The 2023 Federal Budget – What it means for Individuals and SMEs

This week, our new Labour Treasurer, Jim Chalmers, delivered Labour’s first Federal Budget for 2022-23. 

The Budget has had mixed reviews across the media and industry; however, the consensus is that there is not much to report, especially for small businesses.  

We have summarised three key takeaways for individuals and eight for small business owners. 

Individuals

• Childcare Subsidy
• Changes in Personal Income Tax Rates
• Personal Income Tax Compliance Programs

Business

• Increase in Tax Compliance Programs
• An end to Instant Asset Write Off
• Increase in TAFE and University graduates
• Childcare subsidy to boost workforce
• Investment in skilled migration
• Digital Traineeship Program
• Small Business Technology Boost
• Small business mental health support

3 Key Takeaways for Individuals

Childcare subsidy

On the positive side, those who have or are looking to start a family will be happy to hear that the government has committed to investing $4.9 million (and $1.7 million per year ongoing) to expand the Child Care Subsidy.

The maximum rate of the subsidy will increase from 85 per cent to 90 per cent, then decrease by one per cent for every $5,000 of the household income.

Changes in Personal Income Tax Rates

As expected, the Federal Government has decided to go ahead with the previous government’s personal income tax changes. The changes include implementing the Stage 3 tax threshold reductions and confirming that the Low and Middle Income Tax Offset will end.

These changes mean that:

• The 2021-2022 financial income year will be the last year that the Low and Middle-Income Tax Offset (LMITO) is available.
• Personal income tax rate reductions will be applied for income years commencing 1 July 2024 and onwards.

Increase in Personal Income Tax Compliance Programs

The Federal Government has allocated an additional $80.3 million to extend its Tax Avoidance Taskforce and implement personal income tax compliance programs for another two years starting July 2023.

The program intends to raise $674.4 million by investing in systems that improve ATO communication and audit investigations, to better target individuals that are overclaiming and incorrectly reporting on income.

8 Key Takeaways for Small Business

Increase in Tax Compliance Programs

The Labour government continues to pressure businesses by extending their tax compliance programs to generate an additional $4.7 billion over four years.

An end to Instant Asset Write Off as of 30 June 2023

Unfortunately, the Budget announced an end to ‘instant asset write-off’ for small businesses.

This means small businesses will no longer be able to instantly write off investments in equipment, technology, and assets from 1 July 2023. So, if you plan to invest in new equipment in the coming years, you might consider bringing this forward.

Increase in TAFE and university places for in-demand skills

The new Federal Budget has also committed to allocating $485 million to create 480,000 fee-free TAFE courses and 20,000 additional university placements. This program aims to attract and upskill workers across industries experiencing the most significant skills shortage, such as aged care, teaching, nursing, and engineering.

Although these graduates will not be employable for some time, it encourages those without the financial means to invest in education to become highly skilled workers and eventually enter the workforce.

Childcare subsidy changes to boost workforce

In addition to supporting individual workers, this program will help business owners and entrepreneurs with young children to spend more time on their businesses. It also allows SMEs to attract skilled workers to re-enter the workforce after starting a family.

The childcare subsidy changes will deliver up to 1.4 million hours per week in paid hours worked by parents with young children and an extra 37,000 full-time workers to re-enter the workforce each year.

Investment in skilled migration

There is some good news when it comes to skilled migration. To help tackle the skills shortage, the Budget includes an investment of $42.2 million over two years to help increase the efficiency of visa processing for skilled workers and raise awareness of opportunities in Australia among potential skilled migrants.

Digital Traineeship Program

Australia is in need for digital upskilling. The Federal Budget’s $11.5 Million Digital Traineeship program will support mid-career transitions into digital roles. The four-year investment aims to help SMEs access experienced workers with up-to-date digital training.

Small Business Technology Boost

The Small Business Technology Investment Boost remains a benefit to businesses investing in digital capabilities, which is currently a proposal under consideration.

Small business mental health support

To help address the significant toll the last few years have had on SMEs, the Federal Budget has invested $10.9 million into small business mental health support.

Beyond Blue will deliver the ‘New Access for Small Business Owners’ mental health program, a free-to-use program that doesn’t require a GP referral or Mental Health Plan.

An additional $4 million will go towards running a Small Business Debt Helpline, a free service operated by Financial Counselling Australia to help business owners manage debt.

Any Questions? Contact your advisor

Our Morrows One Team take a multidisciplinary approach to business and wealth, helping our clients align their strategic and personal goals. If you would like to discuss any details relating to the Federal Budget, please contact your advisor on 9690 5700.

Your Morrows One Team – October 2022