How will the Australian Federal Budget 2023 impact accountants?
What do recent announcements, handed down as part of the Federal Budget 2023-24, mean for your accounting practice and clients?
You are likely trying to wrap your head around the newly announced Federal Budget measures in cost-of-living and compliance. Your business clients are also looking to you as their accountant to support them in navigating these Federal Budget changes.
When you read our analysis, you will have a better understanding of the Australian Federal Budget 2023 and the impact its measures will have on accountants.
Australian Federal Budget 2023: How it happened
The Australian Federal Budget was handed down by the Federal Government on budget night of 9 May 2023.
The spending measures that the Albanese Government announced in the Federal Budget 2023 emphasised the importance of relief.
The Federal Budget 2023 aimed to address inflationary pressures, rental affordability challenges, social and affordable housing, cost of living relief, compliance, and clean energy for the Australian economy.
According to Federal Treasurer Dr Jim Chalmers in his budget speech, the three words summarising the Federal Budget 2023 were "Relief, repair, and restraint."
During his speech, the Treasurer said, "This Budget builds stronger foundations for a better future by:
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Delivering cost-of-living relief
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Strengthening Medicare
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Investing in a stronger and more secure economy
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Broadening opportunity
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Strengthening the Budget and funding our priorities
"This Budget strikes the right balance between dealing with immediate challenges and setting Australia up for the future."
How did the accounting industry react to the Federal Budget?
The stance of Australia's leading professional accounting body, CPA (Certified Practicing Accountant) Australia, is that the Federal Budget 2023 tackled economic challenges with prudent spending decisions, but the key financial announcements from the Federal Government were "missing a long-term plan that drives a sustainable and economically certain future for Australia" with “not enough support for small businesses.”
The Institute of Public Accountants (IPA Group) agrees with this stance on government spending, stating that “inflation/cost of living relief pressures, health funding, and affordable housing are features of the Federal Budget, but there is little by way of significant support for small businesses.”
Australia Federal Budget 2023: Key insights for accountants
Changes to business cash flow
A Federal Budget 2023-24 amendment to tax laws will set the GDP adjustment for pay-as-you-go (PAYG) and GST (Goods and Services Tax) instalments at 6 per cent for the 2023-24 income year.
From the 2026 tax year onwards, employers must pay super on take-home-pay salary rather than every quarter. This Federal Budget change aims to reduce the risk of superannuation debt.
As these Federal Budget amendments affect cash flow, accounting practices should consider reviewing their client base and introducing cash flow analysis and advice to small business clients not already receiving this service from the practice.
Small business instant asset write-off
Announced in this year’s Federal Budget, smaller accounting practices and vulnerable Australians with small businesses with an annual turnover of less than $10 million are eligible for an instant asset write-off through the Australian Taxation Office (ATO).
Initially, a COVID-stimulus measure introduced to mitigate the economic implications of the pandemic, the Federal Budget extended the instant asset write-off threshold for one year, from its initial expiry date of 30 June.
The small business temporary instant asset write-off threshold increases to $20,000 and will be in place from 1 July 2023.
Accounting practices and their small business clients who meet the eligibility criteria can write off multiple eligible asset costs annually as part of this Federal Budget 2023-24 measure.
Small business energy incentive
Your small business clients may be eligible for a spending deduction on efficient energy, with the small business energy incentive announced by the Australian Government as part of this year's Federal Budget 2023 package.
Small businesses with an annual turnover of less than $50 million will be eligible for an additional deduction of 20 per cent on their energy power bill. Up to $100,000 of total expenditures are eligible for the small business energy incentive, with the maximum energy efficiency bonus per business being $200,000.
The Australian Federal Budget 2023-24 measures aim to encourage accounting practices and clients operating small businesses who meet the minimum energy efficiency requirements to transition from fossil fuels to renewable energy to achieve Net Zero.
The Federal Budget spending measure could help accounting practices and the small businesses they service make energy efficiency investments like:
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electrifying their heating and cooling systems;
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upgrading to more efficient fridges and induction cooktops, and
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installing batteries and heat pumps.
For a small business to be eligible for this Federal Budget 2023-24 direct energy bill relief, any eligible assets or upgrades to existing assets must be first used or installed and ready for use in the income year of 1 July 2023 and 30 June 2024.
This Federal Budget measure will support small and medium businesses on their ESG (Environmental, Social and Governance) reporting. For information on ESG reporting and its part in modern accounting, please read our blog on the topic: ESG reporting for accounting firms.
Investment in personal income tax compliance programs
Treasury hopes to claw back $9.1 billion in unpaid tax over the next five years, ramping up investment through several income tax compliance programs announced in the Federal Budget 2023.
Those avoiding GST and personal income tax are targeted through these Federal Budget tax measures, with compliance programs for both getting funding to extend their work.
In the 2023-24 income year’s Federal Budget, $90 million has been funded to the ATO (Australian Taxation Office) and $1.2 million to the Treasury to extend the personal income tax compliance program for two years from income years beginning 1 July 2025. The scope of the income tax compliance program will be expanded from 1 July 2023.
In the wake of these newly-announced Federal Budget 2023 tax measures, accountants should educate their clients on the risks associated with non-disclosure of personal income tax and be diligent with record keeping.
Changes to superannuation tax
Announced in the Federal Budget 2023, earnings on total superannuation balances greater than $3 million will lift the tax rate up to 30 per cent from the 1 July 2025 income year. This is up from the current concessional tax rate of 15 per cent.
Treasury expects the Federal Budget measure to impact 80,000 people, or 0.5 per cent of members of superannuation funds, but this will grow as the cap is not indexed.
The Federal Budget measure is expected to bring in $2.3 billion in tax revenue in its first full year of receipts.
Although these Federal Budget tax measures won't come into effect for several years, accountants may want to start thinking about immediate challenges for their clients ahead of time, particularly if they have clients getting close to that figure or have been using self-managed super funds in their tax management strategies.
Boosting cyber skills
In the wake of large-scale cyber hacking of the sensitive data of Optus, Medibank and Telstra, the Federal Budget has committed $23.4 million to a "Cyber Wardens" program.
The program, announced in the Federal Budget, will take place over the next three years to boost the cyber skills of small businesses.
The Council of Small Business Organisations Australia (COSBOA) will deliver the program after they piloted it for small businesses and lobbied for its expansion.
This Federal Budget announcement is good news for small accounting practices due to their vast amounts of sensitive financial data, making them prime targets for cyber threats. The emerging risks of cybercrime currently costs accounting practices an average of $39,555.
Please read our guide containing everything you need about cyber security for accounting practices.
Federal Budget insights: in summary
Our key takeaway from the Federal Budget 2023 is that announced government spending measures reflected the restrained economic outlook for Australians
Accounting professionals and their clients operating small businesses will benefit from a number of the spending measures announced in the Federal Budget papers, including the small business energy incentives to help with power bills and the emphasis on education and training on cybersecurity for small businesses.
So, what’s next?
Now that you have read more about the contents of the Federal Budget papers, you may be considering how to enter the new financial year with a fresh start.
This all comes down to whether you have the right accounting practice management software solution to help you and your clients work through Federal Budget 2023 changes.
Trusted by over 8,000 practices across Australia and NZ, our powerful accounting practice management software has integrated features to run all aspects of your practice, improve client experience and increase your productivity, so why not talk to one of our specialists today?
