Birchstone Brief for the week ended 12 May 2023

• The instant asset write-off threshold for small businesses with an aggregated turnover of less than $10m will be $20,000 for the 2023-24 income year, applying on a per asset basis.
• A Small Business Energy Incentive will be introduced, allowing businesses with an annual turnover of less than $50 million to claim a further 20% deduction on eligible expenditure which supports electrification and more efficient use of energy, capped at $20,000.
• A small business lodgement penalty amnesty will be provided for businesses with an annual turnover of less than $10m. The amnesty will automatically remit failure-to-lodge penalties for outstanding tax statements lodged from 1 June to 31 December 2023 that were originally due between 1 December 2019 and 29 February 2022.
• The ‘clean building’ managed investment trust (MIT) withholding tax concession will be extended to data centres and warehouses that meet a minimum energy efficient standard, broadening access to the concessional 10% withholding tax rate.
• Taxpayers will be able to claim capital works deductions at an increased rate (4% per income year) in respect of new build-to-rent projects. Further, MITs that invest in such projects will be able to reduce the final withholding tax rate applying to eligible fund payments from 30% to 15%.
• The start date for the measure to make certain distributions funded by capital raising unfrankable has been changed from 19 December 2016 to 15 September 2022.
• Deductions for the purposes of the petroleum resource rent tax (PRRT) will be capped at 90% of each taxpayer’s PRRT assessable receipts in respect of each project interest producing LNG, with any amounts unable to be deducted due to the cap being carried forward and uplifted at the Government’s long-term bond rate. The policy intent behind this change is to bring forward PRRT revenue from LNG projects.
• The meaning of ‘exploration’ and ‘mining, quarrying and prospecting rights’ will be amended in response to the recent decision in FCT v Shell Energy Holdings Australia Ltd [2022] FCAFC 2 (previously covered in the Birchstone Brief for the week ended 9 September 2022).
• Australia will implement two key aspects of Pillar Two of the OECD/G20’s Two-Pillar Solution to address the tax challenges arising from the digitisation of the global economy. The first is a 15% global minimum tax for large multinational enterprises, with the income inclusion rule to apply to income years starting on or after 1 January 2024 and the undertaxed profits rule to apply to income years starting on or after 1 January 2025. The second is a 15% domestic minimum tax, which will apply to income years starting on or after 1 January 2024.

Superannuation

• The non-arm’s length income (NALI) provisions will be amended such that from 1 July 2023 the amount of non-arm’s length income expenses taxed at the highest marginal rate (45%) will be limited to twice the level of a general expense for SMSFs and small APRA funds, instead of the ‘factor-based approach’ previously proposed in a Treasury consultation paper (covered in the Birchstone Brief for the week ended 27 January 2023).
• The proposed 30% tax on earnings relating to super balances above $3 million will come into effect on 1 July 2025.
• The temporary 50% reduction in the minimum annual payment amounts for superannuation pensions and annuities has not been extended. As such, it is set to end on 30 June 2023.
• From 1 July 2026, employers will be required to make superannuation contributions on their employees’ paydays. 

Miscellaneous

• The Budget contained no changes regarding the Stage 3 tax cuts. As the cuts have already been legislated, they will commence form 1 July 2024 unless the law is changed before then.
• The low and middle come tax offset (LMITO) has not been extended beyond the 2021-22 income year.
• Plug-in hybrid electric cars will no longer be eligible for the FBT exemption for eligible electric cars from 1 April 2025.
• Certain measures previously announced by the Coalition Government will not be proceeded with, including 3 separate patent box measures announced in the 2021-22 and 2022-23 Budgets.
• Starting 1 July 2023, the ATO will be provided with additional funding to assist them in recovering the high-value tax debts of certain individual and business taxpayers.
• The scope of the general anti-avoidance provisions in Part IVA of the ITAA 1936 will be expanded with effect from 1 July 2024 to apply to schemes that reduce tax paid in Australia by accessing a lower withholding tax rate on income paid to foreign residents and schemes that achieve an Australian income tax benefit, even where the dominant purpose of the scheme was to reduce foreign income tax.