It’s been 4-weeks since the Federal Government announced its 2021-22 financial year budget, giving us some time to reflect on the initiatives that will impact small businesses. In May 2020, 12 months ago, the first instalment of JobKeeper had just been paid. JobKeeper, a wage subsidy paid by the Federal Government to businesses significantly impacted by COVID-19, would go on to be the largest single fiscal initiative in Australia’s history.
Although we had just emerged from the first wave of COVID-19 infections better than some of our international peers, the economic outlook in May last year was decidedly bleak. Reputable commentators — Treasury included — warned of an unprecedented economic recession, with unemployment potentially reaching 15 per cent.
Fast-forward to today, and in the words of Treasurer Josh Frydenberg, delivering his third budget, “Australia is coming back”.
Initial predictions were for a modest budget, but with unemployment figures improving, a consumer willingness to spend post-lockdown and a rosier outlook, the 2021-22 Budget contains significant new spending.
While new spending initiatives focus on a transition from broad-based support for the economy to a more targeted approach, we’ve provided a summary of the key announcements that might impact your small to medium business.
TLDR: The quick summary (<1 min read time)
For small to medium businesses
For individuals and owners
Some lesser-known highlights
A more in-depth look at the Budget
Despite the forecast that COVID-19 related debts will leave the Budget in deficit until at least 2028, the stark reality is that a growth agenda is needed to further support business, boost investment and create jobs. That said, Australia has faired much better than most, with more people at work than ever before and unemployment on course to settle below 5 per cent for just the second time in almost 50 years.
Business Tax Incentives
The tax rate for small and medium companies has been further reduced, from 26% this financial year to 25% from 1 July 2021 (a continued drop from 30% in 2014/15). More information on tax rates for base rate entities under the threshold can be found here.
Furthermore, a one-year extension to the “temporary full expensing” measure introduced in last year’s Federal Budget has been announced to further support business investment and to create more jobs. These measures, initially announced as part of the previous budget, provide eligible businesses with an immediate deduction for the full cost of depreciating assets. For further details on temporary full expenses, read this.
The Budget also includes tax breaks for distillers, which could mean up to $250,000 in savings every year. Brewers and distillers are currently only able to claim 60 per cent of paid excise, up to $100,000 a year. This limit has now been lifted to $350,000, which means more money stays in business owners’ back pocket to help them fund new projects and expansions — in a very valuable industry with high growth potential.
A smattering of smaller budget measures was also announced, none of which are likely to make many headlines when considered in isolation — yet together, indicate the government has been listening to the concerns of small businesses. These measures include:
The Government will also allow small businesses to apply to the Small Business Taxation Division of the Administrative Appeals Tribunal (AAT) to pause or modify tax debt recovery actions taken by the Australian Taxation Office (ATO). Currently, small businesses are only able to pause or modify ATO debt recovery actions through the court system. This measure is a welcome initiative for small business taxpayers as it should allow them to focus their resources on the substantive matter before the AAT rather than costly and complex debt collection issues.
The Budget also includes a commitment of $10 billion towards infrastructure projects across Australia, with the aim of making roads safer and reducing travel time. The extra funding will support nearly 20,000 jobs.
Employing and Training Staff
Business owners employing student visa holders will have an easier time scheduling staff and can be more confident investing time and resources into training them.
The JobTrainer subsidy, created last year to help boost youth employment, was set to expire in September 2021. However, it’s just been extended. As an employer, you will receive a 50 per cent wage subsidy of up to $28,000 per year for hiring a young person in the scheme.
The Digital Economy
This one’s big — it comes with an overarching vision: "for Australia to be a leading digital economy and society by 2030”. Described as an investment into the settings, infrastructure, and incentives to grow Australia's digital economy, it’s a $1.2 billion dollar package set to benefit the SME and tech communities in a number of ways. Relevant to business owners might be the government’s commitment to:
Depreciation of intangible assets, such as software, designs and intellectual property, has also been introduced — something the small business and tech communities have been requesting for some time. The government introduced a $20,000 instant-asset write-off scheme back in 2015, allowing for depreciation of assets like work vans and cafe kitchens. (This scheme will continue.) However, intangible assets were left out. The times have obviously changed; now, the government has firmly set its sights on a digital economy.
The government has confirmed it will provide further funding in regional Australia, including $250 million for the Building Better Regions Fund. The fund offers grants from $20,000 up to $10 million to cover 50 per cent or more of the cost of projects that will provide economic and social benefits for regional and remote areas. Although aimed at assisting council and community organisations, the potential benefits for regional and remote business owners is clear. Where an investment is made, tourists typically follow.
You can find more information at the following sources: