Treasurer Josh Frydenberg has delivered a free spending budget designed to drive employment growth, while also allocating increased funding to social programs such as disability services, aged care and mental health, as well as women’s economic security.
Included also is the extension of support to taxpayers through the retention of the low and middle-income tax offset for 2021-22, which will deliver up to A$1080 for lower and middle-income earners.
The government has opted to run a budget deficit of A$161 billion this year, falling to A$57 billion in 2024-5 as the economy recovers and tax receipts increase. The budget, said Treasurer Frydenberg, would help create more than 250,000 jobs by the end of the 2022-23 financial year.
Net debt will increase to A$617.5 billion or 30 percent of GDP this year and peak at A$980.6 billion or 40.9 percent of GDP in June 2025.
Treasurer Frydenberg forecast economic growth of 1.25 per cent in 2020-21, rising to 4.25 per cent in 2021-22.
So, what are the wins for small and medium-sized businesses?
Business Incentive Expansion
The budget includes a number of measures to help small business, beginning with a one-year extension to the full expensing and temporary loss carry back tax provisions for an additional year until 30 June 2023. This is estimated to deliver a further A$20.7 billion in tax relief to businesses over the forward estimates.
The temporary full expensing and temporary loss carry-back measures are estimated to boost GDP by around $2.5 billion in 2020‑21, $7.5 billion in 2021‑22, and $8 billion in 2022‑23, and create around 60,000 jobs by the end of 2022‑23.
The government will deliver more than $16 billion in tax cuts to small and medium businesses by 2023-24 with around $1.5 billion flowing in 2019‑20. This includes reducing the tax rate for small and medium companies, from 30 per cent in 2014‑15 to 25 per cent from 1 July 2021.
In line with its plans to transform Australia into a modern digital economy in the next decade, the government will invest $1.2 billion in its Digital Economy Strategy for three key reasons.
- To build digital skills and capabilities;
- Encourage business investment; and
- Transform government services.
For SMEs, $53.8 million over four years from 2021-22 to create a National Artificial Intelligence (AI) Centre and four AI and Digital Capability Centres to drive and support SMEs to adopt and use transformative artificial intelligence technologies; $15.3 million over three years from 2021-22 to promote and accelerate the adoption of e-invoicing by businesses and across all levels of Government; $12.7 million in 2021-22 to expand the Australian Small Business Advisory Service Digital Solutions program reach to up to 17,000 small businesses.
$6.9 million is allocated to assist business to upgrade their cyber security and contribute to a sustainable recovery.
An additional $500m has been committed to expand the JobTrainer program and $2.7b to boost apprenticeship commencements.
Extension of loan scheme
The government is extending the SME Recovery Loan Scheme which builds on the SME Guarantee scheme. It includes an increased government guarantee of 80 per cent, a higher maximum loan size of $5 million and maximum loan term of 10 years with interest rates capped at around 7.5 per cent. Borrowers may also be offered repayment holidays of up to 24 months on appropriate products. The Scheme is available to SMEs with a turnover of up to $250 million that were recipients of the JobKeeper payment between 4 January 2021 and 28 March 2021 or were affected by the floods in eligible Local Government Areas in March 2021.
Other key measures:
- The Government will allow businesses to self-assess the economic life of certain intangible assets (such as patents) for tax depreciation purposes to encourage investment and hiring in innovative activity.
- Government is broadening the scope of the Administrative Appeals Tribunal to help SMEs put a pause on any debt recovery action launched by ATO until the underlying dispute is resolved. More funding also made available the Australian Small Business and Family Enterprise Ombudsman to continue helping small businesses resolve disputes.
- New efforts to give SMEs a bigger slice of the procurement pie. Government will provide $2.6 million over four years from 2021-22 to support and strengthen participation in Commonwealth procurement.
- Removal of current exclusion that applies to deductions for the first $250 spent on education courses, which will give more business owners (and their employees) a reason to learn new skills.
- Small craft brewers and distillers will benefit from an increase in the cap for claims on the Excise Refund Scheme from $100,000 to $350,000 from 1 July 2021.
- Almost $130 million to encourage entrepreneurship through the New Enterprise Incentive Scheme (NEIS) and Entrepreneurship Facilitators Program support people who want to start, run and grow their own business.
- Startup businesses will be boosted by the introduction of a “patent box”. From July 2022, the patent box will tax income derived from medical and biotech patents at a concessional 17 per cent tax rate, against the normal corporate tax of 30 per cent or 25 per cent for SMEs.
The budget includes several changes to the superannuation system. The $450 minimum income threshold for the superannuation guarantee will be abolished, enabling low-income earners to save for their retirement with every dollar they earn and improve economic security in retirement for women.
The maximum voluntary contributions which can be withdrawn under the First Home Super Saver Scheme will be increased from $30,000 to $50,000.
The work test for people aged between 67 and 74 who are seeking to top up their superannuation will be abolished giving people greater flexibility to move in and out of the workforce as they transition to full retirement.
The Downsizer scheme has expanded to include those aged 60 and over, previously commencing from age 65.
To read the full budget breakdown and its impact for business and taxation, click on this link to the CPA Federal Budget Report.