5 June 2023

• Lodge tax return for all entities with a lodgment due date of 15 May 2023 if the tax return is not required earlier and both of the following criteria are met:
  – non-taxable or a credit assessment in latest year lodged
  – non-taxable or receiving a credit assessment in the current year
  

21 June 2023

• Lodge and pay May 2023 monthly business activity statement.
  

25 June 2023

• Lodge and pay 2023 Fringe Benefits Tax annual return for tax agents if lodging electronically.
  

30 June 2023

• Super guarantee contributions must be paid by this date to qualify for a tax deduction in the 2022–23 financial year.

For those that missed our Federal Budget Edition newsletter this month – please see the highlights below.

Same Day Superannuation

From 1 July 2026, the government will require employers to pay their employees’ superannuation guarantee
(SG) entitlements on the same day that they pay salary and wages.
The current rules require employers to pay their employees’ superannuation guarantee on a quarterly basis.
There will also be changes to the SG charge regime due to the increased payment frequency. This will be
considered as part of the 2024-25 Federal Budget

Medicare Levy Threshold

From 1 July 2022, the Medicare levy low-income thresholds will be increased to the following:

Lump Sum Payments and Medicare Levy

Commencing 1 July 2024, lump sum payments in arrears will be exempt from the Medicare levy. To be eligible
tax payers must have been eligible for a reduction in the Medicare levy for the previous 2 income years.

They must also satisfy the lump sum payment in arrears eligibility, including that a lump sum is at least 10% of
the taxpayer’s income in that year.

Instant Asset Write-Off

Beginning 1 July 2023 and extending to 30 June 2024, there will be a temporary increase in the instant asset write-off threshold by the Government.

The threshold will be raised from $1,000 to $20,000, allowing small businesses with an aggregated annual turnover of less than $10 million to immediately deduct the full cost of eligible assets that cost less than $20,000. The assets must be first used or installed ready for use during the period of 1 July 2023 to 30 June 2024. Small businesses will be able to write off multiple assets as the $20,000 threshold applies on a per-asset basis.

Assets with a value of $20,000 or more cannot be immediately deducted but can be added to the small business simplified depreciation pool and depreciated at a rate of 15% in the first income year and 30% each income year thereafter.

The rules that prevent small businesses from opting back into the simplified depreciation scheme for a period of five years will remain on hold until 30 June 2024.

Energy Incentive Scheme

Small and medium business (businesses with aggregated turnover less than $50m) will be offered an additional 20% deduction on eligible capital expenditure that supports electrification and energy efficiency.

This eligible expenditure is capped at $100,000, meaning there is a maximum bonus deduction available of $20,000. Eligible capital expenditure may include the purchase of certain depreciating assets, or upgrades to existing assets.
Examples of capital expenditure that will be eligible:

Assets that upgrade to more efficient electrical goods (energy efficient fridges);
Assets that support electrification (heat pumps an electric heating/cooling systems); or
Demand management assets (batteries or thermal energy storage).

To claim the bonus deduction, eligible assets must be first used, or available ready for use in between 1 July 2023 and 30 June 2024.

Certain capital expenditure is excluded from this bonus deduction. These include electric vehicles, renewable electricity generation assets, capital works, and assets that are not connected to the electricity grid that use fossil fuels.

FBT on Electric Vehicles

From 01 April 2025, eligible plug-in hybrid vehicles will no longer be exempt from Fringe Benefits Tax (FBT).

Arrangements involving eligible plug-in hybrid vehicles entered into between 01 July 2022 and 31 March 2025, which extend past 01 April 2025, will remain eligible for the FBT exemption up until the arrangement ends.

For example, if an employee enters into a 3 year novated leave arrangement with their employer for an eligible plug-in hybrid vehicle on 31 March 2024, the FBT exemption will only apply until 31 March 2027.

Lodgment Penalty Amnesty Program

Small businesses with an aggregated turnover of less than $10m, will get failure-to-lodge penalties remitted for outstanding statements lodged in the period 1 June to 31 December 2023. These statements must have originally been due of lodgment during the period 1 December 2019 to 28 February 2022.

Reduction in Tax Instalments

Tax law will be amended to set the GCP adjustment factor at 6% for the 2024 income year. This factor applies to pay as you go (PAYG) and GST instalments and is a reduction of the 12% factor which should have been applied under the statutory formula
method.

This reduction will only apply to small business and individuals and to instalments once these changes have been legislated. The eligibility criteria for a small business or individuals being aggregated turnover of $10m for GST instalments and $50m aggregated turnover for PAYG instalments.

Government assistance for students in the form of HECS-HELP debts are indexed to CPI each year on 1 June. Over the past 10 years the indexation of these balances has not caused concern as the CPI has mostly been under 2%.

However, in 2023 the rate is set to skyrocket to around 7% (the exact rate is yet to be determined). So whilst interest is not applied to these debts, the rate of inflation will see these debts increase significantly to keep pace with this rate, and for the first time in quite a while, Taxpayers will be considering HELP debts as more than an afterthought when it comes to their planning.

Compulsory Repayments

Compulsory amounts of HELP debts are repaid on lodgement of the individual’s tax return.

The amount applied is a percentage (the “Repayment Rate”) multiplied by “Repayment Income” (RI). A full table of 2023 repayment thresholds and rates can be found on the ATO website, but as a guide, if an individual has repayment income below 48,361, their rate is Nil.

For someone on $65,000 it is 3%, and for $120,000 it is 8.5%. As such, someone with a $120,000 salary would repay an amount of 0.085 * 120,000 = $10,200 on lodgement of their tax return, or the balance of the loan if it was below this amount. 

Consideration to Voluntary Repayments

Scope exists for voluntary repayments of HECS-HELP debts.  Whilst there is no discount for early repayment, if the amount is paid prior to indexation on 1 June, the debt will avoid the CPI increase.  This payment may be particularly attractive to those approaching the final payments of their debt and may have effectively remitted sufficient to the ATO through their PAYG Withholding payments in their payroll. 

PAYG Withholding relating to HELP debts effectively means repayments are paid in advance of the indexation, with the credit not appearing on the loan until the lodgement of the tax return. This means that if a HELP debt is fully repaid by way of voluntary repayment in May 2023, then any additional withholding will be refunded on lodgement of the 2023 tax return.

For Example

Take our example above of an individual with a $120,000 income.
If their remaining HELP debt at 1 June 2023 was $10,200, the indexation applied at 7% would be $714.

If the balance was paid off completely in May, the indexation would be nil and the Taxpayer could advise their payroll to cease PAYG Withholding relating to HELP, immediately starting to make up for the cash payment brought forward to make the voluntary repayment.

Lodge in July, and ceteris paribus, a refund would be received of $10,200 (the amount remitted in payroll) which offsets the $10,200 paid voluntarily. The end result being a cash neutral position and no HELP debt.

Don’t make the payment and the debt increases to $10,914.  After the return is lodged, a nil cash position is still obtained, but with a remaining debt of $714.
 
Political Pressure on Indexation & Other Considerations

Such a high level of indexation is attracting considerable media attention, however, given the state of the budget and the fact the increase is written into law already, it is not something that is expected to be addressed in the upcoming budget or for relief to be provided.

While the level of indexation is high this year, there is no way to know where CPI will be over the coming years and HELP debt may, once again, be one of the cheapest sources of debt to have.

Not Financial Advice

Harris Black do not offer financial advice and can only offer factual information on this topic.

Please do not hesitate to contact your Harris Black team member should you require any assistance or further clarification.