11th May, 2021
With recovery the order of the day, tonight’s Budget announcements included a number of measures aimed with business owners in mind. Here’s a closer look.
If last year’s Federal Budget was about staving off a recession, this year’s is about staying the course. Recovery is the order of the day, with Treasurer Josh Frydenberg focusing on tax cuts and programs to support job growth.
“Australia’s economic recovery is now well underway and we must keep the momentum going,” Frydenberg said.
But while much of the jobs created will be facilitated through big business measures – the government’s $15.2 billion investment in infrastructure projects is set to create over 30,000 jobs over 10 years – there is plenty for small business as well.
Here are the five key things every small business needs to know about this year’s Federal Budget.
The following measures will have direct impacts for businesses. To find out more regarding measures that will have indirect benefits, such as personal tax changes and superannuation changes, click here.
Last year, the Morrison Government introduced Temporary Full Expensing: a tax incentive to support new investment and increase business cash flow for businesses with turnover or statutory and ordinary income below $5 billion.
The program was designed to encourage additional investment by allowing projects with longer lead times or businesses experiencing COVID-19 related supply chain disruptions to be eligible for full expensing. As an expansion to the Instant Asset Write-Off, this measure is popular among eligible businesses, and it appears the government is extending the incentive for an additional year, now expiring on 30 June 2023.
Eligible businesses will be able to deduct the full cost of assets – including the cost of improvements to existing assets – incurred between October 2020 and June 2023.
The government is also extending temporary loss carry-back by another year, allowing companies with turnovers below $5 billion to recoup tax previously paid profits as far back as 2018-19, using 2022-23 tax losses.
According to Frydenberg, this will provide further cash flow support to businesses and encourage investment.
Combined with Temporary Full Expensing, this measure is set to boost GDP by around $2.5 billion in 2020-21 and create around 60,000 jobs by the end of 2022-23.
Last year’s SME Recovery Loan Scheme “already helped more than 45,000 businesses access low-cost finance,” Frydenberg said. But with JobKeeper payments now over, industry experts – and business owners – were eagerly anticipating news of further support.
By announcing the extension of the SME Recovery Loan Scheme, they may well have something approaching it. The program assists businesses that received JobKeeper in the March quarter 2021 and eligible flood-affected businesses to receive funding from lenders by providing them with cheaper credit.
The government has earmarked $206.4 million to create a “patent box”: a tax incentive to encourage investment in both biotech and medical innovations, in the hope that it will help put Australia at the cutting edge of science and innovation.
This incentive will tax corporate profits from Australian developed and patented medical and biotechnology innovations at a concessional 17 percent effective corporate tax rate – a bargain compared to the current 25 percent tax rate for small and medium businesses.
This will encourage businesses to develop their research and development innovations into profitable businesses in Australia.
Businesses should find it easier to employ workers thanks to the government’s commitment to cutting red tape, with Frydenberg announcing $134.6 million dedicated to winding back regulation.
These measures reduce the regulatory burden for businesses interacting with government, and make it easier for around 124,000 Australians to work in multiple states and territories by improving the recognition of occupational licenses.
Taken together, these measures look set to generate $430 million annually in reduced compliance costs to businesses, individuals and not-for-profits.
According to the government, this has the potential to generate more than $2.4 billion in additional economic activity over the next 10 years.
Want to hear more about what the 2021 Federal Budget means for small business?
See our expert panel featuring the The Hon. Stuart Robert MP, Minister for Employment, Workforce, Skills, Small and Family Business, Dr Craig Latham, Deputy, Small Business and Family Enterprise Ombudsman and Helen Lea, Chief Employee Experience Officer, MYOB, discuss what the Budget means for your small business (from Friday 21 May at 9:30am-10:15 AEST). View it here today.