In approaching the end of the Financial Year, we provide key analysis into potential tax changes to take effect from 1 July 2023, with potential insights covering Instant Asset Write-Off, Fringe Benefit Tax, and Superannuation.
Changes to Instant Asset Write-Off / Temporary Full Expensing
As announced ahead of last month’s Federal Budget, the Temporary Full Expensing provisions will no longer be available from 1 July 2023. Instead, the Instant Asset Write-Off will change from 1 July 2023, with the value of eligible assets increasing from $1,000 to $20,000.
Small businesses with an aggregated annual turnover of less than $10 million may 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 between 1 July 2023 and 30 June 2024.
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 year thereafter.
Changes to Loss Carry-Back for Companies
The Loss Carry-Back provisions were previously extended to the 2023 financial year, however, it's important to note that companies will not be able to carry back their losses from 1 July 2023.
Fringe Benefit Tax Update
As part of our 2023 update, there are a number of new Fringe Benefit Tax considerations business owners should keep in mind – potentially impacting FBT obligations in the forthcoming Financial Year.
Car Parking
The definition of a “commercial parking station” has changed following a number of recent cases and ATO rulings. The effect of these changes is that several car parks such as shopping centres and hospitals may now be considered commercial car parking stations, resulting in an FBT liability for many organisations.
The law applies from the 2022/23 FBT Year (i.e. from 1 April 2022), so it is important employers determine whether car parks offered to employees now trigger an FBT liability.
Electric Vehicle Benefits
From 1 July 2022, eligible electric cars first installed or ready for use are exempt from FBT when provided to employees, where the vehicle is a low or zero-emissions vehicle, and Luxury Car Tax has never been payable on the importation or sale of the car.
Notwithstanding that these vehicles are exempt from FBT, they are still considered a reportable fringe benefit.
Record-Keeping Proposals
There are new record-keeping rules currently moving through the Senate that could change the way employers file records to verify their FBT liability.
If approved, the rules will go into effect from the next FBT year after the Bill receives Royal Assent.
ATO Audit Areas
The ATO has confirmed that compliance enforcement will focus on four main areas.
As part of this, spotlight will be heavily concentrated on employers not reporting benefits offered to employees and also those failing to keep adequate records reflecting FBT scenarios. This concentration also extends to incorrect recording of employee contributions on Income Tax Returns, and the incorrect reporting of employee Reportable Fringe Benefit Amounts.
Furthermore, employers registering motor vehicles in ways inconsistent with their actual, has also be highlighted as critical ATO audit target over the coming period.
For more information on managing your FBT commitments, please feel free to contact our adviser team.
Small Business Energy Incentive
Under the newly introduced Small Business Energy Incentive, businesses with a turnover of up to $50 million will be eligible for a tax deduction where investment is made in energy efficient processes and products – such as electrifying cooling / heating systems, installing batteries and heat pumps, and upgrading fridges and other appliances to better energy rated products.
The incentive offers an additional 20% tax deduction of cost (with a maximum tax deduction bonus being $20,000) for eligible assets or upgrades needed, first-used or installed ready for use between 1 July 2023 and 30 June 2024.
Trust Distribution Resolutions - 30 June
An important note that trustees will need to complete your trust distribution resolutions before 30 June, with failure to do so potentially resulting in the need to pay extra tax of up to 47% of Trust profits.
As such, please ensure your 2023 Trust Distributions are signed before 30 June 2023 to avoid any potential penalties.
Superannuation
A reminder that from 1 July 2023, new superannuation changes take effect, with the mandatory superannuation contribution rate for employers is set to rise to 11% (ordinary times earnings).
The current contribution rate sits at 10.5%, however increases will occur by 0.5% every financial year until it reaches 12% by 1 July 2025.
Finally, Superannuation Guarantee Payments will need to be paid into employees nominated superannuation account by 28 July 2023 for Quarter 4 (April – June 2023).
For More Information
For more information on any of the potential changes and upcoming tax considerations or should we be of assistance, please contact the Archer Gowland Redshaw office on (07) 3002 2699 | info@agredshaw.com.au.
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