The Government has handed down its 2023/24 Federal Budget with a small surplus and a range of cost of living measures. Limited tax measures were announced, aimed mainly at small businesses to encourage transition to energy efficient assets, and to assist with business cash flow.
Business Measures
Small Business Instant Asset Write-off (IAWO)
The Government will increase the threshold for the small business IAWO to $20,000 for the 2024 income year. The temporary full expensing rules cease on 30 June 2023 for all businesses, and the threshold for the small business IAWO was to return to $1,000. The increased IAWO threshold will apply to businesses with an aggregated annual turnover of up to $10 million. All other businesses will return to general depreciation rules, with no IAWO. While a welcome announcement, it is again only a temporary measure and will currently cease on 30 June 2024.
The provisions that prevent small businesses from re-entering the simplified depreciation regime for 5 years if they opt-out will continue to be suspended until 30 June 2024.
Small Business Energy Incentive
The Government will provide small businesses, with an aggregated annual turnover of up to $50m, an additional 20% deduction for the cost of eligible deprecating assets that support electrification and more efficient use of energy. The measures will apply for assets first used or installed ready for use between 1 July 2023 and 30 June 2024. Total expenditure of up to $100,000 will be eligible, equating to a maximum bonus deduction of $20,000. (This is in line with the current digital and training tax boosts).
The measure will cover new assets and upgrades to existing assets. It will include assets that upgrade to more efficient electrical goods such as energy-efficient fridges, assets that support electrification such as heat pumps and electric heating or cooling systems, and demand management assets such as batteries or thermal energy storage. Exclusions from the measures will include electric vehicles, renewable electricity generation assets, capital works, and assets that are not connected to the electricity grid and use fossil fuels. Full details of eligibility criteria will be finalised in consultation with stakeholders.
Small Business Tax Instalments
The GDP adjustment factor for pay as you go (‘PAYG’) and GST installments will be set at 6% for the 2024 income year, a reduction from 12% under the statutory formula. This follows a similar reduction in the 2023 year, where the factor was reduced from 10% to 2%.
The intention in reducing the adjustment factor is to provide cash flow support to small businesses and other PAYG installment taxpayers. The rate will apply to small businesses and individuals with an aggregated turnover of up to $10 million for GST installments and up to $50 million for PAYG installments. It will apply to installments for the 2024 income year that fall due after the legislation receives Royal Assent.
Lodgement penalty amnesty program
An amnesty program is to be provided for small business (aggregated turnover of up to $10 million) to encourage them to re-engage with the tax system. The amnesty will remit Failure To Lodge penalties for tax statements lodged from 1 July 2023 to 31 December 2023 that were due for the period from 1 Decem- ber 2019 to 29 February 2022. The measure will apply to income tax returns; BAS & IAS statements; SG charge statements and any other relevant tax statements.
Capital Works Deduction for Build-to-Rent Projects
Eligible new build-to-rent projects will be subject to a higher rate of capital works deduction of 4% per year. It will apply to projects where construction commences after 7.30pm on 9 May 2023.
Previously, incentives for build-to-rent projects have only been relevant to Managed Investments Trusts (‘MITs’). However, the announced measure applies to all build-to-rent projects consisting of 50 or more apartments or dwellings made available for public use. The dwellings must be retained under single ownership for at least 10 years before being able to be sold and landlords must offer a lease term of at least 3 years for each dwelling.
In addition, the final withholding tax rate on eligible fund payments from MIT investments for build-to rent projects will decrease from 30% to 15% from 1 July 2024.
Tax Integrity Measures
Expansion of Part IVA
The Government will expand the scope of the general anti-avoidance rule for income tax (‘Part IVA’) to ensure that it can apply to schemes that:
reduce Australian tax by accessing a lower withholding tax rate on income paid to foreign residents
achieve an Australian income tax benefit, even where the dominant purpose was to reduce foreign income tax.
This measure will apply to income years commencing on or after 1 July 2024, regardless of whether the scheme was entered into before that date.
Global and domestic minimum tax
It is proposed to implement the OECD Pillar Two Model Rules by introducing:
15% global minimum tax for large multinational enterprises— this comprises an Income Inclusion Rule (which imposes a top-up tax on a resident multinational parent or subsidiary) applying to income years starting from 1 January 2024, and an Undertaxed Profits Rule (which denies deduc- tions) from 1 January 2025.
15% domestic minimum tax applying to income years starting from 1 January 2024—which would give Australia first claim on top-up tax for any low-taxed domestic income.
These taxes will apply to large multinationals with annual global revenue of EUR750 million (approximately $1.2 billion) or more.
Superannuation measures
Non-arm’s length income
The non-arm’s length income (‘NALI’) provisions will be amended in respect of non-arm’s length ex- penditure (‘NALE’) incurred by self-managed superannuation funds and small APRA funds.
Currently, where a fund incurs NALE that is general expenditure, the entire income of the fund will be NALI (noting this is subject to the ATO’s compliance approach in PCG 2020/5 which applies to 30 June 2023). The amendments will instead limit the resulting NALI to 2 times the amount of the general ex- pense (a decrease from a previous proposal of 5 times). NALI will also exclude fund contributions.
No start date for the measures was announced. There are no changes to the NALI rules for SMSFs and small APRA funds for NALE incurred in relation to specific assets.
The Government will also exempt large APRA regulated funds from the NALI provisions for both general and specific expenses of the fund, and exempt expenditure that occurred prior to the 2018-19 income year.
Personal measures
With the focus on cost of living relief, there were no personal tax measures announced in the Federal Budget. The LMITO has not been extended, and therefore the offset will not apply for the 2024 income year.
Medicare Levy – CPI Adjustments
The Medicare levy low-income thresholds will increase in accordance with the CPI. This measure occurs annually.
Exempting lump sum payments in arrears from the Medicare levy
The Government will exempt eligible lump sum payments in arrears from the Medicare levy from 1 July 2024. This measure is to ensure low-income taxpayers do not pay higher amounts of the Medicare levy as a result of receiving an eligible lump sum payment, such as compensation for underpaid wages.
To qualify, taxpayers must be eligible for a reduction in the Medicare levy in the 2 most recent years to which the lump sum accrues. Taxpayers must also satisfy the existing eligibility requirements of the existing lump sum payment in arrears tax offset, including that a lump sum accounts for at least 10% of the taxpayer’s income in the year of receipt.
ATO Compliance funding
Personal Income Tax Compliance
The Government will provide funding to the ATO and Treasury to extend the Personal Income Tax Compliance Program and expand its scope. The expansion of the scope of the program will address emerging areas of risk, which are stated to include deductions relating to short-term rental properties to ensure they are genuinely available to rent.
GST Compliance
The Government will provide additional funding to the ATO to continue a range of activities that pro- mote GST compliance. This measure is estimated to increase GST receipts by $3.8 billion, and other tax receipts by $3.8 billion, over the 5 years from 2022–23.
These activities will ensure businesses meet their tax obligations, including accurately accounting for and remitting GST, and correctly claiming GST refunds. Funding through this extension will also help the ATO develop more sophisticated analytical tools to combat emerging risks to the GST system.
Improving engagement to ensure timely payment of tax and superannuation liabilities
The Government will provide funding to enable the ATO to engage more effectively with businesses to address the growth of tax and superannuation liabilities. This will focus on taxpayers with debts over $100,000 and older than two years who are either:
- public and multinational groups with an aggregated turnover of greater than $10 million; or
- privately owned groups or individuals controlling over $5 million of net wealth. Funding will also be provided to improve data-matching capabilities for underpayment of SG.
The information contained in this bulletin is intended to provide general information only and is not intended to serve as tax advice. Specific advice should always be sought regarding a taxpayer’s particular circumstances. Please contact Colledges Accountants+Advisors if you would like assistance with the issues identified in this bulletin.
This article has been reproduced with the permission of MC Tax Advisors.
FAQs
What is the projected federal budget for 2023? ›
Outlays and Revenues
In CBO's projections, federal outlays total $6.2 trillion, or 23.7 percent of GDP, in 2023.
Interest payment on the national debt is the fastest growing component of the federal budget.
What percentage of the federal budget is Social Security and Medicare? ›In 2022, major entitlement programs—Social Security, Medicare, Medicaid, Obamacare, and other health care programs—consumed 46 percent of all federal spending. Soon, this spending will be larger than the portion of spending for all other priorities (such as national defense) combined.
What is the budget for the NIH in 2024? ›FY 2024 President's Budget:
The overall request includes discretionary budget authority of $48.9 billion, of which $407 million is associated with 21st Century Cures Act allocations and $83 million is for Superfund research activities.
There are two major categories for federal debt: debt held by the public and intragovernmental holdings. The debt held by the public has increased by 106% since 2013. Intragovernmental holdings increased by 40% since 2013.
What's the difference between debt and deficit? ›Unlike the deficit, which drives the amount of money the government borrows in any single year, the debt is the cumulative amount of money the government has borrowed throughout our nation's history. When the government runs a deficit, the debt increases; when the government runs a surplus, the debt shrinks.
What are the 3 biggest expenses in the federal budget? ›Major expenditure categories are healthcare, Social Security, and defense; income and payroll taxes are the primary revenue sources.
Who is the biggest contributor to the US debt? ›But the biggest chunk of those “intragovernmental holdings” belongs to Social Security. As of the end of January, the program's retirement and disability trust funds together held more than $2.8 trillion in special non-traded Treasury securities, or 9% of the total debt.
Who is the largest contributor to the federal budget? ›Sources of Federal Revenue
Additional sources of tax revenue consist of excise tax, estate tax, and other taxes and fees. So far in FY 2023, individual income taxes have accounted for 53% of total revenue while Social Security and Medicare taxes made up another 34%.
Annuity. An annuity is by definition a way to supplement your retirement income. To "annuitize" an investment means to convert it from a pool of capital to an income stream that lasts for your lifetime. If you die prematurely, the insurance company keeps the remainder of the payments.
What is an average Social Security check? ›
Average Social Security retirement benefits in 2023
Average payments for all retirees enrolled in the Social Security program increased to approximately $1,827, according to the Social Security Administration (SSA).
| 1. | SOCIAL SECURITY SYSTEM--May 9, 1977 |
|---|---|
| 3. | SOCIAL SECURITY FINANCING BILL -- October 27, 1977 |
| 4. | SOCIAL SECURITY FINANCING LEGISLATION -- December 1, 1977 |
| 5. | SOCIAL SECURITY AMENDMENTS OF 1977 --December 20, 1977 |
| 6. | SOCIAL SECURITY FINANCING LEGISLATION --April 10, 1978 |
Effective January 1, 2023, the salary limitation is set at a rate of $212,100 for 100 percent effort. Your institution may use non-award funds to pay you beyond the cap. An individual's terminal degree has no bearing on the salary cap.
What is the salary cap for NIH in FY 2023? ›NIH Salary Cap for Federal Fiscal Year 2023
Executive Level II is $212,100.
Last month, President Biden signed into law H.R. 2617, the Consolidated Appropriations Act, which provides full-year NIH funding through Sept. 30, 2023.
Does China have more debt than the US? ›Overall, Chinese government debt is now equivalent to 102% of its GDP, the analysts estimated. That debt ratio is still lower than America's, which is currently about 122%, based on its national debt and GDP in 2022, but China's has grown at a staggering rate, more than doubling from 47% in 2016.
Who owns most of the debt in the world? ›In 1970, total foreign holdings accounted for $14.0 billion, or just 5 percent, of DHBP. As of December 2022, such holdings made up $7.3 trillion, or 30 percent, of DHBP. Of that amount, 54 percent was held by foreign governments while private investors held the remaining 46 percent.
What is the most indebted country in the world? ›United States. The United States boasts both the world's biggest national debt in terms of dollar amount and its largest economy, which resolves to a debt-to GDP ratio of approximately 128.13%. The United States' government's spending exceeds its income most years, and the US has not had a budget surplus since 2001.
How much debt is too much debt? ›Debt-to-income ratio targets
Generally speaking, a good debt-to-income ratio is anything less than or equal to 36%. Meanwhile, any ratio above 43% is considered too high.
Tax Cuts. Historically, tax cuts passed by Congress play a large part in the growth of the national debt. The Bush tax cuts of 2001 and 2003 had a combined estimated 10-year cost of about $1.7 trillion. 10 The American Taxpayer Relief Act of 2012 made the bulk of the tax cuts passed in 2001 and 2003 permanent.
Who is the government in debt to? ›
As of January 2023, the five countries owning the most US debt are Japan ($1.1 trillion), China ($859 billion), the United Kingdom ($668 billion), Belgium ($331 billion), and Luxembourg ($318 billion).
What is the single biggest expense of the U.S. government? ›- 19 % Social Security.
- 15 % Health.
- 14 % Income Security.
- 12 % National Defense.
- 12 % Medicare.
- 11 % Education, Training, Employment, and Social Services.
- 8 % Net Interest.
- 4 % Veterans Benefits and Services.
The primary source of revenue for the U.S. government in 2022 was Individual Income Taxes. Revenue collected by the U.S. government is used to fund a variety of goods, programs, and services to support the American public and pay interest incurred from borrowing.
Do 40 states get more in federal payments than taxes paid? ›A recent analysis by the Rockefeller Institute found that forty states are "getters" while ten are "givers". Forty states received more funds from the federal government than the tax revenues they send, resulting in a positive balance of payments. In the remaining ten states, tax burdens were not offset.
How much debt does US have to China? ›Democrats have pointed out that the Republican plan to prioritize payments would benefit Wall Street and China, since they hold most government bonds. China holds about $1 trillion of U.S. debt, about 3% of all U.S. debt outstanding.
Why does the US borrow money from China? ›Chinese loans to the U.S., through the purchase of U.S. debt, enable the U.S. to buy Chinese products. It's a win-win situation for both nations, with both benefiting mutually. China gets a huge market for its products, and the U.S. benefits from the economical prices of Chinese goods.
What is the most common debt in America? ›Get a FREE customized plan for your money in 3 minutes! Some of the most common types of debt in America include credit cards, student loans, auto loans, home equity lines of credit (HELOCs), and mortgages.
How much does the average American pay in taxes annually? ›Among those taxpayers, the average income tax rate was 14.6% and the average tax paid was $20,663. The OECD reported that the U.S. "tax wedge" for the average single worker was 28.4% in 2021.
When was the last time the U.S. had a budget surplus? ›A surplus occurs when the government collects more money than it spends. The last surplus for the federal government was in 2001.
What states take the most federal money? ›| Rank | State | Total Score |
|---|---|---|
| 1 | Alaska | 83.18 |
| 2 | West Virginia | 76.02 |
| 3 | Mississippi | 71.31 |
| 4 | Kentucky | 70.95 |
At what age is Social Security no longer taxed? ›
Social Security benefits may or may not be taxed after 62, depending in large part on other income earned. Those only receiving Social Security benefits do not have to pay federal income taxes.
How do I get the $16728 Social Security bonus? ›To acquire the full amount, you need to maximize your working life and begin collecting your check until age 70. Another way to maximize your check is by asking for a raise every two or three years. Moving companies throughout your career is another way to prove your worth, and generate more money.
Do you get Social Security if you never worked? ›The only people who can legally collect benefits without paying into Social Security are family members of workers who have done so. Nonworking spouses, ex-spouses, offspring or parents may be eligible for spousal, survivor or children's benefits based on the qualifying worker's earnings record.
What is a good monthly retirement income? ›65-74 years: $59,872 per year or $4,989 per month. 75 and older: $43,217 per year or $3,601 per month.
Where can I retire on $800 a month? ›Ecuador. If you're looking for a country where you can retire outside the US comfortably with $800 per month and experience one of the most ecologically diverse places in the world, then Ecuador might be for you. The go-to city for US retirees in Ecuador is Cuenca, which also happens to be a UNESCO World Heritage site.
What is the highest Social Security check? ›In 2023, the average senior on Social Security collects $1,827 a month. But you may be eligible for a lot more money than that. In fact, some seniors this year are looking at a monthly benefit of $4,555, which is the maximum Social Security will pay. Here's how to score a benefit that high.
What did Reagan do to Social Security? ›Overview. The Reform Act instituted a "medical improvement standard" that said benefits could only be terminated if certain conditions were met, and put the burden of proof on the Social Security Administration (SSA) to demonstrate that the individual was capable of engaging in "substantial gainful activity".
Why is Social Security taxed twice? ›It's not double taxation because the funds you collect don't come directly from your taxes. Your taxes are paying for today's beneficiaries, so the benefits you receive will be from someone else's payroll taxes. You have to think about your payroll taxes as a premium into a retirement account.
Has Congress ever borrowed from Social Security? ›The Social Security Administration (SSA) says the notion is a myth and misinformation. "There has never been any change in the way the Social Security program is financed or the way that Social Security payroll taxes are used by the federal government," the agency said.
What is the federal payscale increase for 2023? ›The 2023 federal pay raise, enacted in January, was 4.6% on average, composed of a 4.1% base pay raise and a 0.5% average locality pay bump.
What is the federal 2023 salary increase? ›
The figure marks an increase over the 4.6% pay hike feds received in 2023, and would be the highest proposed pay hike federal workers have seen since the Carter administration implemented a 9.1% average pay increase in 1980.
How much do Harvard postdocs make? ›Average Harvard University Post-doctoral Fellow yearly pay in the United States is approximately $60,818, which is 10% above the national average.
How much does a principal investigator make in NIH? ›How accurate does $190,775 look to you? Your input helps Glassdoor refine our pay estimates over time.
What is the Executive Level IV pay cap for 2023? ›Salaries for career federal employees, under law, can't exceed the pay rates for political appointees and others at level IV of the Executive Schedule, which is currently $183,500.
What is the salary cap for Executive Level 2 in 2023? ›The Office of Personnel Management recently released new salary levels for the Executive Pay Scale. Effective January 1, 2023, the salary limitation for Executive Level II is $212,100.
How much is the proposed 2023 Federal budget? ›L. 117–264 (text) (PDF) to December 30. The Consolidated Appropriations Act, 2023 is a $1.7 trillion omnibus spending bill that was signed by President Joe Biden on December 29, 2022.
What is the status of government funding 2023? ›For fiscal year 2023, the bill provides $136.7 billion, an increase of $9.8 billion above the budget request and an increase of $20.5 billion above the fiscal year 2022 enacted level.
What is the 2023 Federal budget for the CDC? ›CDC's enacted FY2023 (P.L. 117-328) core public health program level is $9.269 billion, which represents a $787 million (+9.3%) increase from the FY2022 final core public health program level.
Where is most of the federal budget going? ›Major entitlements—Medicare, Medicaid, other health care, and Social Security—devoured nearly half of the 2022 budget, consuming 46 percent of all spending. ($2.9 trillion) Other federal transfer programs consumed another 18 percent.
What is the biggest single part of the US federal budget quizlet? ›Mandatory outlays constitute the largest portion of the U.S. federal budget. They are determined by law and not subject to adjustment during the budget process. The other two broad categories in the budget are discretionary outlays and interest on the federal debt.
Which part of the federal budget is the most expensive? ›
Mandatory expenditures, such as Social Security, Medicare, and the Supplemental Nutrition Assistance Program, account for about 65% of the budget. Budget expenditures are estimated to exceed federal revenues by $1.873 trillion for FY 2022.
Which two programs get the largest slices of the total federal budget? ›Nearly two-thirds of the federal budget goes toward mandatory programs, like Social Security and Medicare. Defense makes up by far the biggest discretionary category at 14% of the budget, followed by education at 3%, while interest payments consume 8%.
What percentage of budget is Social Security? ›Today, Social Security is the largest program in the federal budget and typically makes up almost one-fifth of total federal spending. The program provides benefits to nearly 66 million beneficiaries, or about 20 percent of the American population.
How much does U.S. spend on Social Security? ›As the chart below shows, three major areas of spending make up the majority of the budget: Social Security: In 2022, 21 percent of the budget, or $1.2 trillion, will be paid for Social Security, which will provide monthly retirement benefits averaging $1,538 to 49 million retired workers.
What is the biggest single expense in most state budgets? ›What do state and local governments spend money on? State and local governments spend most of their resources on education and health care programs.
What is the largest source of revenue for the state government? ›Taxes represent the largest single source of revenue for state and local governments.
What is the largest share of federal mandatory spending? ›Federal Spending on Domestic and Global Health Programs and Services Accounted for 29% of Net Federal Outlays in FY 2023. Mandatory spending comprises the majority (88% or $1.6 trillion) of federal spending on health programs and services.
What is the U.S. government biggest expense? ›- 19 % Social Security.
- 15 % Health.
- 14 % Income Security.
- 12 % National Defense.
- 12 % Medicare.
- 11 % Education, Training, Employment, and Social Services.
- 8 % Net Interest.
- 4 % Veterans Benefits and Services.
What Is the Main Goal in Creating the Federal Budget? The federal budget is used to set the government's spending priorities, such as Social Security, national defense, and education, among many items, and to identify how it will pay for those priorities with tax revenues.
What is the current debt of the United States? ›The $31 trillion gross federal debt equals debt held by the public plus debt held by federal trust funds and other government accounts. In very basic terms, this can be thought of as debt that the government owes to others plus debt that it owes to itself.
When was the last time the US balanced the budget? ›
The U.S. has experienced a fiscal year-end budget surplus five times in the last 50 years, most recently in 2001. When there is no deficit or surplus due to spending and revenue being equal, the budget is considered balanced.
What percent of federal budget is military? ›Defense spending accounts for 12 percent of all federal spending and nearly half of discretionary spending. Total discretionary spending — for both defense and nondefense purposes — is typically only about one-third of the annual federal budget.
What is the difference between budget and funding? ›BUDGET VS FUNDING: Budget is the projected cost of doing the work in a given fiscal year. Funding is the appropriated funds ($) allotted to do the work for that fiscal year. Programs are adjusted when funding does not meet the program budget.