Federal Budget 2023–24: five key takeaways for general counsel

By Tim Chislett, Jillian Button, Rachel Nicolson, Kip Fitzsimon, David Donnelly, Kate Axup, Martin Fry, Dennis Smith, Emily Turnbull, Danielle Jones, Jay Prasad, Scott Lang, Sevanne McGarity, Isabelle Guyot, Jake Boudsocq, Tom St John, Lewis Graham, William Gordon, Lucy Sheppard
Energy Environmental, Social & Governance Infrastructure & Transport Tax

Getting to grips with the Budget 14 min read

Here is our take on the essential issues for general counsel arising from the Federal Budget (the Budget) 2023–24.

Key takeaways 

  1. Australia's energy transition now needs to happen at an accelerated pace and we are likely in for a bumpy ride. The Federal Government has clearly demonstrated its commitment to the energy transition; however, questions remain about the detail of a number of schemes – such as when they will be rolled out, how they will work in practice (and quickly enough), and where they will overlap or dovetail with various state-led initiatives. Firms need to be agile as these details unfold.
  2. Enforcing environmental laws, and enhancing the integrity and standards of environmental processes and markets, are key priorities. ASIC will continue to bolster its greenwashing crackdown as investment is made in the sustainable finance sector. Alongside this, Environment Protection Australia (the EPA) has been established, to take a firm stance and enforce environmental laws. To limit potential regulatory exposure and ESG-related litigation risk – eg regarding greenwashing – we recommend that companies have in place appropriate processes to verify ESG-related statements before they are published, and consider undertaking assurance exercises regarding existing ESG-related statements.
  3. There's a strong commitment to building a resilient cyber-secure Australia, with significant funding allocated. Businesses should anticipate tighter cyber expectations and requirements as the Government aims to uplift its response and timeliness  in responding to cyber incidents, given the volume and complexity of cyberattacks impacting Australian organisations.
  4. Australia is likely to see an overdue rebalancing of the infrastructure spend, from economic and transport infrastructure towards social and energy infrastructure. The Government's 90-day review into the existing 738 already approved projects will result in reprioritisation of funding, and will likely see several projects axed, modified or postponed. With the review being long overdue, businesses are in limbo until its outcomes are known (later this year), which is when there will be a sense of how the Budget actually impacts infrastructure spending. 
  5. The Government remains focused on incremental tax reform but has avoided wide-ranging, structural tax changes.  The Government has supplemented its suite of recently announced tax measures directed at multinational groups by committing to implement the globally agreed minimum tax regime of a 15% effective tax rate, and expanding the scope of Australia's general anti-avoidance rules.  There are potentially significant changes for the resources sector, including a proposal to (retrospectively) narrow the meaning of 'exploration' determined by recent case law for PRRT purposes.  But there are also some targeted concessionary measures: a reduction to the withholding tax rate for qualifying 'build-to-rent' projects and 'clean energy' buildings are designed to encourage investment in those sectors, and more generous than expected changes are proposed to the 'non-arm's length income' rule for certain superannuation funds. 


The 2023–24 Budget seeks to underpin the Federal Government's ambitious plan to achieve 82% renewables by 2030 and net zero carbon emissions by 2050. With sizeable investment to support the decarbonisation of the energy sector, this represents numerous opportunities for industry participants in this space.

Renewables, transmission infrastructure and critical minerals

A cornerstone of the Government's decarbonisation strategy is its major investment in emerging technologies such as hydrogen. The $2 billion Hydrogen Headstart will offer 'competitive hydrogen production contracts' to counteract market-wide concerns about the commercial viability of green hydrogen. This influx of capital will be supplemented by a $38 million investment in the establishment of a Guarantee of Origin scheme. While the scheme will operate in part to verify the emissions intensity of hydrogen products, the proposed establishment of a new tradeable green energy certificate will open a new market not only to renewable energy generators but Australian-wide corporates that are interested in bolstering their green credentials.  

The Government also earmarking an additional $12 billion for priority transmission infrastructure, through the Rewiring the Nation program, signifies its commitment to supporting the transformation of our electricity grid through the development of large-scale battery projects, offshore wind, and state-led Renewable Energy Zones (REZs). The Government's assurance of continued public investment in transmission upgrades will create future revenue opportunities for renewables developers and transmission infrastructure investors. This will:

  • operate alongside the existing state-level revenue underwriting schemes to support the bankability of major renewable energy developments; and
  • reduce existing congestion and access constraints.

This investment in transmission infrastructure operates alongside the planned acceleration of investment in the Capacity Investment Scheme to support firmed renewable capacity. While the precise scope and national rollout of the Capacity Investment Scheme remain unclear, the Government intends to deliver auctions for clean energy projects in South Australia and Victoria in late 2023, with investment in New South Wales to be incorporated into the NSW Electricity Infrastructure Roadmap.

The Government will also continue its efforts to capitalise on Australia's ample reserves of critical mineral resources, through a $57 million investment in Critical Minerals International Partnerships (on top of, among others, a $2 billion investment in the Critical Minerals Facility). This is particularly relevant in light of the increasing pressures on the supply chain for battery manufacturing.

Ultimately, the Federal Government's 2023-24 Budget demonstrates its commitment to the energy transition, with not inconsiderable amounts set aside to bolster existing and new policies to achieve this change.  While the investment is welcomed, there are still questions about the detail of a number of schemes, such as when they will be rolled out, and how they will work in practice, and how they will overlap with the various state-led initiatives. Further, the ambitious targets that have been set require a pace of change that will not necessarily result in a smooth or efficient transition and arguably cannot bet met given the pace to date. What is not in question, however, is that the energy transition is in full swing and the fiscal support at a federal level opens up ample opportunities for the industry at large.


ESG measures outlined in the Budget can be broadly grouped into (i) the advancement of existing initiatives, and (ii) the development of new bodies. The Budget shows that the Government's focus is on enforcing environmental laws, and enhancing the integrity and standards of environmental processes and markets. There is also a focus on social rights, with advancing gender equality enforcement.


The Budget provided additional funding to ASIC, which will see its regulatory powers increased in the sustainable finance sector. With the provision of $4.3 million, ASIC has been tasked with bolstering its capabilities to undertake greenwashing-related actions. This funding will be accompanied by an additional $1.6 million to support the initial development of a sustainable finance taxonomy for classifying economic activities according to their impact on sustainability goals, as the Government pushes to reach net zero in ambitious timeframes. We expect that this further funding will see the regulator increasing its focus on climate and other sustainability-based representations made by companies as the energy transition occurs.

Similarly, funding has been provided to offshore regulators, with further capability to address recent issues identified in the natural resources sector. The Budget has indicated that $12 million will be set aside for a review of the environmental management regime for the offshore industry – relevantly, with particular regard to consultation requirements with First Nations peoples. A further $4.5 million is to be used to develop an offshore petroleum decommissioning industry in Australia. We would also expect that the outcomes of these programs may have corresponding impacts on the emerging offshore wind sector in Australia.

There is also the development of new bodies in the Budget. First, the Government has provided $121 million to establish the EPA, enacted to enforce environmental laws and to take a much firmer approach. The Government is also making significant investments in ensuring the integrity of environmental markets, including:

  1. $18.1 million over two years to implement priority reforms to the operation of the Australian Carbon Credit Unit (ACCU) scheme. This includes $5.9 million over two years to conduct audits of human-induced regeneration projects;
  2. $32.7 million over four years to restore transparency, integrity and confidence to water markets;
  3. $38.2 million over four years to establish a Guarantee of Origin Certificate scheme – this will allow people to trade clean hydrogen, and other low emissions products, with confidence that they were manufactured using clean energy;
  4. $4.3 million in funding to ASIC to take enforcement action against financial market participants engaging in greenwashing and other sustainable finance misconduct.

The Government has also made a significant commitment to its nature positive plan, including $34 million over two years to implement the plan (by implementing legislative reforms and adopting national environmental standards) and $7.7 million in 2023–24 to develop the Nature Repair Market. The Government is also making significant direct investments in nature, including $341.2 million over five years to protect nature, threatened species and habitats, and $302.1 million over five years to support a climate-smart, sustainable agricultural sector. (See our Insight on the Nature Repair Market.)

Second, $364.6 million will be used to deliver the referendum on the Voice to Parliament (the Voice), which will form part of the Government's commitment to implement the Uluru Statement from the Heart. We expect that there will be significant interest in understanding the implications that both the EPA and the Voice may have for current understandings of regulatory obligations.

Gender Equality

In terms of advancing existing policies, the Federal Government has developed its policies to support gender equality by making changes to Paid Parental Leave, by rolling the support into one 20-week payment that can be shared between parents. Further, the family income limit has been increased to $350,000 per annum. Amendments to the Workplace Gender Equality Act 2012 (Cth) will require the publication of gender pay gaps of employers with 100 or more workers from early 2024. These policies have been developed to address gender pay disparity and, particularly regarding the publication of pay gaps, are designed to encourage businesses to adopt best practice.

Cyber security, resilience and privacy

Strengthening Australia's cyber governance measures, including cyber security, resilience and privacy enforcement, is a priority for the Government. In addition to the Government's signficant investment in cyber security and response (including the establishment of the Coordinator for Cyber Security), the Attorney-General's Department has been allocated funding to continue its review of the Privacy Act – which is expected to result in widescale changes to the current regime.

Cyber, Digital and Anti-Scam

In the cyber and digital space, the Government is investing more than $2 billion in 2023–24 in digital and Information Communications Technology (ICT) 'to deliver easy, accessible, and secure services for people and businesses'. 

The Budget formally allocates funding for the establishment of the ACCC's National Anti-Scam Centre (the NASC). Previously, the ACCC had marked scam detection and disruption as an enforcement and compliance priority for 2023–24, with the NASC intended to strengthen existing efforts to, among other things:

  • analyse data to identify trends, monitor financial losses and inform future prevention strategy;
  • communicate with the public about current and emerging scams; and
  • partner with other government bodies and the private sector to reduce opportunities for scams, by increasing consumer protection.

 The sum of $58 million has been allocated over the next two years to set up the NASC, which will be phased in from 1 July this year. The ACCC intends the NASC will actively cooperate with regulatory bodies such as ASIC and ACMA, as well as with the private sector. It also intends to develop new technology that will facilitate improved data sharing among agencies, to more effectively prevent scams, including the establishment of Australia's first SMS Sender ID Registry, to prevent scammers imitating trusted brand names..

Critical technologies

The Budget also provides $116 million over five years to support the development and adoption of critical technologies in artificial intelligence, quantum computing and batteries. This investment follows the release of the Government's first National Quantum Strategy on 3 May 2023, and will support the Government's 2030 vision of Australia being recognised as a leader of the global quantum industry, and the recognition that quantum technologies are integral to a prosperous, fair and inclusive Australia. It remains to be seen if this will be enough for Australia to meet this goal – it's not insignificant, but quantum computing requires large financial resources.

See our Insight for a full Budget update on the priorities for privacy, cyber and digital.

Competition and Consumer Data Right (CDR)

The Government has committed $88.8 million to support the CDR for banking, energy and the non-bank lending sectors to progress the design of action initiation and undertake a cyber-security uplift. Funding will be divided between the ACCC and OAIC, with the former (being the body that enforces the Competition and Consumer Act 2010 (Cth)) anticipated to receive the majority of the Budget's CDR allocation.


Whilst it appears that the Government is willing to support continued enhancement of the CDR in existing sectors, we understand this funding does not cover the roll out of the CDR to any new sectors. A strategic review of the status of the CDR at the end of 2024 will consider the outcomes of the implementation in existing sectors and make an assessment of the rollout and effectiveness of the regime. As such, pending the outcome of that strategic review, we do not expect to see expansion of the CDR to new sectors in the near term.


Reprioritisation of funding

The Government has ordered a 90-day review into the existing 738 already approved projects. This will result in reprioritisation of funding, and will likely see several projects axed, modified or postponed.

There are a few meaningful infrastructure commitments across Australia, with substantial projects including:

  • $687 million over six years for a national approach to sustainable urban development;
  • $1.03 billion to enhance capacity and improve transport infrastructure in Sydney’s western suburbs, which is in addition to the Western Sydney Airport;
  • $3.4 billion over 10 years for the Brisbane 2032 Olympics; and
  • $305 million for further urban development projects in partnership with the Tasmanian Government, including $240 million towards the Macquarie Point precinct in Hobart and $65 million for a stadium redevelopment in Launceston.

With the review being long overdue, businesses are in limbo until its outcomes are known (later this year), which is when there will be a sense of how the Budget actually impacts infrastructure spending.

This is likely to see an overdue rebalancing of the infrastructure spend, from economic and transport infrastructure towards social and energy infrastructure.

Build-to-rent and affordable housing

Through increased tax concessions for the BTR sector, the Budget seeks to expand domestic housing supply. The Budget confirmed prior 'leaks' to the media that certain BTR projects commenced after Budget night will be eligible for:

  • an increase to the annual rate for capital works tax deductions (ie depreciation of buildings) from 2.5% to 4% (to align with industrial and short-term traveller accommodation buildings); and
  • a reduction of the final withholding tax rate applied to distributions of rental income from a managed investment trust (MIT) to foreign resident investors in information exchange countries from 30% to 15%.

The Government is undertaking further consultation on what BTR projects will be eligible for these concessions. In particular, relating to the requirement for a minimum number of apartments to be offered as affordable tenancies, its preliminary position is that the project must:

  • consist of 50 or more apartments made available for rent to the general public (offered for at least three-year terms); and
  • retained under single ownership for at least 10 years.

These measures have put BTR projects on a level playing field with other real estate asset classes, and are a step forward in addressing the lack of housing supply, including affordable housing, in Australia.

Clean buildings

In an effort to encourage emissions reduction and the clean energy transition, the Government proposes to extend the concessional 10% final withholding tax rate applied to distributions of rental income to foreign resident investors in information exchange countries from a MIT that owns energy-efficient buildings.

The 10% concessional rate currently applies to MITs that own energy-efficient office buildings, hotels or shopping centres, but will be extended to MITs that own energy-efficient data centres and warehouses that are built after Budget night.

In addition, the relevant energy efficiency standards for all existing and new buildings will be increased to a 6 star rating from the Green Building Council of Australia or the National Australian Built Environment Rating System (from 5 and 5.5, respectively). There will be further consultation on transitional arrangements for existing buildings.


Pillar Two regime

The Budget offered further clarity on the OECD's Global Anti-Base Erosion (or 'Pillar Two') regime timeline. This regime is designed to impose a floor on corporate income tax competition between jurisdictions, to prevent a so-called 'race-to-the-bottom' on tax rates and tax incentives. The internationally agreed floor is an effective tax rate (ETR) of 15%, with the scope of the regime limited to multinational groups with annual turnover of €750 million or more (equivalent to approximately A$1.2 billion).  

With effect from 1 January 2024, Australia will implement an Income Inclusion Rule (IIR) and a Qualifying Domestic Minimum Top-up Tax (QDMTT) in accordance with the OECD Model Rules. The IIR will enable the ATO to levy a top-up tax on an Australian company to the extent to which the ETR in the jurisdictions in which its direct or indirect subsidiaries operate is less than 15% and is not first subject to another country's IIR (such as the ultimate parent entity). The QDMTT will supplement the IRR, to ensure that the ATO has first rights to impose a top-up tax on a multinational group's Australian operations to the extent to which the ETR is less than 15% (as a result of eg tax incentives or significant book-to-tax differences). The IIR and QDMTT are expected to be subject to a modest substance-based income exclusion referable to payroll costs and tangible assets, although this has not yet been formally announced.

With effect from 1 January 2025, Australia will implement an Undertaxed Payment Rule (the UTPR). The UTPR is an integrity measure that will deny deductions (or require an equivalent adjustment) to the extent to which intragroup payments are made and the ETR in the jurisdiction in which the related party is a tax resident is less than 15% (and not otherwise subject to tax under an IIR). The UTPR will serve as a backstop to the IIR and is primarily targeted at tax-driven corporate inversions.

The timing of implementation is broadly consistent with the timing of that of other developed jurisdictions, including the European Union, which requires its Member States to enact domestic legislation for the IIR from 2024, and for the UTPR from 2025. Further details on the implementation of Pillar Two in Australia will need to be considered closely in the coming months. These include the development of any substance-based income exclusions, the treatment of tax losses, and the interaction of Pillar Two with other areas of Australia's income tax law (including, in particular, Australia's controlled foreign corporation and franking credit regimes).

Changes to the tax treatment of 'exploration' and 'mining, quarrying and prospecting rights'

The Government will make amendments to Petroleum Resource Rent Tax (PRRT) and income legislation, following the Full Federal Court’s decision in Commissioner of Taxation v Shell Energy Holdings Australia Limited [2022] FCAFC 2. It states that these amendments 'will ensure the PRRT and income tax legislation operates as intended'.

In relation to PRRT, the Government will amend the legislation to clarify that ‘exploration for petroleum’ is limited to the ‘discovery and identification of the existence, extent and nature of the petroleum resource’, and does not extend to ‘activities and feasibility studies directed at evaluating whether the resource is commercially recoverable’. This measure will have retrospective effect and will apply to all expenditure incurred from 21 August 2013 (the date of application of Tax Ruling 2014/9).

In relation to income tax, the Government will amend the law so that mining, quarrying and prospecting rights (MQPRs) cannot be depreciated for income tax purposes until they are used (not merely held), and to limit the circumstances in which the issue of new rights over areas covered by existing rights lead to tax adjustments. The Government states that these amendments will restore the policy intent of the law, and that the amendments will apply to all MQPRs acquired or started to be used after the date of the announcement (7.30 pm (AEST) on 9 May 2023 (Budget night)).

Allens acted for Shell in relation to the above decision and has previously published an Insight on its implications here. This Budget measure impacts upon the views expressed in that Insight, and a follow-up Insight on this measure is here.

PRRT – capping of deductions for LNG projects and technical amendments

The Government will amend the PRRT legislation in relation to PRRT projects that produce LNG, to cap the deductible expenditure that can be claimed each year to 90% of the assessable receipts. The amounts that are unable to be deducted because of the cap will be carried forward and uplifted. Projects would not be subject to the cap until seven years after the year of first production or from 1 July 2023, whichever is later. The cap will not apply to certain classes of deductible expenditure in the PRRT – closing-down expenditure, starting base expenditure and resource tax expenditure. These amendments are expected to bring forward the PRRT payments of LNG projects that would otherwise not have a PRRT liability until future years.  

The Government will also make a number of technical changes to the PRRT general anti-avoidance rule, arm's length rule and gas transfer pricing arrangements.

General anti-avoidance rule (Part IVA)

The Government announced in the Budget its intention to expand the scope of the general anti-avoidance rule for income tax in Part IVA of the ITAA 1936. This reform was not announced before the Budget and, as yet, the Government has not undertaken (or announced) a public consultation on the changes.

The changes are proposed to apply to income years commencing on or after 1 July 2024, even if the scheme was entered into before that date.

'Tax benefits' to include a reduction in the rate of withholding tax

The Government intends to expand Part IVA so that it may apply to schemes that reduce the tax paid in Australia by accessing a lower withholding tax rate on income paid to foreign residents.  

We expect the reform to complement the reduction in the MIT withholding tax rate for qualifying BTR projects (also announced in the Budget), and it would be particularly relevant for schemes (with a requisite tax avoidance purpose) in which:

  1. a taxpayer benefits from a reduction in the final withholding tax rate applied to distributions of rental income from a MIT to qualifying foreign resident investors under the proposed BTR reforms;
  2. a taxpayer obtains a reduced rate of withholding tax under a relevant double tax agreement; or
  3. a taxpayer structures a scheme in a manner to obtain a particular characterisation under the Australian debt-equity rules that results in a lower rate of withholding tax (eg where a taxpayer pays interest withholding tax instead of dividend withholding tax).
Part IVA to apply where there is a dominant purpose of reducing foreign income tax

The Government also intends to expand Part IVA so that it may apply to schemes where a taxpayer achieves an Australian income tax benefit where the dominant purpose was to reduce foreign income tax.

Under the proposed changes, taxpayers would no longer be able to rely on a defence that the dominant purpose of a scheme was to obtain a foreign tax benefit. This is a significant development, as it would appear to be a further instance in which our anti-avoidance provisions can apply where there is a less than dominant purpose of achieving an Australian tax benefit. It does not appear, though, that the proposed reform would prevent a taxpayer from arguing that a scheme was entered into or carried out for the purpose of obtaining a benefit under foreign tax laws that are not 'foreign income tax'.  

There is currently no detail about what the term 'foreign income tax' would cover. Eg it is not clear whether the reform would apply only to tax imposed by a law of a particular foreign country (eg US tax) or whether the reform would apply to tax imposed by foreign countries generally (ie the amount of foreign tax imposed by a country on an amount as compared with other countries). It is also not clear whether the reform would treat a favourable foreign tax outcome obtained by making a declaration, agreement, election, selection or choice that is legitimately available under a foreign tax law as constituting a foreign tax benefit (eg an election under the US 'tick-the-box' rules).

This proposed reform is likely to complement the Government's focus in recent years on combatting what it perceives as tax avoidance by multinational groups and, relevantly, the rollout of the base erosion and profit shifting measures proposed in the Budget. The interaction between existing global anti-avoidance measures, such as the hybrid mismatch rules, and the proposed reform, is unclear.


Non-arm's length income

In good news for superannuation funds, the Budget announced that the Government intends to implement more generous amendments to the non-arm's length income (NALI) rules than those suggested in a consultation paper earlier this year. Superannuation funds are taxed at 45% on NALI, as opposed to 15% for other income (or nil to the extent fund assets support the payment of pensions).

The Government intends to introduce amending legislation that will:

  • for self-managed superannuation funds and small APRA-regulated funds, limit the amount of NALI arising from a non-arm's length expense of a general nature to two times the difference between the actual expense and an arm's length expense amount (reduced from five times in the consultation paper); and
  • for large APRA-regulated funds, ensure that no NALI can arise from a non-arm's length expense of a general nature or that is related to a specific fund asset (the consultation paper proposed NALI could still arise from specific expenses).

Given that the ATO's concessional compliance approach to general expense NALI contained in Practical Compliance Guideline PCG 2020/5 expires on 30 June 2023, the Government faces a tight timeframe within which to implement these amendments.

Interestingly, the Budget does not state a date from which these amendments will be effective. However, given that the amendments will also ensure no NALI can arise from expenses incurred before the 2018–19 income year, which was the year in which the NALI rules were first applied to non-arm's length expenses, there is a reasonable basis to think that the amendments might be retrospective to the 2018–19 income year.

The Budget reaffirmed the Government's intention to introduce a new 15% tax on the fund earnings of superannuation fund members with a total superannuation balance of $3 million or more. It contained no additional information to the consultation paper issued earlier this year.

While the tax is applied to members and not superannuation funds, the consultation paper foreshadowed changes to fund reporting requirements to allow the new tax to be implemented, and noted that funds will need to ensure they have sufficient liquid funds to respond to any release requests from members to pay their tax liability. This is particularly so given the earnings that will be subject to tax include unrealised gains on fund assets (including those of other funds with which the member has an account).

Additional 15% tax on high balance members

The Budget reaffirmed the Government's intention to introduce a new 15% tax on the fund earnings of superannuation fund members with a total superannuation balance of $3 million or more. It contained no additional information to the consultation paper issued earlier this year.

While the tax is applied to members and not superannuation funds, the consultation paper foreshadowed changes to fund reporting requirements to allow the new tax to be implemented and noted that funds will need to ensure they have sufficient liquid funds to respond to any release requests from members to pay their tax liability, particularly given that the earnings that will be subject to tax include unrealised gains on fund assets (including those of other funds with which the member has an account).

What's next?

If you would like to discuss the matters raised in this Insight, please contact any of the people below.