As we begin the 2023-24 financial year, it’s important for businesses and individuals to be aware of and comply with tax changes. These changes can have an impact on financial strategies and responsibilities for both parties, so staying informed is crucial.

By understanding and adapting to the evolving tax changes, businesses and individuals can effectively manage their financial obligations. It’s essential to stay updated on any new regulations or adjustments that may affect how taxes are calculated and paid – and to be aware of any ATO target areas so you can ensure information provided to us is true and correct.

This article aims to outline the tax revisions that Australian businesses and individuals should be made aware of to ensure their compliance obligations are met. These include:

Business

Instant asset write off returns with a $20,000 threshold
New tax incentive for small business to invest in energy-saving technology
July 1 wage increase

Employers and Business

Superannuation guarantee increases to 11% from 10.5%
National and Award minimum wage increases take effect
The minimum salary that must be paid to a sponsored employee – the Temporary Skilled Migration Income Threshold – increased to $70,000 from $53,900
Work restrictions for student visa holders reintroduced to 48 hours per fortnight
The cap on claims via the small claims court procedures for workers to recover unpaid work entitlements increases from $20,000 to $100,000
Energy Bill Relief Fund for small business kicks in – it will apply to your energy bills if you meet the criteria
Sharing economy reporting to the ATO commences for electronic distribution platforms

Individual

Updated tax rates and thresholds
Key tax time targets
Self-education reduction in expenses
Major target area – investment properties

Superannuation

Super guarantee rate increase to 11%
Indexation increases the general transfer balance cap to $1.9 million
Minimum pension amounts for super income streams return to default rates
SMSF transfer balance event reporting moves from annual to quarterly for all funds

Business

Instant asset write-off returns with a $20,000 threshold

The instant asset write-off returns with a $20,000 threshold per asset from 1 July 2023 to 30 June 2024.

Small businesses, i.e. 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 2023 and 30 June 2024. 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 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 instant asset write-off rules allow for the immediate deduction for the cost of a depreciating asset for small business entities. However, these rules were effectively replaced by temporary full expensing (which effectively allowed for the immediate write off of all eligible capital assets, without a monetary limit) in relation to depreciating assets first held, and used or installed ready for use for a taxable purpose, between the 2020 Budget time (6 October 2020) and 30 June 2023. Temporary full expensing therefore ends on 30 June 2023.

New tax incentive for small business to invest in energy-saving technology

The Small Business Energy Incentive will help small and medium‑sized businesses to invest in their energy transformation.

The bonus tax deduction will provide businesses with an annual turnover of less than $50 million with an additional 20 per cent deduction on spending that supports electrification and more efficient use of energy.

It will help small businesses make investments like electrifying their heating and cooling systems, upgrading to more efficient fridges and induction cooktops, and installing batteries and heat pumps.

Tradies, manufacturers, restaurants, hairdressers, real estate agents and other small businesses are expected to benefit from the move.

However, certain exclusions will apply, such as:

electric vehicles
renewable electricity generation assets
capital works
assets that are not connected to the electricity grid and use fossil fuels

Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business.

Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024.

1 July 2023 wage increases

For employers, incorrectly calculating wages is not portrayed as a mistake, it’s “wage theft.” Beyond the reputational issues of getting it wrong, the Fair Work Commission backs it up with fines of $9,390 per breach for a corporation. In 2021-22 alone, the Fair Work Ombudsman recovered $532 million in unpaid wages recovered for over 384,000 workers.

On 1 July 2023, award rates of pay and the National Minimum Wage increased by 5.75%.

It is critically important that all employers review their payroll systems and ensure they are applying the correct rates and Awards.

The National Minimum Wage applies to workers not covered by an Award or registered agreement. From 1 July 2023, the National Minimum wage has increased to $23.23 per hour ($882.80 per week for a full-time employee working a standard 38 hours week).

For casuals, the minimum wage including the 25% casual loading is a minimum of $29.04 per hour.

For workers under an Award, adult minimum award wages increase by 5.75% applied from the first full pay period on or after 1 July 2023. Proportionate increases apply to junior workers, apprentice and supported wages.

In addition, the superannuation guarantee increased from 10.5% to 11% on 1 July 2023.

If the employment agreement with your workers states the employee is paid on a ‘total remuneration’ basis (base plus SG and any other allowances), then their take home pay might be reduced by 0.5%. That is, a greater percentage of their total remuneration will be directed to their superannuation fund. For employees paid a rate plus superannuation, then their take home pay will remain the same and the 0.5% increase will be added to their SG payments.

Individuals

Changes to tax rates

Personal tax rates – unchanged

There are no changes to any personal tax rates or threshold in 2023-24.

Resident rates and thresholds

The 2023-24 tax rates and income thresholds for residents (unchanged since 2021-22) are:

taxable income up to $18,200 – nil
taxable income of $18,201 to $45,000 – 19% of excess over $18,200
taxable income of $45,001 to $120,000 – $5,092 plus 32.5% of excess over $45,000
taxable income of $120,001 to $180,000 – $29,467 plus 37% of excess over $120,000, and
taxable income of more than $180,001 – $51,667 plus 45% of excess over $180,000

Non resident tax rates and threshold

For 2023-24, the tax rates for foreign residents (unchanged) are:

$0 – $120,000 – 32.5%
$120,001 – $180,000 – 37%
$180,001+ – 45%

Low and Middle Income Tax Offset – not extended!

There was no announcement to extend the LMITO beyond 2021-22 and therefore the LMITO has now ceased.

As a result, low-to-middle income earners may see their tax refunds from July 2023 reduced by between $675 and $1,500 (for incomes up to $90,000 but phasing out up to $126,000).

Tax time targets for individuals

Key tax time targets include:

Rental property income and expenses
Income and ‘gifts’ from online content creation (OnlyFans, YouTube, TikTok etc.)
Cryptocurrency gains
Gig economy workers (not declaring income)
Foreign income (not declared)
Work from home expenses (inaccurately claimed)
And as always, work related expenses (overclaimed).

Increasingly sophisticated data-matching programs mean that the ATO is more likely to notice if you have failed to declare income from the sale of assets, income earned through platforms, and made a gain on crypto transactions.

You can offset your assessable income against any allowable deductions you can claim. To be tax deductible, an expense must be directly related to how you earn your income. When it comes to expenses, if you are claiming for items not normally associated with your industry, claim the same amount or same items each year (cut and paste claims), or claim amounts outside of the norm, then it is likely the ATO will take a closer look.

Getting rental properties right

If you are earning income from an investment property, you can claim deductions for your expenses. These expenses fit into two categories – what you can claim now, and what is claimed over time.

You can claim interest on loans, council rates, repairs and maintenance, and depreciating assets costing $300 or less, in the year that you paid for them. Other items, like structural improvements, ovens, adding fences and retaining walls, are depreciated over time.

Rental properties are a major target for the ATO this year:

Rental income – Declare all rental income (including short term stays, renting out a room in your house, insurance payouts, rental bonds retained).
Rental expenses – Rental expenses can only be claimed for the portion of time that the property was rented or genuinely available for rent. If, for example, you did not make the property available for rent while you were renovating it, you cannot claim the cost of the expenses over this period. Sometime the ATO will argue that a property is not genuinely available for rent even if it is advertised as being available. This can be relevant for properties in locations where there is very little demand during certain times of the year.
Interest and redraws – If you have refinanced or redrawn on your rental property loan for personal expenses like holidays or a car, this will impact on the interest you can claim.
Sale of assets – If you earned income from a residential property (renting out a room or the whole house), then it’s likely you will pay capital gains tax on any gain you make on the sale of the property. However, if the property was your home for a period of time, you might be able to claim a full or partial exemption from CGT. In some cases it will be necessary to obtain a valuation of the property at the time it is first used to produce income if it has previously only been used as your main residence.

If you need some help to account for your rental property deductions, we have checklists and schedules available on our website – Tax Preparation Checklists.

Superannuation

The super guarantee rate has increased to 11%.

The SG rate is on the rise, gradually increasing by 0.5% each financial year until it reaches 12% on 1 July 2025. Starting from 1 July 2023, the SG rate jumps from 10.5% to 11%.

As an employer, this means you’ll be required to increase the amount of money you contribute to your employees’ super accounts. Failure to comply with this new rate can result in penalties and fines.

To stay on top of things, give yourself enough time to update your payroll and accounting systems. This way, you can continue paying the correct amount of super for your employees.

Wondering when to start paying your employees the 11% SG?

Remember, it depends on the payment date, not the dates they worked. If you pay your employees in July for work completed in June, the rate is 11% because the payment date falls on or after 1 July 2023.

How can Walsh Accountants help you?

If you need any assistance to understand how these tax updates will affect you or your business, please don’t hesitate to give our team a call.

Must-know tax changes for the new financial year