Last night,Tuesday 25 October 2022, the Labor Government delivered the much-anticipated updated 2022/23 Federal Budget. It’s the first budget for the new Government since coming into office earlier this year.
While our federal budgets are usually delivered in May each year, the change of Government, current levels of economic uncertainty across the world, together with the persistent cost of living pressures here at home, meant that it was important for the new Government to get to work to address many issues sooner rather than later.
Although most of the focus for the updated 2022/23 Federal Budget is centred around reducing the cost of living burden for individuals and households, there are a number of important things to know for business owners.
Environmental Focus & Green Initiatives
The updated 2022/23 Federal Budget provides incentives to encourage businesses to make greener choices.
FBT Exemptions for Electric Cars
Battery, hydrogen fuel cell and plug-in hybrid electric cars purchased after 1 July 2022, and that have a first retail price below the luxury car tax threshold for fuel-efficient cars, will be exempt from fringe benefits tax (FBT) and import tariffs.
It is important to note that this exemption does not apply to cars that were held or used prior to 1 July 2022. Although it is exempt, the provision of an electric car is still a reportable fringe benefit, and so employers are required to include any fringe benefits in relation to electric cars in employee’s reportable fringe benefits amount.
Energy Efficiency Grants
The Government has indicated that it will provide funding to support energy efficient equipment upgrades for small and medium businesses. The funding is intended to support various aspects of the process such as studies and planning, as well as equipment and facility upgrade projects. Projects may seek to improve energy efficiency, reduce emissions or improve the management of power demand.
ATO Compliance – Back on the Agenda
During the height of COVID-19 and its dramatic impact on everyone and everything, including the business community, the ATO particularly relaxed its compliance and auditing activities to give businesses a chance to “weather the storm”.
Now that things are slowly getting back on track, it has been made clear that ensuring compliance, and more specifically targeting non-compliance, across a range of taxation areas, is very much back in the spotlight.
Specifically, the budget has provided funding for a number of ATO programs targeted at taxation compliance.
- Personal Income Taxation Compliance Program – focusing on areas such as over claiming of deductions and incorrect reporting of income
- Shadow Economy Compliance Program – targeted at shadow economy activities such as cash transactions that take place outside the tax and regulatory system, protecting revenue and level the playing field for those businesses that are following the rules through the expansion and improvement of the taxable payments reporting system.
- Tax Avoidance Taskforce – this is the largest allocation of the Government’s funding in relation to targeting tax compliance and so you can expect to see a lot of activity in this area.
Funding of the Tax Avoidance Taskforce will support the ATO to target the priority areas of observed business tax risks, together with its ongoing focus on multinational enterprises and large public and private businesses.
As a result we expect to see increased scrutiny in relation to areas such as:
- Allocation of proceeds of sale as capital versus revenue
- Administration of, and details surrounding Capital Gains Tax (CGT) disposals and claiming of small business CGT concessions
- Division 7A loans
- Trust distributions including those under section 100A
- Related party transactions
As is always good business practice, it is important to seek professional advice to ensure ongoing tax compliance in your business. If you are doing the right thing, you should have nothing to worry about if the ATO decides to look into your business a little further.
You should also be sure to always keep good business records and maintain all supporting documentation in regards to business transactions, so that you can readily provide substantiating evidence to the ATO should it be requested.
Extended Paid Parental Leave
While this announcement is good news for families it is also important for business owners to be aware of the changes so that they can adequately prepare and plan for any resulting impacts to their business.
The changes to the Paid Parental Leave Scheme, to be effective from 1 July 2023, sees increased flexibility and access for families in that it is available for eligible parents – covering either parent, birth parents and non-birth parents. For businesses, this means there is potential for more of their employees to access time off to care for their newborn child.
From 1 July 2024, the scheme will be expanded further to incrementally increase the eligible period that is available, to a total of 26 weeks by 1 July 2026.
Extension of Small Business Debt Helpline and NewAccess for Small Business Owners Programs
$15.1 million (over 2 calendar years from 1 January 2023 to 31 December 2024) has been committed to extend the Small Business Debt Helpline and NewAccess for Small Business Owners programs.
The provision of these programs provides much needed mental health coaching and financial counselling for small business owners free of charge. They are a valuable service for business and business owners who are in need of additional support and guidance in these challenging times.
No Mention of These Previously Announced Initiatives
Technology Investment Boost
In the first 2022/23 Federal Budget that was issued by the previous government earlier this year, they announced a technology investment boost that was set to provide an additional 20% deduction on eligible expenses and depreciating assets that supported digital adoption within their business. The initiative was due to be effective on purchases made from the date of announcement, being 29 March 2022, until 30 June 2023. This might include items such as portable payment devices, cyber security systems or subscriptions to cloud-based services.
While the Treasury released draft legislation for comment in late August 2022, there was no mention of the initiative in last night’s update 2022/23 budget and the Technology Investment Boost remains in draft format for the time being.
This could provide substantial support to businesses looking to undertake technology investment action in their businesses, but with the legislation still yet to be passed, it is difficult to know if/when businesses will be able to take advantage of this measure.
Temporary Full Expensing – Immediate Deductions for Eligible Depreciating Assets ends 30 June 2023
Businesses are currently able to access a temporary full expensing rule that allows for an immediate deduction for 100% of the cost of eligible depreciating assets.
The conditions are such that the assets must be installed and ready for use by 30 June 2023.
The fact that this was not mentioned in the recently updated 2022/23 Federal Budget means that it is unlikely to expect that this will be extended past the current 30 June 2023 deadline.
If you are looking to take advantage of this, be sure to keep the deadline in mind and don’t leave it too late to take action.
Business Help is Available
Admittedly, there wasn’t a lot of direct relief and support measures announced for businesses in the updated 2022/23 Federal Budget, but that certainly doesn’t mean that there aren’t plenty of ways that you can take advantage of existing measures and gain expert advice to maximise your business potential and legally minimise your tax obligations.
The team of tax lawyers and accountants at The Quinn Group have many years of experience providing tailored advice to support a range of businesses and business owners. Contact us by calling (02) 9223 9166 or submit an online enquiry and make an appointment to discuss how we can help you and your business.