The 2024/2025 Federal Budget may not be as comprehensive in terms of tax related matters as previous budgets, but it does bring- some encouraging news for small business owners.
One of the key announcements is the extension of the Instant Asset Write Off scheme. Small businesses will continue to benefit from this popular program, which allows for the immediate deduction of assets up to $20,000. This extension provides small businesses with an opportunity to invest in necessary equipment and assets to support their growth and productivity.
Instant Asset Write Off Extension
The Instant Asset Write-Off Scheme has been extended for the 2024/2025 financial year, providing small businesses with continued benefits.
Here are some key details about how the scheme will work:
Threshold Limit
This scheme allows businesses with an aggregated turnover of less than $10 million to immediately deduct the entire cost of eligible assets, up to $20,000. The best part is, this threshold applies to each individual item, so businesses can claim deductions for multiple eligible purchases.
Eligibility Period
To be eligible for the Instant Asset Write-Off, assets must be first used or installed ready for use in the business between July 1, 2024, and June 30, 2025. Assets valued at $20,000 or more can be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year after that.
Eligible Assets
The Instant Asset Write-Off applies to a wide range of assets, including vehicles, machinery and equipment, computers and laptops, office furniture and fittings, tools and machinery, technology hardware, solar panels, energy-efficient equipment, kitchen equipment, agricultural machinery and equipment, and manufacturing equipment.
Tax Compliance Crackdown
Another important announcement that may have flown under the radar is the funding for tax compliance. The Australian Taxation Office (ATO) has been given increased funding and resources to crack down on aged debts, tax avoidance, and unpaid superannuation. This signifies the government’s commitment to ensuring fair tax practices and compliance among businesses.
The government is continuing its focus on tax compliance and has allocated additional funding to the ATO to strengthen its ability to detect, prevent, and address fraud committed against the tax and superannuation systems. Some key initiatives include the extension of the Tax Avoidance Task force, Personal Income Tax Compliance Program, and Shadow Economy Compliance Program to further address tax avoidance.
Starting from July 1, 2024, the ATO will receive an additional $187 million to combat fraud and non-compliance. A new penalty will be introduced for multinational companies that try to avoid paying Australian royalty withholding tax.
The notification period for the ATO to inform business owners about the retention of a BAS refund for further investigation will be extended from 14 days to 30 days. However, the ATO will be required to pay interest on any legitimate refunds that are held beyond 14 days.
Superannuation Changes
Starting from July 1, the scheduled increase to the superannuation guarantee (SG) entitlement will be implemented. The minimum SG rate will be raised from 11% to 11.5%. It is imperative for all employers to ensure that they fulfil their SG obligations towards their employees.
Additionally, the government has committed to funding superannuation on the government-funded Paid Parental Leave (PPL), which will be administered by the ATO from July 1, 2025. This ensures that eligible employees receive their superannuation entitlements while on parental leave.
While this may not be a budget-related change, it’s important to highlight that the annual Concessional Contribution Cap will be increasing from July 2024. The current cap of $27,500 will be raised to $30,000. If you have a salary sacrifice arrangement and want to make the most of contributing to your superannuation each year, it’s advisable to update your arrangements as soon as possible.
Personal Tax Changes
The budget also includes some changes to personal tax rates. Notably, there will be a new cap to the HELP indexation rate, reducing interest charges on HELP debts from 1 June 2023. The stage 3 tax cuts, which were passed on 5 March 2024, will come into effect from July 1. This includes lower tax rates for income brackets, providing some relief for taxpayers.
Overall, the 2024/2025 Federal Budget has some good news for small business owners. However, experts believe that while there are a few measures in place to benefit businesses, the budget falls short in providing adequate support. The increase in costs has led to a decrease in consumer spending and demand, which has posed challenges for small and medium-sized businesses. It would have been great to see more proactive measures to support the SME sector.
If you would like to know more about how these new changes may affect you, reach out here.
