2023 Budget Implications: Hospitality & the Wider Economy
By Simon Bowe – Chief Financial Officer
The 2023/24 Federal budget was released this week and some may be disappointed that the Government missed a valuable opportunity for genuine reform early in their election cycle, especially considering the surplus at their disposal. Instead the Budget took a measured approach that is unlikely to disrupt a delicately positioned economy.
Gone are the days of consumer spending surges fueled by COVID-related handouts. Instead, the government has chosen to refrain from injecting additional cash directly into voters’ hands and to bank a $4 billion surplus. While there are some modest increases in support payments aimed to reduce the impact of cost of living increases for the more disadvantaged, the overall budget is targeted to ease pressure on the economy and not put further pressure on interest rates.
The budget includes a number of measures that will impact the Coffee Commune community and we have outlined some of the key impacts below:
Direct impacts on Cafes & Roasters
• PAYG/GST instalments – Small businesses and individuals with up to $10 million turnover for GST and $50 million for PAYG instalments will benefit from a reduced annual adjustment rate from 12% to 6% for 2023/24. While this adjustment won’t result in tax savings, it will provide a cash flow boost for these businesses during the specified period.
• End of full expensing of assets – the temporary full expensing of assets was not extended and will end on 30/06/2023. However, small businesses with a turnover of less than $10 million will still be able to instantly write off assets under $20,000, until June 30, 2024. Businesses aiming to take advantage of either of these provisions, should ensure that eligible assets are used, or installed ready for use before the deadline.
• Small Business Energy incentive – From July 1, 2023, businesses with a turnover of less than $50 million will be eligible for an additional 20% deduction on investments in more efficient energy use. While specific details and eligibility criteria are yet to be finalized, this incentive offers the potential for businesses to claim deductions when investing in energy-efficient assets such as fridges, induction cooktops, heat pumps, and batteries.
• Energy relief fund – To alleviate the burden of electricity bills, the government has allocated $3 billion for electricity bill relief. Small businesses will be eligible to receive up to $650 in relief, providing some financial respite in this area.
• End carry back losses – The carry-back losses initiative, introduced as a COVID cash flow assistance measure, will not be extended beyond the current 2022/23 tax year. This means that from 2023/24, businesses will not be able to offset losses against prior years’ profits for and recover tax previously paid.
• Real Wage Growth – The budget forecasts a 3.75% increase in real wages in 2022/23, followed by a 4% increase in 2023/24. This year, on average, workers will see a reduction in real wages due to inflation, while in 2024 with inflation expected to be at 3.25%, workers would see an increase in real wages – though still be behind where they were. This projection gives hope to business owners that Fair Work award increases next month will be closer to the 3.75% than the 7.8% inflation rate.
• Inflation – The budget projects a return to a 3.25% inflation rate by June 2024. Considered neutral or slightly contractionary, the budget is not expected to exert further upward pressure on interest rates.
• Migration Boost – The budget anticipates the arrival of 1.5 million new migrants in Australia over the next five years, with 400,000 expected in 2023/24. Queensland’s population will increase by 6.3% over the next 5 years to 5.782 million, inclusive of interstate migration of 115,000. This influx of population will contribute to the economy bringing more customers and potential employee. However, it may further increase the existing pressure on housing and rental markets.
• Visa student hours – the cap on working hours for international student visa holders, which was temporarily removed as COVID-19 restrictions impacted on staffing levels, will return on 01/07/2023. The cap will permanently increase by 8 hours, to 48 hours per fortnight, granting students the ability to do an extra day of work compared to pre-pandemic levels but potentially less than they can work right now.
• Amnesty for overdue lodgements – businesses with a turnover under $10 million with outstanding tax returns originally due 01/12/2019 to 29/02/2022 will have their failure to lodge penalties remitted, if the returns are lodged between 01/06/2023 and 31/12/2023. This amnesty provides an opportunity for eligible businesses to rectify their tax compliance without facing severe penalties.
• Pay super on payday – from July 2026, superannuation will need to be paid on pay day, no longer quarterly or monthly. While this change may pose challenges for small businesses in terms of cash flow, they have over two years to prepare for this transition. It is crucial for businesses to ensure that their payroll software is capable of handling this change seamlessly.
• Tax compliance – the ATO is receiving additional funding to ensure GST compliance by business, boosting staffing in this area and developing analytical tools such as data matching to identify. They are targeting an additional $3.8 billion of tax revenue from this measure.
• Cyber warden training – $23.4m of funding to assist training 50,000 small businesses over 3 years to improve their cybersecurity, helping protect their businesses from growing digital threats.
• FBT exemption hybrid EVs to end – The Fringe Benefits Tax (FBT) exemption for hybrid electric vehicles (EVs) will end on 1st April 2025. However, arrangements involving plug-in hybrid electric cars entered into between 1st July 2022 and 31st March 2025 will remain eligible for the electric car discount.
• Authorised Signatories for Single Touch Payroll – Currently, businesses are required to sign Single Touch Payroll (STP) forms themselves. However, starting from mid-2024, businesses will have the option to authorize their tax agent or accountant to sign these forms on their behalf. This change aims to streamline the STP reporting process and reduce the administrative burden on businesses.
IN YOUR WORDS
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