Whilst a number of measures will present business opportunities both in existing (housing and infrastructure) and emerging sectors (green and renewable transitions), there are only a few short-term taxation changes, with more focus and funding on compliance and anti-avoidance programs. As usual, there are also other initiatives around both migration and tertiary education and apprenticeships that whilst not directly tax-related, could have a direct or indirect impact on business operations.
Future Made in Australia
The biggest new business measures are in the Government’s plan to reshape the economy and the country as an “indispensable part” of the transition to green and renewable energy on the path to Net Zero by way of the Future Made in Australia policy.
From a taxation point of view, “future” is the operative word, with a large portion of the Government’s announced investment coming in the form of Production Tax Incentive credits available to support refining and processing of 31 critical minerals, along with a Hydrogen Production Tax Incentive. Credits and incentives are available from 2027-28 and are viewed as industry-building investments. As yet, there are no specific details on how these incentives will be implemented.
Other aspects of the Future Made policy relate to funding for investments in innovation, science and digital capabilities, attracting investment and promoting “sustainable finance markets” in Australia and for the development of a skilled and diverse workforce and trade partnerships.
Small Business $20,000 Instant Asset Write-off extended to 30 June 2025
In what has become an annual tradition, the Government will once again, for small businesses with aggregated turnover under $10 million, retain the instant asset write-off threshold at $20,000 for assets installed ready for use until 30 June 2025.
The $20,000 threshold will apply on a per-asset basis, so small businesses can instantly write off multiple assets. 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 income year thereafter. The provisions that prevent small businesses from re-entering the simplified depreciation regime for 5 years if they opt-out will continue to be suspended until 30 June 2025.
ATO funding and compliance programs
Tax compliance activity is one of the Government’s initiatives in dealing with the structural deficit in the Federal Budget. Several compliance programs will continue to receive funding, or receive additional funding:
- The ATO will receive $187m over 4 years from 1 July 2024 for the ATO Counter Fraud Strategy to strengthen its ability to detect, prevent and mitigate fraud against the tax and superannuation systems. This includes funding for compliance taskforces and technological upgrades to identify and block suspicious activity in real time.
- The Government will 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
- The ATO Shadow Economy Compliance Program will be extended for two years from 1 July 2026, enabling the ATO to continue to reduce shadow economy activity.
- The Government will extend the ATO Tax Avoidance Taskforce for two years from 1 July 2026. Extending the Taskforce ensures the ATO continues to be well-resourced to pursue key tax avoidance risks, with a focus on multinationals, large public and private businesses, and high-wealth individuals. This measure is estimated to increase receipts by $2.4 billion and increase payments by $1.2 billion over the 5 years from 2023–24.
- Amend the start date of proposed Part IVA changes from the 2023-24 Budget from 1 July 2024 to income years commencing on or after the day the amending legislation receives Royal Assent. The proposal is to extend Part IVA to schemes that reduce tax paid in Australia by accessing a lower withholding tax rate on income paid to non-residents and to schemes that achieve an Australian tax benefit even where the dominant purpose was to reduce foreign tax paid.
Foreign resident capital gains tax (CGT) notification and withholding
The Government will strengthen the foreign resident capital gains tax (CGT) regime. Amendments will apply to CGT events commencing on or after 1 July 2025 to:
- Clarify and broaden the types of assets that foreign residents are subject to CGT on.
- Amend the point-in-time principal asset test to a 365-day testing period.
- Require foreign residents disposing of shares and other membership interests exceeding $20 million in value to notify the ATO, prior to the transaction being executed.
This measure will ensure that Australia can tax foreign residents on direct and indirect sales of assets with a close economic connection to Australian land, more in line with the tax treatment that already applies to Australian residents. The new ATO notification process will improve oversight and compliance with the foreign resident CGT withholding rules, where a vendor self-assesses their sale is not taxable real property. The Government will consult on the implementation details of the measure.
For more information on the May 2024 Federal Budget please click here for our overview.
If you want any more information on any of the topics discussed in this article or to discuss the application to your specific circumstances, please get in touch with your local Accru representative.
