This year’s federal budget will stand as one of the most significant announcements for SMEs in memory. With Australia recovering from a pandemic-induced recession and still mopping up after damaging business restrictions, SMEs listened closely to see how they’d be treated in the budget.
With small businesses in mind, we scoured the federal budget measures that were revealed last night by the Treasurer to find what matters to SMEs.
How have SMEs fared in this year’s budget? What measures have been extended to the small business community? Were there any specific winners? Let’s unpack the highlights for Australian small business owners.
Temporary full expensing gives tax relief and confidence for businesses to grow
One of the big-ticket items for small to medium businesses was a much expected continuation of the already enhanced instant asset write off (IAWO) scheme. This was coupled with a one year extension of temporary full expensing and loss carry back.
Reckon CEO Sam Allert says that while the IAWO scheme has ballooned in scope over the last few years, the temporary full expensing and temporary loss carry-back for an additional year will be of great benefit.
“The ability for SMEs to instantly depreciate assets will lower the friction for immediate business investment. By extending this for another year, the measure will particularly assist those businesses with supply issues or long-term projects in mind.”
SME company tax cuts will help protect cashflow
Another standout measure which will bring sharp relief to a business’ cashflow concerns is the cutting of the SME company tax rate from 27.5% to 25%.
The new 25% rate, effective from 1 July 2021, is down from 30% in 2014-15, representing a significant fall in a few short years.
“This is a powerful move from a cashflow perspective,” says Sam Allert.
“SMEs can now retain more of the money they earn to buttress their businesses from the corrosive effects of the pandemic, while concentrating on stability and growth.”
Sole traders receive a mixed bag
Sole traders will receive no specific tax cuts in this budget, despite many of them employing staff.
As a concession, there are some aspects to the budget that may assist the self-employed and encourage job seekers to start their own businesses.
$129.8 million in extended funding was announced for the New Enterprise Incentive Scheme (NEIS), Exploring Being My Own Boss Workshops and Entrepreneurship Facilitators. The aim is to make it easier for microbusinesses and those seeking to become self-employed to access training and support.
Services will include:
- small business workshops
- formal business training
- business support such as idea generation, planning, and business health assessments
The industry sectors that really won out
There were a few industry sectors specifically targeted with budget benefits. Businesses in these industries will likely be pleased with the support and consideration offered.
Who was targeted?
Medical and biotech startups
SMEs and startups in the medical and biotech industry will benefit from a new ‘patent box’. The patent box will reduce taxes on income from innovative research to encourage businesses to undertake their R&D in Australia and keep patents here. This is coupled with the enhanced R&D incentives announced in last year’s budget.
Tourism and events
Tourism businesses, who have been devastated by travel restrictions and low consumer confidence, are also set to receive targeted support.
There are provisions in this budget in the form of $274.6 million to expand and extend current programs that are supporting businesses hard-hit by border closures, including travel agents, zoos, and aquariums.
Many in the tourism industry, however, aren’t satisfied with the scope and scale of the funding. With our international border shut until at least 2022, many SMEs in this space are experiencing considerable pain. More detail in terms of specific benefits is being sought by SMEs in the tourism sector.
The gaming industry
Australia’s burgeoning gaming industry has received a boost to encourage more developers and businesses to create games in Australia. Digital game developers are set to receive a 30% refundable tax offset, for qualifying Australian games expenditure. This will be capped at $20 million.
Measures to address employment and skills
This year’s budget has been dubbed the ‘jobs budget’. It sets out with a primary directive to get more Australians into work, upskill employees and incentivise apprenticeships.
- The extension of JobTrainer was a key inclusion in last night’s announcement. The federal government has committed an additional $500 million, to be matched by state and territory governments, to expand the JobTrainer Fund by a further 163,000 places and extend the program until 31 December 2022.
- There are also meaningful incentives for apprenticeships, with an additional $2.7 Billion to extend the Boosting Apprenticeship Commencements program, which is expected to support more than 170,000 new apprentices and trainees by paying businesses a 50% wage subsidy over 12 months for newly commencing apprentices or trainees.
- However, JobTrainer and other upskilling measures don’t assist all SMEs equally and those who were reliant on JobKeeper will not see any replacement initiatives.
SMEs and the digital economy
Building digital literacy, adoption and capacity has been prioritised with several SME focused announcements centered on the digital economy.
“Our Digital Economy Strategy will allow Australian businesses to capitalise on the opportunities that digital technologies are creating,” said Treasurer Josh Frydenberg.
“Greater digital adoption will improve our competitiveness and lift our productivity – driving job creation and higher wages.”
- $15.3 million to be spent over three years from 2021-22 to promote and accelerate the adoption of e-invoicing by SMEs.
- $12.7 million will be spent in 2021-22 to expand the Australian Small Business Advisory Service Digital Solutions program, which is expected to reach up to 17,000 small businesses.
- Aspects of the JobTrainer initiative will be focused on building digital capacity and upskilling employees.
Reducing red tape
Deregulation measures are also a welcome inclusion with $134.6 million being injected into the government’s Deregulation Agenda.
This investment will make it less burdensome and costly for businesses to employ people, comply with regulation and interact with the federal government.
Key aspects include:
- Increased digitisation coupled with the streamlining of data use and sharing.
- New technology to facilitate small businesses’ compliance with modern awards.
- Greater flexibility for business communications through technology neutral corporations, credit, superannuation, and insurance laws.
That’s a wrap! If you wish to view the full scope of the budget and track down individual concerns or more detail on announcements which affect your business, please refer to the official budget release.