Shell Energy Holdings Australia Limited [2022] FCAFC 2.
Introduction of ‘Payday Super’ from 1 July 2026.

Australia will implement key aspects of the OECD’s Pillar Two framework, including a domestic minimum tax, with an effective date for some measures from 1 January 2024.
Affected taxpayers will need to act quickly to ensure they have the data needed to forecast and model the impacts of the new rules in the interim, as well as to maintain reporting and compliance requirements upon enactment.

No changes to personal income tax rates and thresholds; however, indexation of the Medicare Levy Surcharge and Private Health Insurance Rebate income thresholds will resume from 1 July 2023.
Low income earners will also be eligible for a Medicare Levy exemption on eligible lump sum payments from 1 July 2024.
Better targeted superannuation concessions from 1 July 2025 to provide a system that is more sustainable and fairer, anticipated to affect less than 0.5 per cent of Australians.
Amendments to the former Government’s proposed measure relating to non-arm’s length expenditure incurred by superannuation funds.

The general anti-avoidance rule for income tax to be expanded for schemes that access a lower withholding tax rate and schemes that achieve an Australian income tax benefit where a foreign tax benefit was the dominant purpose.
There is an increase in ATO and Treasury funding to target debt and compliance.
Increase in the tax on tobacco by five per cent per year for the next three years (above standard indexation increases).
Deferring start date of excise streamlining measures to 1 July 2024.
Decrease in Fuel Tax Credit for on-road Heavy Vehicles.

In this section of our 2023-24 Federal Budget tax analysis, we outline the forward agenda for tax measures yet to be enacted and the status of any announced but unenacted measures from the previous Government which have now been clarified.

Federal Budget | Tax

Federal Budget 2023-24

In depth analysis

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