Federal Budget 2023-24

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The budget was handed down by Treasurer, Dr Jim Chalmers on 9 May 2023. Below are the key takeaways:

Businesses

The temporary full expensing measure will finish on 30 June 2023, but small businesses will have access to the temporary $20,000 instant asset write off until 30 June 2024.

A new incentive called ‘The Small Business Energy Incentive’ will be offered to businesses with an annual turnover of less than $50 million to electrify and save on their energy bills. These businesses will have access to a bonus 20% tax deduction for eligible assets supporting electrification and more efficient use of energy for the 2024 financial year. The maximum that can be claimed through the Energy incentive is $20,000, meaning $100,000 worth of expenditure will be eligible.

Personal

There are no changes to the planned stage 3 tax cuts that will apply from 1 July 2024. The tax cut will abolish the 37% tax bracket and lower the 32.5% tax bracket to 30%. Below is a table of the changes:

There are also changes to the Medicare Levy surcharge which have had no changes since 2014. Below is a table of the changes:

Date 1 July 2020- 30 June 2024 1 July 2024 onwards
Rate (%) Income range ($) Income range ($)
Nil 0 – 18,200 0 – 18,200
19 18,201 – 45,000 18,201 – 45,000
30 N/A 45,000 – 200,000
32.5 45,001 – 120,000 N/A
37 120,001 – 180,000 N/A
45 >180,000 >200,000

1 July 2014- 30 June 2023

Threshold Base tier Tier 1 Tier 2 Tier 3
Single ($) >90,000 90,001 – 105,000 105,001 – 140,000 >140,001
Family ($) >180,000 180,001 – 210,000 210,001 – 280,000 >280,001
Surcharge 0% 1% 1.25% 1.5%

1 July 2023 onwards

Threshold Base tier Tier 1 Tier 2 Tier 3
Single ($) >93,000 93,001 – 108,000 108,001 – 144,444 >144,441
Family ($) >186,000 186,001 – 216,000 216,001 – 288,000 >288,001
Surcharge 0% 1% 1.25% 1.5%

Superannuation

From 1 July 2026, employers will be required to pay their employees’ super at the same time as their wages rather than quarterly, making it harder for employers to not pay super. Significant administration changes will be required to make the transition seamless. The super guarantee rate will also increase from 10.5% to 11% from 1 July 2023, as already legislated.

Individuals with balances over $3 million will be subject to an additional 15% tax. This tax will relate to the portion of the balance over $3 million and is set to affect 80,000 individuals. Revenue from the new tax is estimated to be $2 billion per year.

If you would like to discuss the Budget 2023 in further detail, please contact our office at 03 9973 5905.

Entertainment Expenses for Businesses

Posted by Admin PWA on

Entertainment expenses refer to costs incurred by a business for entertaining clients or staff members. According to the ATO, such expenses can be deductible, but only if they meet certain conditions.

To qualify as a deductible expense, entertainment costs must be directly related to the business and incurred while generating assessable income. Additionally, the expenses must not be lavish or extravagant.

Examples of deductible entertainment expenses may include business lunches or dinners, sporting events, and other social outings that are primarily focused on conducting business. However, expenses such as family outings, personal events, and entertainment unrelated to business are not deductible.

It’s worth noting that there are certain limitations to the deductibility of entertainment expenses. For instance, any costs incurred for providing entertainment to employees may be subject to fringe benefits tax (FBT). Similarly, expenses that exceed the entertainment limit of $300 per person may not be fully deductible.

Here’s an example to illustrate how entertainment expenses work in practice. A software development firm hosts an event to launch a new product, inviting its clients and staff members. The cost of the event is $10,000, and there were 50 attendees, including 20 clients. As per the Australian taxation law, the company can claim a deduction for the cost of the event, but it must apportion the expenses between business and private use.

The firm may only claim the costs relating to the 20 clients as a deductible expense, as this expenditure was incurred directly while generating assessable income. Additionally, the costs relating to the employees may be subject to FBT. The remaining expenses not meeting the conditions for deductibility may not be claimed as an expense on the company’s tax return.

In conclusion, businesses should ensure that they understand the rules surrounding entertainment expenses to avoid any potential issues with the ATO. If you are a business that incurs entertainment expenses and would like more information, please contact our office at 03 9973 5905.