Federal Budget 2023: Massive new tax break everyone should be talking about
Australians who run a business will soon be able to claim a $20,000 tax break if they buy more efficient fridges or link their heating and cooling to solar energy. This looks set to replace With this program - known as 'temporary full expensing program' set to end on June 30 - Treasurer Jim Chalmers, Minister Chris Bowen and Small Business Minister Julie Collins have announced a new tax break beginning on July 1. Small businesses will be able to link their heating and cooling to solar energy, upgrade to more energy-efficient fridges and induction cooktops and install batteries and heat pumps. H&R Block director of tax communications Mark Chapman said the small business energy incentive 'Based on current law, expenses on these kinds of items will need to be depreciated over a number of years,' he told Daily Mail Australia. The green energy would have to be installed or first used between July 1, 2023 and June 30, 2024. This program is expected to cost $314 million over three years and help 3.8million small and medium-sized businesses. Small businesses with a turnover of less than $50million will also be eligible for an additional 20 per cent deduction for spending on energy efficiency and electrification, where there is a switch to renewable energy. 'This scheme gives businesses in addition to the usual write-off of the cost of the assets the chance to claim an extra 20 per cent tax deduction in relation to the cost,' Mr Chapman said. 'Therefore, if you spend $10,000 on the asset, you can actually write off $12,000.' Businesses can already claim items like computers or machinery as a tax deduction, provided they claim it over the life of the item. The outgoing instant asset write-off program - known as temporary full expensing - debuted in October 2020 during the early months of the pandemic. Former Liberal treasurer Josh Frydenberg extended it until June 30, 2023 in the 2021 Budget, allowing the cost of a ute to be claimed over one year rather than eight. The threshold was initially set at $59,136 but that rose to $64,741 with inflation. Tradies will soon lose the right to instantly write off their utes as small businesses pay more tax under a significant Budget change due to kick in within weeks. Treasurer Jim Chalmers has given no hint the former Coalition government's instant asset write-off measures will be extended in the May 9 federal Budget. Under those measures - formally known as 'temporary full expensing' - tradies can claim the whole cost of a work ute or van on tax in one year, rather than over eight. The cost of a vehicle is now capped at $64,741 - which covers Australia's two bestsellers, the Toyota HiLux and Ford Ranger. The tax arrangements also allowed businesses with a turnover of up to $5billion a year to claim the cost of office equipment like furniture and computers upfront in one year - with an unlimited threshold. That also applied to tools and machinery. H&R Block director of tax communications Mark Chapman said the end of the instant asset write-off arrangements on June 30 would see small businesses pay a lot more tax. 'Many businesses are going to be paying much more tax upfront - they'll still get the tax relief but it will be spread across several years,' he told Daily Mail Australia. 'It will make an enormous difference to cash flow - going forward, if you acquire a capital asset, you need to write that off over the course of its effective life.' The temporary full expensing program would revert to a 'far less generous instant asset write-off'. 'It's due to expire on 30 June, 2023 and there are no indications that the Treasurer plans to extend it, let alone make it permanent - as many business groups have called for,' Mr Chapman said. Instead, under current plans, from July 1, 'The instant asset write off has supported hundreds of thousands of businesses to invest in productivity, helped new businesses find their footing, and existing businesses to ride out tough times,' he told Daily Mail Australia. 'Labor flagged its plan to end these tax measures which support investment, innovation, and small businesses at a time when they need it most.' 'That threshold is there to stop taxpayers going out and buying lavish vehicles for their business - they didn't want to encourage people to go out and buy a BMW when a Ford or a Honda would do,' he said. From July 1, the vehicle threshold would be indexed to inflation - taking it to $69,144 under the present 6.8 per cent inflation rate for February - but this would have to be claimed back over eight years rather than one. Dr Chalmers did not respond to a request for comment last week. William