Federal Budget 2023

The Budget has delivered some small relief measures for individuals and small business and also boosted funding for a tougher compliance crackdown of tax evaders.

PERSONAL TAXATION

Personal tax rates

Personal tax rates unchanged for 2024 (unchanged since 2022).

Low and middle income tax offset

The LMITO was not extended beyond 2022. As a result, low-to-middle income earners may see their 2023 tax refunds reduced by up to $1,500 (for incomes up to $90,000 but phasing out up to $126,000), all other things being equal.

Low income tax offset

Low income taxpayers are still entitled to the low income tax offset (LITO). The maximum amount of the LITO is $700. The LITO is withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000 and then at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667.

Medicare levy low-income thresholds

The Medicare levy low-income threshold for singles will be increased to $24,276 (up from $23,365 for 2022). For couples with no children, the family income threshold will be increased to $40,939 (up from $39,402 for 2022). The additional amount of threshold for each dependent child or student will be increased to $3,760 (up from $3,619).

For single seniors and pensioners eligible for the seniors and pensioners tax offset (SAPTO), the Medicare levy low-income threshold will be increased to $38,365 (up from $36,925 for 2022). The family threshold for seniors and pensioners will be increased to $53,406 (up from $51,401), plus $3,760 for each dependent child or student.

Small business 

A temporary increase in the instant asset write-off threshold to $20,000 for one year from 1 July 2023.

An amendment to the tax law to set the GDP adjustment factor for pay as you go (PAYG) and GST installments at 6 per cent for the 2024 income year.

No renewal of the loss carry back tax offset and the SME technology investment boost.

Superannuation

For SMSFs under the non-arm's length income (NALI) provisions. Under the new proposal, income will be taxable at twice the level of the general expense where there is a breach, instead of five times as previously proposed. 

Fund income taxable as NALI will also exclude contributions.

Confirmation of move to payday super which will require employers to pay their employees’ super guarantee amounts at the same time as their salary and wages from 1 July 2026.

The ATO will receive additional resourcing to help it detect unpaid super payments earlier.

Funding boost for compliance programs 

Funding to ATO to extend the Personal Income Tax Compliance Program for 2 years from 1 July 2025.

GST compliance program over 4 years to conduct a range of activities to promote GST compliance and assist the ATO to develop more sophisticated analytical tools to combat emerging risks to the GST system.

Expanding the scope of the general anti-avoidance rules for income tax. Part IVA will be expanded to include 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.

Additional funding to facilitate ATO engagement with taxpayers with high-value debts over $100,000 and aged debts older than two years. This will apply to taxpayers that 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.

Multinationals

The government will implement a 15% global minimum tax for large multinational enterprises to help prevent a “race to the bottom” on corporate tax rates, and protect Australia’s corporate tax base. 

The global minimum tax rules would allow Australia to apply a top up tax on a resident multinational parent or subsidiary company where the group’s income is taxed below 15 per cent overseas.

Amendments to the Petroleum Resource Rent Tax (PRRT) in response to Treasury’s Review of the PRRT Gas Transfer Pricing (GTP) arrangements.

Conclusion

Overall the Government seems to have struck a balance between cost-of-living relief and not overheating the economy, but largely it’s very much a budget for addressing short-term challenges.