Federal Budget 2023: BDO's comment

Mark Molesworth, Tax Partner at BDO in Australia, says a slew of compliance programs detailed in Tuesday’s Federal Budget, alongside tax measures targeting multinationals, will mean taxpayers can expect greater scrutiny from the ATO.

“Wealthy individuals, small businesses, multi-nationals and blatant tax evaders can now expect a lot more visits from the Tax Office,” said Mr Molesworth.

“These are not new tax measures but a compliance crackdown targeting a small cohort of taxpayers for significant additional revenue.

“Multinationals can also expect the net to tighten with the government now giving us certainty around the 1 January 2024 start date for a 15 per cent minimum tax rate.

“Further, the government has proposed amendments to the general anti-avoidance rules in Part IVA to give them more teeth. In what looks like a targeted attack on multi-national enterprises withholding tax rate minimisation schemes and schemes to save foreign tax where the Australian tax system is merely collateral damage will now be within range of the anti-avoidance provisions."

Mr Molesworth says the slender budget surplus means any discussions around holistic tax reform appears to be put aside until the budget comes under pressure from higher spending pressures and lower tax receipts in the medium-term.

“This budget has been framed around sustainability, but it has not given any thought about reforms to make the revenue collection system more sustainable,” said Mr Molesworth.

“We need to have a frank conversation about a sustainable tax system instead of perpetually kicking the can down the road.”

Despite the lack of substantive tax measures, small businesses will enjoy the return of the $20,000 instant asset write-off.

“It's welcome given that the instant asset write-off threshold was about to drop back to $1,000 but it is unlikely to move the dial to make businesses want to invest in capital projects because most significant equipment is going to cost more than $20,000,” said Mr Molesworth.

“It's sensible when you're buying small assets like your computers, printers, and photocopiers but given we're coming from an almost unlimited instant asset write-off at 30 June 2023, to a $20,000 maximum at 1 July 2023, there's a big cliff coming and businesses that are looking to make purchases above $20,000 will need to get their skates on because they need those assets installed ready for use by 30 June 2023.”

The $20,000 instant asset write-off comes after the government announced a maximum $20,000 tax deduction for small businesses that make moves to electrify their businesses.