How the 2024 Federal Government Budget impacts Australian businesses

Jason Matchado, Corey Beat, David Hall
15/05/2024

In the latest Federal Budget from the Albanese Government, notable announcements were made to support small and medium-sized businesses, enhance foreign investment, and improve compliance measures. Let’s explore these measures and the impact they could have on your business.

Instant asset write-off

The Federal Government has extended the $20,000 small business instant asset write off for another 12 months until 30 June 2025. The incentive threshold applies to each individual asset, which must be used or installed and ready for use by 30 June 2025. Eligible small businesses are those with an aggregated turnover of less than $10 million.

This incentive has been in place for several years, initially introduced as part of the COVID measures, and has continued to be extended each year. However, the previous extension of this incentive (for the income year ended 30 June 2024) is still not yet law. This delay is due to the Senate's amended Bill, backed by the Coalition and crossbench, which aims to increase the incentive to $30,000. The bill is still awaiting approval by the House of Representatives.

For small businesses with assets valued over $20,000, you can still place these assets into the small business simplified depreciation pool. They will be depreciated at 15% in the first income year and 30% each subsequent year.

The provisions that prevent small businesses from re-entering the simplified depreciation regime for five years, if they opt-out, will continue to be suspended until 30 June 2025.

Creating a “front door” for investors

As announced prior to Federal Budget last night, the Federal Government is investing to realign the Foreign Investment Review Board (FIRB) priorities and approval framework. This initiative aims to better balance economic growth with national security, ensuring that foreign investments align with Australia’s national interest.

In summary, the new framework aims to:

1. ‘Be stronger’

  • Investments in sensitive sectors, such as critical infrastructure and technology, will undergo increased scrutiny to safeguard national interests. We expect more attention paid to major renewable projects given their critical infrastructure status.
  • Potential on-site visits appear from Treasury Officials as part of increased compliance activity.
  • An increased focus on ensuring investors pay a ‘fair share of tax’ and greater scrutiny towards overly complex arrangements, intragroup transactions, financing arrangements which seek to avoid withholding tax obligations etc.

2. ‘A streamlined process’

  • The Federal Government is expediting the review process for low-risk investments, aiming to process 50% of proposals within 30 days by January 2025, although the impact might be felt as soon as 1 July 2024.
  • FIRB to refund application fees for unsuccessful applicants in a competitive bid process.
  • Providing more recognition of prior applications – i.e. easier application ‘repeats’ where the ownership structure has remained unchanged.
  • Labour supply support by allowing employers to buy established residential properties for specific classes of workers.

Tax incentives for hydrogen production and critical minerals

To incentivise investment in renewable hydrogen production, the Commonwealth Government is introducing a tax incentive from 2027-28 for a period of ten years to 2040-41. The announcement suggests that a $2 incentive will be provided for each kilogram of renewable hydrogen produced, for a period of 10 years per project.

A Critical Minerals Production Tax Incentive is also being established and will be available from 2027-28 (for 10 years) to encourage investment in the refinement and processing of 31 critical minerals which have been identified by the Federal Government. It provides a production incentive valued at 10% of the applicable processing and refinements costs of the identified 31 minerals and is applicable for a period of ten years per project, for production between 2027-28 and 2039-40, where projects have reached final investment decisions by 2030.

Given that these tax incentives are only expected to come into effect in future income years, we would expect greater detail to be released once consultation opens prior to the legislation being drafted.

Foreign Resident Capital Gains Tax regime

From 1 July 2025, where a foreign resident divests or sells a capital asset and triggers a CGT event, the Commonwealth Government will seek to introduce amendments to the existing Foreign Resident Capital Gains Tax regime.

These amendments will:

  • Clarify and broaden the types of assets which will be subject to Capital Gains Tax.
  • Amend the point-in-time principal asset test to a 365-day testing period in connection with the definition of indirect Australian real property interests.
  • Require foreign residents disposing of shares (and other membership interests) to notify the Australian Taxation Office (ATO) of the proposed disposal prior to executing the transaction where the value of the shares exceeds $20million.

These integrity measures are being introduced to ensure both direct and indirect sales of assets with a close economic connection to real Australian property (i.e., land) are aligned with the tax treatment for Australian residents and are in line with OECD standards and tax laws in overseas jurisdictions.

Furthermore, by notifying the ATO of a material disposal of shares or other membership interests, will provide greater oversight with the existing foreign resident capital gains tax regime, where a vendor self-assesses the transaction as not real Australian property.

Further details on this integrity measure will be made available at the time the Federal Government opens the consultation process, prior to implementation.

Expansion of general anti-avoidance provisions

The prior year’s Federal Government Budget included measures to amend and expand the general anti-avoidance provisions in Part IVA to capture the following types of arrangements:

  • Schemes that result in reduced Australian tax via lower withholding tax rates on income paid to foreign residents.
  • Schemes that achieve an Australian tax benefit, even where the dominant purpose is to reduce foreign income tax.

The amendments related to the first point seem to target schemes that create multinational structures through "treaty shopping." This involves using entities in countries with favourable withholding tax rates. The changes may also affect arrangements that seek to alter income to access lower withholding rates, such as reclassifying royalties as interest payments to reduce the tax rate from 30% to 10%.

Amendments related to the second point seem to be aiming to prevent multinational taxpayers from gaining an Australian tax benefit. They target schemes where the dominant purpose is to reduce the taxpayer’s global tax burden.

In recent Federal Court cases like Minerva and Mylan Australia, the ATO's attempts to apply Part IVA to cross-border arrangements were unsuccessful. Taxpayers successfully argued that global tax rates and their impact on non-resident taxpayers' financial positions were the dominant purpose driving these schemes.

These measures were meant to commence for income years starting on or after 1 July 2024 but will now commence for income years commencing on or after the day the amending legislation receives Royal Assent. In any event, the rules will apply to schemes entered into both before and after the commencement date.

ATO’s tax avoidance programs extended – are you ready for the taxman’s call?

The Federal Government announced that it would provide an additional $1.8 billion in funding to the extend the operation of the following ATO tax compliance programs:

  • Tax Avoidance Taskforce
  • Personal Income Tax Compliance Program
  • Shadow Economy Compliance Program

The Federal Government has also committed funding of $187 million over four years to strengthen the ATO’s ability to detect, prevent and mitigate fraud against the tax and superannuation systems, such as the BAS refund fraud that triggered the ATO’s Operation Protego. The funding is also aimed at assisting individual taxpayers who have been harmed by fraud.

Tax Avoidance Taskforce

The operation of the ATO’s Tax Avoidance Taskforce has been extended for an additional two years, and the program will continue into the 2026-27 & 2027-28 financial years.

The operation of the ATO’s Tax Avoidance Taskforce has been extended for an additional two years, and the program will continue into the 2026-27 & 2027-28 financial years.

The taskforce aims to prevent, detect, and address tax avoidance, while also working to eradicate illegal and fraudulent tax arrangements. This ensures that Australia's largest and wealthiest taxpayers contribute their fair share of taxes. Since its inception in 2016, the taskforce has extended its work programs to cover the following taxpayer segments:

Publicly owned and multinational businesses

  • Top 100 justified trust program.
  • Top 1,000 combined assurance program.
  • Medium and emerging public groups tax performance program.

Privately owned businesses and high net wealth individuals

  • Top 500 private groups tax performance program.
  • Next 5,000 private groups tax performance program.
  • Medium and emerging private groups tax performance program.

This additional funding means business taxpayers are more likely than ever to receive a ‘knock on the door’ from the ATO.

ATO tax performance programs encompass more than just audits of specific transactions. The ATO will gauge the taxpayer’s attitude and culture towards managing its tax risks and will also seek to understand whether the taxpayer has an effective, tax control framework.

Crowe tax advisory specialists can assist you to minimise your risks in the event of an ATO audit or review, as well as support less intense and less frequent reviews by the ATO.

Personal Income Tax Compliance Program

The operation of the ATO’s Personal Income Tax Compliance Program has been extended for an additional 12 months and will continue into the 2027-28 financial year.

The ATO will use the additional funding to continue its focus on emerging risks to the tax system, such as deductions relating to short-term rental properties (e.g. Airbnb rentals).

The funding will also enable the ATO to continue to deliver a combination of proactive, preventative and corrective activities in key areas of non-compliance, including overclaiming of deductions, incorrect reporting of income and inappropriate tax agent influence.

Shadow Economy Compliance Program

The operation of the ATO’s Shadow Economy Compliance Program has been extended for an additional two years, and the program will continue into the 2026-27 & 2027-28 financial years.

The operation of the ATO’s Shadow Economy Compliance Program has been extended for an additional two years, and the program will continue into the 2026-27 & 2027-28 financial years.

The ‘shadow economy’ refers to dishonest and criminal activities that take place outside of the tax and regulatory systems, and can include behaviours such as:

  • Demanding or paying for work cash-in-hand to avoid tax and other reporting obligations.
  • Not reporting or under-reporting income.
  • Underpayment of wages.
  • Visa fraud and bypassing visa restrictions.
  • ABN, GST, and duty fraud.
  • Sham contracting – presenting an employment relationship as a contracting arrangement.
  • Illegal phoenixing – liquidating and re-forming a business to avoid obligations.

Key takeaways

The 2024 Federal Government Budget introduces a range of measures aimed at supporting Australian businesses, particularly SMEs. From extended asset write-offs to streamlined foreign investment processes, these initiatives are designed to ensure economic growth and resilience.

With the extension of key tax incentives and the introduction of new investment incentives, businesses are encouraged to seize opportunities for expansion and innovation. However, it's essential for businesses to stay informed about these changes and consult with their tax advisors to maximise the benefits available under the new budget.

To navigate the complexities of the 2024 Federal Government Budget, contact Crowe's tax advisory specialists today. You can also explore our full summary of the budget here.

This document contains general information and is not intended to constitute legal or taxation advice. If you need legal or taxation advice, we recommend you speak to a qualified advisor.