Small businesses with aggregated turnover of less than $10 million will be eligible for a temporary increase in the instant asset write-off threshold to $20,000 for the 2023-24 year. This measure applies to eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2024.
There is no extension to temporary full expensing which will end on 30 June 2023. Currently, under the temporary full expensing, all businesses with an annual aggregated turnover of less than $5 billion will be able to deduct the full cost of eligible depreciable assets acquired from 7.30pm AEDT on 6 October 2020 and first used or installed by 30 June 2023.
Small Business Energy Incentive
Small and medium businesses with an aggregated annual turnover of less than $50 million will be able to access an additional 20% deduction on investments related to electrification and more efficient use of energy.
Up to $100,000 of total expenditure will be eligible for this tax incentive, with the maximum additional deduction being $20,000.
Eligible investments may include:
- heating and cooling systems;
- upgrading to more efficient fridges and induction cooktops; and
- installing batteries and heat pumps.
This incentive applies to eligible assets or upgrades that are first used or installed ready for use between 1 July 2023 and 30 June 2024.
Extending the Clean Building Managed Investment Trust (MIT) Withholding Tax Concession to Data Centres And Warehouses
The Government will extend the clean building MIT withholding tax concession to data centres and warehouses that meet the relevant energy efficiency standard.
Under the existing law, a clean building MIT is entitled to a concessional rate of 10% withholding tax on fund payments.
An MIT is a clean building MIT if it holds only energy efficient commercial buildings, and it does not derive assessable income from any taxable Australian property other than from the clean buildings or assets that are reasonably incidental to those buildings.
A “clean building” means the building that is a commercial building (such as an office building, hotel, shopping centre etc) and it meets at least 5 Star Green Star rating as certified by the Green Building Council of Australia or a 5.5 star energy rating as accredited by the National Australian Built Environment Rating System.
This new measure will also raise the minimum energy efficiency requirements for existing and new clean buildings to a 6-star rating from the Green Building Council Australia or a 6-star rating under the National Australian Built Environment Rating System.
This measure will apply from 1 July 2025.
The Government will offer incentives to increase the supply of rental housing by changing arrangements for investments in build-to-rent housing. The incentives will:
- increase the rate for capital works tax deduction to 4% p.a. for eligible new build-to-rent projects where construction commences after 9 May 2023; and
- reduce the withholding tax rate for MIT investments from 30% to 15% for eligible fund payments from MIT that invest in build-to-rent properties.
New build-to-rent projects that satisfy the following criteria will be eligible for the above incentives:
- construction commenced after 9 May 2023;
- consist of 50 or more apartments or dwellings made available for rent to the general public;
- 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.
This measure will apply from 1 July 2024.
Global Minimum Tax and Domestic Minimum Tax
The Government will implement key aspects of Pillar Two of the OECD/G20 Two-Pillar Solution which are designed to ensure that large multinationals with annual global revenue of EUR750 million (approx. A$1.2 billion) pay an effective minimum level of tax on the income arising in each jurisdiction where they operate.
The global minimum tax rules will allow Australia to apply a top up tax on a resident multinational parent or subsidiary company where the group’s income is taxed below 15%.
Where the tax paid by a large multinational in a jurisdiction does not reach the 15% global minimum effective tax rate, the rules will determine an amount of top up tax. That amount is collected through either:
- The Domestic Minimum Tax which will allow Australia to collect any top up tax on Australian profits, where the effective rate is below 15%;
- The Income Inclusion Rule which will allow Australia to collect any top up tax on the undertaxed profits of an Australian entity’s foreign subsidiaries located in jurisdictions where no domestic minimum tax is in place; and
- The Undertaxed Profits Rule which will allow Australia to collect a proportion of any top up tax on a foreign headquartered multinational if it has income in a jurisdiction which is being taxed below the global minimum rate of 15% and no Income Inclusion Rule applies. In that case, the share of top-up tax Australia will collect will be based on the proportion of the large multinational group’s employees and value of tangible assets in Australia relative to other countries.
The Domestic Minimum Tax and the Income Inclusion Rule will apply for income years commencing on or after 1 January 2024 while the Untaxed Profits Rule will apply for years of income starting on or after 1 January 2025.
Electric Car Discount
The electric car discount provides an FBT exemption for an eligible zero or low emissions vehicles, first held and used on or after 1 July 2022.
From 1 April 2025, plug-in hybrid electric cars will no longer be eligible for the FBT exemption. The FBT exemption remains available to arrangements involving plug-in hybrid electric cars entered into between 1 July 2022 and 31 March 2025.
Patent Box Measures will Not Proceed
The Government will not proceed with three separate patent box measures announced by the former Government in the 2021–22 and 2022–23 March Budgets.