AU Tax Updates

As we commence the new year following the festive season, it’s timely to consider the personal income tax rates for the 2023-24 financial year, which remain consistent with the previous years. In the context of current economic pressures, it’s understandable to question the comparative tax burdens on individuals and corporations.

The tax rates for Australian residents for 2023-24 are structured as follows:

Looking ahead, the Stage 3 tax cuts set for implementation from 1 July 2024 are anticipated to bring significant changes. These include reducing the 32.5% tax rate to 30% for incomes between $45,000 and $200,000 and abolishing the 37% tax bracket. Consequently, the tax structure for the 2024-25 financial year will predominantly feature three tax rates: 19%, 30%, and 45%. This shift is expected to align personal income tax more closely with corporate tax rates, affecting a substantial proportion of Australian taxpayers.

For the 2024-25 financial year, the tax brackets will be structured as follows:

Please note that the figures do not include the 2% Medicare Levy.

As part of the 2022–23 Budget, the Government has unveiled measures to support small businesses, pending the enactment of the law. These initiatives aim to provide additional incentives for small businesses in the areas of technology investment and skills training.

Small Business Technology Investment Boost

Under the proposed legislation, small businesses with an aggregated annual turnover of less than $50 million will be eligible for an extra 20% deduction on expenditure incurred for business digital operations or the digitization of their operations. This deduction will apply to business expenses and depreciating assets, such as portable payment devices, cybersecurity systems, and subscriptions to cloud-based services.

It’s important to note that businesses can continue to deduct expenditures that are ineligible for the bonus deduction under existing tax laws. Further details on eligible expenses will be provided once the law is passed. Additionally, an annual cap of $100,000 will apply to qualifying expenditure in each income year, while expenses exceeding $100,000 can still be deducted under existing law.

Small Business Skills and Training Boost

Subject to the passage of the law, small businesses with an aggregated annual turnover of less than $50 million will enjoy an additional 20% deduction on eligible external training courses provided to their employees by registered providers in Australia. Expenditures that do not meet the criteria for the bonus deduction can still be deducted in accordance with existing tax laws.

Effective Dates and Special Rules

The technology investment boost will apply to expenditure incurred from 7:30 pm AEDT on 29 March 2022 until 30 June 2023. As for the skills and training boost, it will be applicable to expenditure incurred from 7:30 pm AEDT on 29 March 2022 until 30 June 2024.

It’s worth noting that special rules are expected to govern when the bonus deductions can be claimed in tax returns, depending on a business’s balancing date. The specific details and guidelines will be provided in due course, taking into account the finalization of the legislation.

We will continue to monitor the progress of these measures and provide updates as they develop. In the meantime, small businesses are encouraged to consult with their tax advisors and stay informed about the proposed changes.

Please note that these measures are still subject to the enactment of the law, and businesses should wait for the law to be passed before claiming the boosts.

The Australian Taxation Office (ATO) has extended an olive branch to small businesses with overdue tax returns or business activity statements, announcing an amnesty period till 31st December 2023. During this period, small businesses are encouraged to resolve any outstanding income tax returns, fringe benefits tax returns, and business activity statements​¹​.

The ATO’s amnesty was unveiled as part of the 2023-24 budget and applies to tax obligations initially due between 1st December 2019 and 28th February 2022. The tax office urges small businesses to meet their tax obligations even if they fall outside the amnesty period, as it may consider individual circumstances and possibly reduce penalties​¹​.

ATO assistant commissioner Emma Tobias has stressed the importance of small businesses taking advantage of this amnesty. She acknowledged the challenges many small businesses have faced over the past few years due to the pandemic and natural disasters and understands that tax obligations may have been deprioritised. However, she emphasised that the lodging of these forms is not optional and hopes the amnesty will aid impacted small businesses to realign their tax commitments​¹​.

The ATO has streamlined the amnesty process, eliminating the need for businesses or tax agents to separately request a remission of Failure to Lodge (FTL) penalties for forms lodged under the amnesty. The ATO will automatically remit these penalties from their end​¹​.

Furthermore, businesses have been warned that outstanding lodgements could be perceived as a red flag, indicating non-engagement in the tax system. The ATO encourages firms to lodge all overdue tax commitments, and if they are unable to make full payment of their debt, the ATO is willing to work together to find a solution​¹​.

To qualify for the amnesty, the small business must have had an aggregated turnover of less than $10 million when the original lodgement was due. However, it’s important to note that superannuation obligations and other administrative penalties, such as those associated with the Taxable Payments Reporting System, are not included in this amnesty​¹​.

In light of this development, we at Corporate Advantage encourage our clients to ensure their tax affairs are in order. Now is an opportune moment to reach out to your registered tax or BAS agent, review your tax situation, and take necessary actions to regularise any outstanding tax commitments.

We remain committed to supporting our clients during this period, helping them navigate their obligations and take full advantage of the amnesty. Our dedicated team of experts are on hand to provide tailored advice and support, ensuring your business is compliant and your tax affairs are up-to-date. Contact us today to schedule a consultation.