Why 2023 Was A Year of Living Taxingly
Ongoing economic uncertainty created by global events continued into 2023, fuelled by persistently high inflation, repeated interest rate hikes, tight labour markets and geopolitical shocks. These and other factors have compounded cost of living pressures.
Small and medium enterprises
Following years of tweaks (and changes of a more substantial nature) to the full expensing measures for depreciating assets of SMEs, the next variant remains to be legislated. The standard instant asset write-off threshold is proposed to be temporarily increased from $1,000 to $20,000 (for eligible depreciating assets costing less than $20,000) for small business entities (aggregated turnover of less than $10 million) where those assets are first used or installed ready for use in 2023–24.
Eligible business entities (aggregated turnover of less than $50 million) will be allowed to claim an additional 20 per cent deduction on spending that supports electrification and more efficient use of energy. Eligible assets or upgrades need to be first used or installed ready for use in 2023-24.
Superannuation
Division 296 tax
In a major change for those with substantial superannuation balances, the Treasury Laws Amendment (Better Targeted Superannuation Concessions Bill) 2023 proposes to introduce new Division 296 into the ITAA 1997 to levy an additional tax on individuals at the rate of 15 per cent on earnings on total superannuation balances above $3 million. The measure is proposed to start on 1 July 2025. On 7 December 2023, the Senate referred the Bill to the Senate Economics and Legislation Committee for inquiry and report by 19 April 2024.
Unquestionably, the primary concern of stakeholders, including the Tax Institute (see our submission to the Treasury) is the establishment of a new precedent of taxing unrealised gains. Historically, taxing unrealised gains has been used only in the context of anti-avoidance provisions and it should not be a feature in the design of this, or future, general taxation measures.
The inability to carry back unrealised losses, the non-indexation of the $3 million threshold and liquidity issues relating to the payment of the new tax are among the other concerns stakeholders have with the new measure.
Payday super
In October 2023, Treasury released a consultation paper on payday super which will require employers from 1 July 2026 to pay their employees’ superannuation guarantee contributions at the same time they pay salary and wages. The measure is to be applauded for its objective to better secure the superannuation entitlements of millions of workers. However, a range of design and implementation issues must be considered, as set out in the joint submission on the consultation paper lodged with the Treasury by the Tax Institute and other professional associations.
by Kati Gheidar
