Late tax charges, skill programs cut: Six small business updates from MYEFO

The federal government has rustled up $9.8 billion in savings since the May budget through a combination of spending cuts and reprioritisations, including measures focused on the business sector.

The Mid-Year Economic and Fiscal Outlook (MYEFO), released Wednesday, suggests the budget deficit will come in at $1.1 billion in 2023‑24, an improvement on the $12.8 billion predicted in the May budget.

Increased tax receipts through higher overall wages, and the resiliency of resource prices, have contributed to that bottom-line improvement.

Yet those savings will not be immediately funneled into new and additional cost-of-living support measures, as households and businesses face persistent, if moderating, inflation.

Additionally, the MYEFO details some critical changes to the tax system, covering the General Interest Charge and tweaks to the treatment of luxury vehicles.

Here are a few highlights from the MYEFO relevant to the small business sector.

Commitment to regulatory reform

The MYEFO documents reaffirm the Albanese government’s approach to cost-of-living support for the business community.

Beyond significant energy bill relief, much of its plan rests on regulatory reform and attempts to strengthen the competitive landscape.

MYEFO highlights the two-year rolling competition review, $8.1 million in funding to accelerate payment times for small businesses, and its suite of cyber resiliency measures.

The government says it will provide $27.9 million over three years from 2024–25, and $9.4 million per year thereafter, to “ensure regulation is fit-for-purpose in a digital era, protect against regulatory failures and improve productivity”.

Cuts to employment skills programs

Two workplace skills programs will get the cut, according to the MYEFO document.

The first is the Skills Checkpoint for Older Workers Program, which will cease on July 1, 2024.

The program provides assistance to older workers whose roles may be vulnerable and those who have recently become unemployed.

Participants can obtain upskilling advice in the hopes of maintaining their employment, or guidance on seeking a new position.

Cutting the program is slated to save $12.7 million over three years from 2024–25, and $4.8 million per year thereafter.

Additionally, the Foundation Skills for Your Future Program will cease from December 22 this year.

Currently offered by dozens of TAFEs and education providers nationwide, the program offers reading, writing, mathematics, and digital literacy skills for employed and recently unemployed Australians.

Ending the scheme will result in savings of $3.5 million this financial year.

Those savings will be redirected to other policy priorities in the Workplace Relations portfolio.

General Interest Charge loses tax deductibility

The General Interest Charge (GIC) is a powerful deterrent against overdue tax payments and shortfalls in self-assessed payments.

MYEFO makes it even stronger, by removing its tax-deductible status from July 1, 2025.

The measure means taxpaying entities, including small businesses, will have to face up to their GIC penalties without the prospect of a meagre tax deduction.

The federal government states the changes will enhance incentives for all entities to correctly self-assess their tax liabilities and pay on time, and level the playing field for individuals and businesses who already do so.

In effect, the removal of tax-deductible status will eke away at what is left of the ATO’s leniency towards overdue tax obligations.

The change is expected to result in extra tax revenues of $500 million a year, kicking off in mid-2025.

Luxury Car Tax reforms

Businesses looking to modernise their car fleets in 2025 should take note of changes to the luxury car tax (LCT).

The LCT is a 33% tax applied to each dollar of a vehicle’s value over a certain threshold.

For vehicles that achieve fuel efficiency of 7 litres per kilometre or lower, the threshold is currently $76,950.

Fuel-efficient vehicles, which achieve seven litres per kilometre or higher, face a higher threshold of $89,332.

The greater threshold-free total for fuel-efficient vehicles is designed to encourage the uptake of newer EVs and hybrid models.

The latest MYEFO promises to overhaul the FCT.

From July 1, 2025, fuel-efficient vehicles will need to achieve an efficiency of 3.5 litres per kilometre, or greater, to qualify for the softer LCT threshold.

Additionally, the annual indexation rate will be de-pegged from headline CPI, and will instead match inflation in motor vehicle purchase values.

The measure is expected to boost government revenue by $155 million between July 1, 2025, and June 30, 2027.

While the measure will likely encourage the uptake of EVs, Australia’s automotive retailing sector says the reworked low-emissions threshold will bump the upfront cost of vehicles currently deemed fuel-efficient.

“The LCT penalises Australian consumers, as it imposes unnecessary additional taxes on many low-emission technology vehicles,” said Tony Weber, chief executive of the Federal Chamber of Automotive Industries.

Penalty unit hike

The maximum civil penalties for individuals and companies that breach corporate law will jump significantly from July 1, 2024.

Civil penalties are derived from penalty units, which are currently set at $313 per unit.

MYEFO states that will rise to $330 per unit as of the next financial year, pending legislation.

The amount will be indexed every three years, according to CPI figures.

The update is expected to raise $4.5 million over five years from 2022–23.

It is also likely to slam individuals and businesses that violate corporate law.

Currently, the maximum penalty for an individual is the greater of 5,000 penalty units (currently $15.65 million), or three times the financial benefit of the offending conduct.

The update means 5,000 penalty units will come in at $16.5 million.

For corporations: penalties are currently capped at 2.5 million penalty units, or $782.5 million.

That will become $825 million.

The cost of not Modernising Business Registers

As previously flagged, the decision not to continue with the multibillion-dollar Modernising Business Registers (MBR) program will come with its own cost.

That cost: $2.2 million in funding towards the Treasury to help with the wind-down process.

Additionally, responsibility for business registers will transfer from the Australian Taxation Office to the Australian Securities and Investments Commission.

The upfront cost will be $75.6 million over four years, starting next financial year, and $3.4 million a year after that.

The cost of that project will be partially met by redirecting funds originally locked up with the ATO for the purposes of meeting the MBR agenda.