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Budget 2023: The Aussies getting a $20k tax break and energy boost

Treasurer Jim Chalmers has walked away from the large, blanket tax-cutting initiatives of the last Liberal government.

Budget 2023: Compilation image of Treasurer Jim Chalmers and hands holding cash to represent small business tax write off
Small businesses are getting a tax break in the federal budget. (Source: Getty)

Small businesses will see a return of the $20,000 instant asset write-off and a new incentive to invest in energy-saving technology, thanks to the federal budget.

Small businesses - those with an aggregated annual turnover of less than $10 million - will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used, or installed ready for use, between July 1, 2023 and June 30, 2024.

The $20,000 threshold will apply on a per-asset basis, so small businesses can instantly write off multiple assets. This is effectively an immediate tax deduction for all eligible capital assets costing less than $20,000.

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Assets valued at $20,000 or more (which cannot be immediately deducted) can be placed into the small business simplified depreciation pool and depreciated at 15 per cent in the first income year and 30 per cent each income year thereafter.

These rules will replace temporary full expensing, which allows for immediate write-off of all eligible capital assets - regardless of the amount - of depreciating assets first held, used or installed for a taxable purpose, between the 2020 budget time (October 6, 2020) and June 30, 2023. This means temporary full expensing ends on June 30, 2023.

20 per cent deduction in energy-saving technology

The budget also revealed that small businesses with a turnover of less than $50 million would be eligible for an extra 20 per cent deduction on energy-saving technology.

This includes energy-efficient fridges, electric cooling systems, induction cooktops, batteries and other assets that support electrification and more efficient energy use. It does not include electric vehicles, renewable-energy-generation assets, capital works and assets that aren’t connected to the electricity grid and use fossil fuels.

More budget news:

Tradies, manufacturers, restaurants, hairdressers, real estate agents and other small businesses are expected to benefit from the move.

Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business, and eligible assets or upgrades will need to be first used, or installed ready for use, between July 1, 2023 and June 30, 2024.

Small businesses to get lodgment penalty amnesty

A lodgment penalty amnesty program will also be provided for small businesses with an aggregate turnover of less than $10 million, to encourage them to re-engage with the tax system. The amnesty will remit failure-to-lodge penalties for outstanding tax statements lodged in the period from June 1, 2023 to December 31, 2023 that were originally due during the period from December 1, 2019 to February 29, 2022.

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