Federal Budget announcement 2023 – other areas

Other particular areas of the new budget which may be worth noting include:

Tax Integrity – extension of the ATO Tax Avoidance Taskforce
The Budget includes additional funding of $200 million per year over the next four years for the ATO’s Tax Avoidance Taskforce.
The focus being on multinational enterprisers and large public and private businesses. This means there will be a continued focus on compliance activities and the recovery of tax arrears.

Tax Integrity – extension of the ATO Shadow Economy Program
The Government will extend the existing ATO Shadow Economy Program to 30 June 2026.
The extension of the program will enable the ATO to target shadow economy activity, protect revenue and level the playing field for businesses that are following the rules.

Tax Integrity – extension of the ATO Personal Income Tax Compliance Program
The Government’s focus on addressing non-compliance by individual taxpayers remains, with funding allocated for a further two years to support corrective activities targeted at overclaiming of deductions and incorrect reporting of income.

Tax Integrity – increased investigations into Tax Practitioners
The Government will provide $30.4 million to the Tax Practitioners Board (TPB) to increase compliance investigations into high-risk tax practitioners and unregisters preparers over four years from 1 July 2023.

The funding will be utilised by the TBP to develop new risk engines, allowing better identification of tax practitioners who engage in unlawful tax advice. Compliance activities are targeted at improving tax compliance and raising industry standards.

Changes to International Tax Compliance
Consistent with its election commitments, the government will amend the thin capitalisation rules from income years commencing on or after 1 July 2023. The measures include:

• Replacement of the existing safe harbour test with a 30 percent of earnings before interest, taxes, depreciation, and amortisation (EBITDA) test. Following strong feedback, deductions denied under this test may be carried forward up to 15 years.
• Replacement of the worldwide gearing ratio with a new earnings-based group ratio to allow debt-related deductions up to the level of the worldwide group’s net interest expense as a share of earnings (which may exceed the 30 percent EBITDA ratio); and
• Limiting the Arm’s Length Debt Test to an entity’s external (third party) debt.