Key Findings
- The treasurer has allocated over $4 billion in the budget to renewable energy investments, reinforcing the government’s commitment to transitioning towards clean and sustainable energy sources.
- With a further 20% tax benefit available for some enterprises, a new Small Business Energy Incentive has been launched to stimulate investments in energy-efficient assets.
- The instant asset write-off scheme, although with tighter limits, continues to provide small businesses with the ability to deduct the cost of eligible depreciating assets.
- Small businesses, pensioners, and welfare recipients will receive a share of $1.5 billion in bill relief for the next two years to assist with energy costs.
- The instant tax write-off for small businesses allows firms with a turnover under $10 million to deduct the full cost of assets valued up to $20,000 each, encouraging investment in electronics, machinery, and tools.
- Small businesses that are behind on their taxes have an amnesty, avoiding fines if taxes are lodged by the end of the year.
- The government will halve the rate of income tax and GST instalments for small and medium-sized businesses using the statutory formula, providing financial relief and preventing insolvency.
- The Cyber Wardens Program, funded with $23.4 million from the budget, aims to increase corporate resilience to cyber threats.
- Via the Industry Growth Program, the government has also set aside money to provide start-ups and small firms with grants and advice.
Benefits That Will Not be Available For Financial Year 2023-24
- Technological investments by small businesses will no longer be eligible for a 20% tax benefit after June 30.
- After June 30th, Immediate Asset Expensing won’t be an option; depreciating assets worth more than $20,000 will be necessary.
- Quarterly tax instalments for small businesses will increase by 6% instead of the current 12% reduction.
- The previous instant tax write-off limit of $150,000 for assets purchased by businesses with turnover under $10 million will be reduced to $20,000.
- Small businesses will have a four-year period starting from July 1, 2025, to amend their tax returns.
Energy Assistance and Renewables Investment for Small Businesses
Energy assistance and renewables investment are key focuses of the recent budget, with measures introduced to support the energy sector and provide relief to businesses and consumers.
The budget includes a $392.4 million Industry Growth Program aimed at assisting small-to-medium-sized enterprises and startups commercialise their ideas, particularly in the areas prioritised by the National Reconstruction Fund, such as renewables and low-emissions technologies.
One notable measure is the tax incentive for small and medium businesses that have an annual turnover of less than $50 million to invest in electrification and energy efficiency. This incentive allows them to deduct an additional 20% of the cost of eligible assets supporting electrification and more efficient energy use.
Up to $100,000 of total expenditures will be eligible for the Small Business Energy Incentive, with a maximum bonus deduction of $20,000. These initiatives are expected to cost the government $310 million and benefit small business operators.
While some experts argue that the budget’s energy transition initiatives are smaller in scale compared to those implemented in other regions like the United States and the European Union, the measures are still significant for businesses seeking to transition to cleaner energy sources.
Small businesses, including energy-intensive ones like laundromats, face rising energy costs, which can impact their operations. The budget aims to alleviate this burden by providing energy bill relief over the next two years, not only to small businesses but also to pensioners, welfare recipients, and family tax benefit recipients. These measures aim to support businesses and individuals during a time of economic uncertainty and provide them with the confidence to invest in a sustainable future.
Considering these measures and the opportunities they present, small businesses looking to transition to cleaner energy sources and improve their energy efficiency can take advantage of available resources. They can explore options such as small business loans or quick funding for business initiatives.
By leveraging financial support and the incentives provided by the budget, businesses can make necessary investments, adopt renewable technologies, and ultimately contribute to a more sustainable and prosperous future.
Boosting Cash Flow
To enhance cash flow for small businesses and assist them in managing income tax and GST liabilities, the government plans to halve the increase in quarterly tax installments for the 2023-2024 financial year. Instead of a 12% increase, the instalments will rise by 6%. This measure is expected to benefit approximately 2.1 million eligible small businesses, providing them with greater financial flexibility.
Scaling Back of Key Tax Break
In the 2023 budget, there has been a scaling back of a key tax break that previously benefited small businesses. Small business owners will have an extended period of up to four years, starting from July 1, 2025, to amend their tax returns.
Also, firms with turnover of less than $10 million a year can access an instant tax write-off for assets purchased valued up to $20,000 each without any limit on the number of assets they can buy. Previously, the asset value limit was $150,000, and the eligibility threshold was a turnover of $500 million.
Based on those figures, this is a significant reduction compared to the more generous measures implemented during the COVID-19 period.
The temporary rule allowing immediate deduction of the full cost of assets will end on 30 June 2023. Small businesses that opted out will still be prevented from re-entering the simplified depreciation system for 5 years. Remember, after 30 June, assets costing over $20,000 will need to be depreciated instead of instantly expensed.
These adjustments in tax incentives are expected to have an impact on businesses and individuals. Barrenjoey’s economists note that the focus of the instant asset write-off will shift from larger investments like utility vehicles to smaller investments in electronics, machinery, and tools.
While the previous program was more open-ended and applicable to a wider range of businesses, the tightening of incentives may lead to a temporary slowdown in aggregate business capital expenditure.
It’s crucial to understand this scaling back in the context of previous budgets. The government of Australia is taking the required steps to control the costs associated with the previous, more generous measures introduced during the COVID-19 pandemic. As a result, the current budget aligns with the need to manage expenditures and ensure fiscal sustainability.
The Small Business Technology Investment Boost
The Small Business Technology Investment Boost allows small businesses to deduct an additional 20% of their expenditure on digital operations and assets like payment devices, cybersecurity systems, and cloud services. However, this 20% tax deduction will no longer be available after 30 June.
There is an annual cap of $100,000 for qualifying expenses, and businesses can continue to deduct amounts over that limit under existing law. The boost applies to expenses incurred between 29 March 2022 and 30 June 2023, with specific rules for claiming the deduction based on a business’s balancing date.
Payday Super
Starting from 1 July 2026, employers will be obligated to pay their employees’ superannuation guarantee (SG) entitlements on the same day they pay their salaries and wages.
This change aims to increase the payment frequency of employee super contributions, which are currently paid quarterly. The government plans to engage in a consultation process to determine the final design of this measure, with the intention of providing further details in the 2024-25 Federal Budget.
Tax Assistance
The budget includes several measures to reduce the administrative burden on small businesses during tax time. The budget introduces a trial for independent reviews targeting small businesses with turnovers between $10 million and $50 million, subject to an Australian Taxation Office (ATO) audit.
Access to advice will also be expanded through a tax clinic program, utilising TAFE services in regional areas. These initiatives aim to streamline the tax process and provide support to small businesses during the financial administration phase.
The government has introduced a lodgment penalty amnesty program aimed at encouraging small businesses to fulfil their tax obligations and bring them up-to-date. Under this program, tax obligations, including income tax and business activity statements, that were originally due between December 1, 2019, and February 28, 2022, can be lodged between June 1, 2023, and December 31, 2023.
The program automatically remits any failure-to-lodge penalties associated with the late lodgment without the need for any additional action. To be eligible for the amnesty, the small business must have an aggregated turnover of less than $10 million at the time of lodgment.
It’s important to note that this program does not apply to privately owned groups or individuals with control over $5 million of net wealth. This initiative aims to provide relief and support to small businesses in meeting their tax obligations and ensuring compliance.
Support Against Cyber Threats
The Australian government has recognised and extended its support to the COSBOA-initiated CyberWardens program, a cyber awareness, education, and accreditation initiative developed by small businesses for small businesses.
The program, which was piloted by Telstra, CommBank, 89Degrees East, and COSBOA, has received an allocation of $23.4 million in the Australian Budget 2023. Its primary objective is to equip small businesses with the necessary tools and knowledge to combat cyber threats effectively.
Matthew Addison, the Chair of COSBOA, expressed his satisfaction with the government’s commitment, emphasising the potential impact on the cybersecurity behaviour of approximately 15,000 small businesses.
This funding will further strengthen the in-house capabilities of SMEs, empowering them to mitigate and reduce the risks associated with cyberattacks. By supporting initiatives like the CyberWardens program, the government aims to foster a more secure cyber landscape for small businesses across the country.
Start-up Assistance
The government has allocated $392 million to an Industry Growth Program designed to provide advice and grants to start-ups and small-to-medium businesses.
The program aims to support the commercialisation of ideas and foster growth in priority funding areas, including renewables and low-emissions technologies, medical science, transport, resources, and the agriculture, forestry, and fisheries sectors.
Minister for Industry and Science Ed Husic emphasised the program’s potential to drive innovation and development in these key industries.
Considering these changes, small businesses may face challenges in making necessary investments without the previous tax breaks. However, there are alternative solutions available.
Quick business loans, or fast funding options, can provide the necessary financial support for businesses looking to expand, upgrade equipment, or invest in growth opportunities. With the 2023 budget and its revised tax incentives as a backdrop, it becomes even more important for businesses to explore financing options that can help them navigate the changing landscape and take hold of new opportunities.
As a small business owner, if you’re looking to get the funds necessary to sustain and expand your business, we recommend that you consider getting a small business loan.
At Capify, we provide customised small business finance options that cater to the specific requirements of small businesses. Our solutions are flexible and tailored to meet your needs. Whether you need capital for equipment, inventory, or operational expenses, a business loan can provide the necessary financial flexibility to pursue your ambitions.
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