Another year; another Budget. But while this was a big Budget for assisting hard-pressed individuals who are doing it tough with tax cuts, there was precious little in it for small business, certainly on the tax side.

So what measures were there and how effective will they be?

Personal tax cuts for all taxpayers

The headline measure in this year’s Federal Budget is one we already knew about – individual tax cuts.

From 1 July 2024, all 13.6 million taxpayers will get a tax cut, which will flow through into their pay packets immediately thereafter. These tax cuts replace the original Stage 3 tax cuts which were legislated by the former government.

The tax cuts will put more money into the pockets of taxpayers, especially low and middle income taxpayers, and provide welcome relief from the surging cost of living. It is to be hoped that this money will directly boost spending power, which could potentially flow through into the bottom lines of retail business, rather than being saved or used to pay down debt.

As originally designed by the Liberal/National government, the tax cuts delivered most of the benefit to those on high incomes. So, nothing at all for people earning $40,000 and only $875 for people earning $80,000. This has now been rectified – people earning $40,000 will get a tax cut of $654 and people earning $80,000 will get a tax cut of $1,679.

With the cost of living disproportionately impacting low and middle income taxpayers, this will provide some much needed extra cash in the pockets of hard working families to pay mortgages, food and fuel bills.

Taxpayers don’t need to do anything to get the tax cut. Employers will automatically adjust the amount of tax they take out of pay which means that employees should see an immediate increase in their take home pay from 1 July 2024.[1]

Instant asset write off extended for a further year

The instant asset write-off is to be retained for a further year through to 30 June 2025.

Small businesses, ie those with aggregated annual turnover of less than $10 million, will 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 2024 and 30 June 2025. The $20,000 threshold will apply on a per asset basis, so small businesses can instantly write off multiple assets.

This measure is ideal for:

  • Cash registers and other POS devices
  • Delivery vans
  • Store fittings and fixtures
  • Computers, laptops and tablets
  • In store security systems

Assets valued at $20,000 or more (which cannot be immediately deducted) can be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year thereafter.

This measure was already in force for the year through to 30 June 2024 and its extension represents a welcome break for small businesses though it arguably doesn’t go far enough, with government ignoring pressure to either increase the threshold (possibly to $30,000 or even $150,000 from some over-optimistic commentators!), make the tax-break permanent or both.

Energy bill relief

Not strictly speaking a tax measure but worth mentioning anyway, the government is extending the existing Energy Bill Relief Fund, as a result of which, eligible small businesses will receive $325 to help pay their energy bills.

The government says that one million businesses on small customer electricity plans will receive help from the fund in total.

ATO tax compliance programs to be beefed up

The government has awarded more money to the ATO to help beef up its compliance programs. Amongst the measures that are relevant in the small business space (at least if your business is not compliant with the tax law!) are:

  • $78.7 million for upgrades to information and communications technologies to enable the ATO to identify and block suspicious activity in real time
  • $83.5 million for a new compliance taskforce to recover lost revenue and intervene when attempts to obtain fraudulent refunds are made
  • $24.8 million to improve the ATO’s management and governance of its counter-fraud activities, including improving how the ATO assists individuals harmed by fraud.

The Government will also strengthen the ATO’s ability to combat fraud by extending the time the ATO has to notify a taxpayer if it intends to retain a business activity statement (BAS) refund for further investigation. The ATO’s mandatory notification period for BAS refund retention will be increased from 14 days to 30 days to align with time limits for non-BAS refunds.

ATO to be granted greater discretion over old tax debts

The government will amend the tax law to give the ATO the discretion to not use a taxpayer’s refund to offset old tax debts, where the Commissioner had put that old tax debt on hold prior to 1 January 2017. This discretion will apply to individuals, small businesses and not-for-profits.

Mark Chapman is director of tax communications at H&R Block.

[1] Personal Tax Cuts

The effect of the tax cuts can best be illustrated in table form. The original stage 3 cuts are those suggested by the Coalition and the revised tax cuts are those announced (and legislated) by the Albanese government. 

Redistribution of tax cuts

Taxable income ($)Tax cut under original stage 3 ($)Tax cut under revised stage 3 ($)Difference
Note: excludes Medicare levy