The latest policy announcements and election commitments relevant to accountants and advisers.
The political parties have forgone the traditional starter gun of an election announcement and launched their campaigns early. In this blog, we’ll bring you the latest policy announcements and election commitments relevant to accountants and advisers, and their clients.
We won’t cover ad-hoc comments and supposition - like most of the commentary on the financial advice and accounting industry generally, unless it’s a stated position.
Tax
Tax deductible entertainment for SMEs
18 Jan 2024: In a move designed to garner favour with small and medium businesses and support the struggling hospitality industry, Peter Dutton has promised a two year $20k per annum “business-related meal and entertainment expenses” tax deduction.
Generally, the cost of entertaining your clients – food, drink or other entertainment – is not tax deductible. The main exception to this is where entertainment is provided to employees and this triggers a fringe benefits tax (FBT) liability for the employer.
If enacted, the entertainment boost will:
- Be available to SMEs with an aggregated turnover under $10m
- Apply to “business-related meal and entertainment expenses” but EXCLUDES alcohol.
- Expenses under the measure will be exempt from FBT.
What’s the current definition of ‘entertainment’
There has been a lot of chatter about what is included as entertainment in the Coalition’s policy. Peter Dutton says that the initiative is not, “going to extend to playing golf and the rest of it – it’s not.”
The tax rules basically define ‘entertainment’ as being entertainment by way of food, drink or recreation plus travel and accommodation relating to the provision of entertainment. This means that things like golf games, movie or theatre tickets, and accommodation at resorts, can all fall within the definition of entertainment for tax purposes.
There are multiple interacting tax laws involved in entertainment. The way it normally works is that a business cannot claim a tax deduction or GST credits for expenses relating to entertainment unless a specific exception applies. As noted above, the main exception is where the entertainment is subject to FBT (i.e, where the entertainment is provided to an employee and a specific FBT exemption doesn’t apply).
It’s difficult to see how this policy initiative will come to fruition without a tight set of definitions around what entertainment is deductible.
See New Tax Deduction to Deliver Red Tape Relief for Small Business
Permanent $30k instant asset write off
16 May 2024: An increase to the $1,000 instant asset write-off threshold has been a consistent feature of Federal Budgets by various Governments as an incentive for small business to invest.
Peter Dutton promised to permanently increase the instant asset write-off to $30,000 in his Budget reply speech. It’s a promise that he has repeated consistently since the announcement.
The instant asset write-off has been in place since 1 July 2011 where it applied to businesses with an aggregated turnover of less than $2 million. The turnover threshold increased to $10 million from 1 July 2016. The threshold has only reduced back to the original $1,000 once in the last 13 financial years. See more on the instant asset write off here.
The announced extension of the increased instant asset write-off threshold of $20,000 for another year to the 2024-25 financial year is not yet law and will default to $1,000 if enabling legislation is not enacted.
See Budget reply.
Energy
Green Aluminium Production Credit
20 Jan 2025: $2bn has been set aside for a new Green Aluminium Production Credit to support Australian aluminium smelters switching to renewable electricity before 2036 (there are four of them).
Like us, you are probably wondering why the aluminium industry has been singled out. The reason is two-fold; Aluminium is the second most used metal in the world; and according to the Institute of Energy Economics and Financial Analysis, represents about 10% of Australia’s electricity demand - Tomago Aluminium just north of Newcastle in NSW, is the largest single user of electricity in the country with electricity making up about 40% of its costs. Transition from brown to green energy is not just a consumption issue for the industry, it is a recreation of the value chain.
Under the initiative, smelters will be able to negotiate an emissions-linked credit contract payable per tonne of green aluminium produced for up to 10 years. The final credit rates will be based on individual facility circumstances and be dependent on reducing Scope 2 emissions. Scope 2 emissions are indirect greenhouse gas emissions associated with the purchase of electricity, steam, heat or cooling. They account for around 85% of emissions from aluminium smelting.
See:
Infrastructure
Billions in infrastructure spending
The Albanese Government has leaned into infrastructure as both an economic stimulus and a means to support industry. Announcements include:
Small business
National small business strategy
3 Feb 2025: The Government have released their National small business strategy for consultation. The strategy primarily addresses how different government jurisdictions work with small business and how to relieve some of the friction when dealing across government systems and requirements. Less about small business and more about how to ensure government is not making it harder.
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