Business income tax measures

Here are the key business income tax measures announced in the Australian federal budgets.

Small business ­– $20,000 instant asset write-off extended

The Government will extend the $20,000 small business instant asset write off (IAWO) by 12 months until 30 June 2025.

Small businesses, with an aggregated annual turnover of less than $10 million, will continue to 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 by 30 June 2025. The asset threshold applies 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.

Provisions that prevent small businesses from re-entering the simplified depreciation regime for five years if they opt out will continue to be suspended until 30 June 2025. This will be the seventh time since 12 May 2015 that the IAWO threshold has been varied.

Importantly, last year’s budget measure that proposed to temporarily increase the IAWO threshold to $20,000 for the 2023–24 income year has still not been legislated. The Senate has amended the Bill to temporarily increase the asset threshold from $20,000 to $30,000 and the aggregated turnover threshold from $10 million to $50 million for 2023–24 only. However, the House of Representatives must agree to these amendments before they can become law. At the time of writing, the Parliament was still considering the final form of the IAWO for the 2023–24 income year. The ongoing uncertainty of this measure is greatly concerning as SBE taxpayers have a mere five weeks until the end of the 2023–24 income year yet still do not have certainty on the tax treatment of their depreciating assets.

Foreign resident CGT regime

The Government will strengthen the foreign resident capital gains tax (CGT) regime to ensure foreign residents pay their fair share of tax in Australia and to provide greater certainty about the operation of the rules. The amendments will apply to CGT events commencing on or after 1 July 2025 to:

  • Clarify and broaden the types of assets on which foreign residents are subject to CGT;
  • Modify the principal asset test from a point in time to a 365 day testing period;
  • Require foreign residents disposing of shares and other membership interests worth more than $20 million in value to notify the ATO before executing the transaction.

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 capital gains withholding rules, requiring vendors to notify the ATO even if they have self-assessed their sale as not taxable real property and not subject to foreign resident CGT withholding.

The Government said that these reforms will also improve certainty for foreign investors by aligning Australia’s tax law for foreign resident capital gains more closely with OECD standards and international best practice.

The Government will consult on the implementation details of the measure.

Paying super on paid parental leave 

On 8 March 2024, the Government announced that superannuation would be paid on government-funded paid parental leave (PPL) for births and adoptions on or after 1 July 2025 (by then the Superannuation Guarantee rate will be 12%). 

This measure is part of the Government’s plan to modernise PPL. The first step is providing additional PPL (already legislated): 

  • An additional two weeks from 1 July 2024 (making 22 weeks in total);
  • A further two weeks from 1 July 2025 (making 24 weeks in total); and 
  • A further two weeks from 1 July 2026 (making 26 weeks in total). 

In the Budget, the Government said it will provide $1.1 billion over five years from 2023–24 (and $0.6 billion per year ongoing) to strengthen the PPL scheme and improve women’s retirement outcomes. Funding includes:

  • $1.1 billion over four years from 2024–25 (and $0.6 billion per year ongoing) to pay superannuation on Commonwealth government‑funded PPL for births and adoptions on or after 1 July 2025. Eligible parents will receive an additional payment based on the Superannuation Guarantee (12% of their PPL payments), as a contribution to their superannuation fund;
  • $10.0 million over two years from 2024–25 to provide additional support for small business employers in administering PPL; and
  • $1.4 million over two years from 2023–24 to update communication products and documents for potential PPL recipients.

Contact KMT accountants now for your tax planning advice!

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This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek tax advice from a qualified accountant at KMT Partners. Information is current at the date of issue and may change.