With the election looming, the government has handed down its budget and, with a real chance that the government won’t be returned to power, the budget is full of incentives to sway voters. Given the crucial importance of SMEs to Australia’s economy, it’s no surprise that there are plenty of goodies in the budget for small businesses.
It’s worth remembering that the following measures will only come into effect if the government wins re-election. However, many of the measures either don’t go far enough for small business owners or don’t focus on the right areas, so it remains to be seen whether this will be an election-winning budget. 1
Here’s a breakdown of the most pertinent measures affecting SMEs:
Taxpayers earning up to $126,000 a year will receive tax cuts, while the highest tax rate of 37.5 per cent will be eliminated altogether and the current 32.5 per cent rate will be lowered to 30 per cent.
The small business instant asset write-off threshold will increase to cover purchases worth up to $30,000, and businesses will be able to make multiple deductions under the scheme within the same tax year. Eligibility will also be extended to businesses with an annual turnover of up to $50 million.
The small business tax rate would be cut to 25 per cent in the 2021-22 financial year.
The government also promised to bring forward the increases to the unincorporated small business tax discount rate, rising from eight per cent to 13 per cent in 2020-21, and to 16 per cent in 2021-22 up to a $1,000 cap.
The government promised to overhaul regulator powers and responsibilities following widespread complaints regarding the ATO’s handing of tax disputes with SMEs. This could include the ability for small businesses to be reimbursed by the ATO for legal costs involved in challenging an ATO ruling, as well as more help for small businesses in the form of advice and support.
Regulators will also receive more funding to chase unpaid taxes and expose sham contracts. The Fair Work Commission will receive around $1 million per year over four years in extra funding.
The government announced a number of grants and incentives for businesses aimed at helping jobseekers prepare for the workforce, protecting vulnerable workers, and funding export and agriculture.
The Fair Work Commission’s Workplace Advice Service clinics will receive more funding to provide small businesses and sole traders with free legal advice on employment law.
e-Invoicing will be fully rolled out, which is expected to reduce the cost of business transactions by almost $30 billion over the next 10 years.
And the government reaffirmed its commitment to the $2 billion Australian Business Securitisation Fund, which will help small businesses access finance more easily. However, this was one of the areas that small businesses indicated was of very little interest to them in a recent survey, so it’s unlikely to move the needle on the government’s re-election chances.2
Small businesses paying workers in cash or accepting cash in hand for jobs could be at risk with the ATO cracking down on undeclared income.
In the Opposition’s budget reply, it backed a tax cut for SMEs and promised to provide an extra 20 per cent tax break for every business that invests in productivity-boosting equipment above $20,000. This can include manufacturing equipment, vehicles, or any other equipment that a business needs to provide goods and services to its customers.
The Opposition promised more generous tax cuts for people earning under $48,000, along with significant investment in infrastructure, potentially creating more work for small businesses.
$440 million was committed to TAFE and vocational education to help overcome the skills gap plaguing small businesses and making it difficult for them to grow. This number includes $330 million to deliver 150,000 apprenticeship subsidies in areas with skills shortages. Employers will receive $8,000 per placement while new apprentices receive $2,000.
In contrast, the Coalition has promised to spend $200 million to create 80,000 apprenticeships, with businesses receiving just $4,000 instead of $8,000 under Labor’s plan.
Following its unpopular tax cuts for big business, this budget sets its sights squarely on winning over small and medium businesses. The tax cuts and rebates are likely to prove popular, while businesses that depend on apprentices and/or are suffering from the skills shortage may find Labor’s plan to address this more attractive.
The measures are generally considered positive for business and could increase confidence following the election. However, it’s also important to note the timing of many of these measures; some require the Coalition to be returned to government not just at this election but the next as well. This could mean some of the promised cuts are on the never-never, and may not materialise.
Whether voters are convinced by this budget remains to be seen. Its timing means that the election outcome could be seen as a strong mandate to fully ratify the budget since voters will have their say before Parliament does.3
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