Now that the 2022 Federal Budget dust has settled, it’s time to take a closer look at what the budget announcements mean for small businesses, micro businesses, and sole traders. We’ve reached out to our sponsors RSM Albury and Business Edge Advisors to help us break down what the 2022 Federal Budget means for these businesses.
With a Federal election around the corner, the budget attempts to address cost of living pressures impacting Australian households through temporary cost of living measures while also investing for future economic growth.
Although the temporary cut to the fuel excise was the headline announcement from the budget, several new measures announced in the 2022-2023 budget directly target small business.
Budget 2022-23 aims to drive digitisation in small business by supporting innovation, streamlining compliance, increasing transparency, and making it easier to spot anomalies when they occur.
Let’s dive in!
The main budget highlights for small businesses and individuals include
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- A focus on skills training and education; improving innovation; and digitisation for small businesses
- Support for apprenticeship programs and reducing youth unemployment
- Changes to the Pay as You Go (PAYG) and Goods and Services Tax (GST) systems and an increase to the low and middle income tax offset to boost short term cash flow for businesses and individuals
- Deductions and exemptions for COVID-19 related support and testing
- Expanding access to employee share schemes (ESS)
Skills training and education; improving innovation; and digitisation for small businesses
Technology investment boost
Small business with a turnover of less than $50m will be able to deduct an additional 20% for expenditure incurred on supporting the business’ digital adoption. For example, a business that purchases a new software package for $1,000 will be able to deduct $1,200. Expenditure on digital adoption that attracts the additional deduction will be capped at $100,000 per financial year.
For expenditure incurred between 7:30pm on 29 March 2022 and 30 June 2022, the boost will be deductible in the 2023 tax return. Expenditure incurred after 1 July 2022 will receive the 20% boost deduction in the financial year it is incurred.
Skills and training boost
Small business will be able to deduct an additional 20% for expenditure incurred on external training courses provided to employees. There is no cap on eligible training expenditure, but the training must be delivered by a registered training entity. Until June 2024 for every $100 a small business invests in external training courses for their employees, they will get a $120 tax deduction.
Support for apprenticeship programs and reducing youth unemployment
Extension of the Apprenticeship Commencements and Completing Apprenticeship Commencements Wage Subsidy
Businesses employing apprentices or trainees can access an extension of the apprentice wage subsidy by an additional three months to 30 June 2022. Under the scheme, businesses employing eligible apprentices and trainees before 30 June 2022 can receive up to $28,000 in wage subsidies in the first year for the new apprentice.
Australian Apprenticeships Incentive System
The Australian Apprenticeships Incentive System (AAIS) is a suite of new incentives to encourage and support new Australian apprentices. There are several new incentives such as wage subsidies, training support payments and living away from home allowance payments available for businesses that employ apprentices or trainees.
Changes to the Pay as You Go (PAYG) and Goods and Services Tax (GST) systems to boost short term cash flow
The Federal government is reducing the GDP uplift factor used to determine PAYG and GST instalments. This reduction from 10% to 2% will lower PAYG and GST instalment payments, giving a cashflow boost to eligible businesses. Additionally, the budget includes provisions to align PAYG instalments with financial performance with information extracted from a business’ accounting software.
An increase to the low and middle income tax offset (LMITO) to boost short term cash flow for businesses and individuals
The LMITO will be increased from $1,080 to $1,500 for the 2021-22 financial year. Taxpayers who earn less than $126,000 and are eligible for the LMITO will receive the full $420 increase and will be paid when taxpayers lodge their 2021-22 tax return.
Deductions and exemptions for COVID-19 related support and testing
The Government has committed to specifically make COVID-19 tests required for work will be tax deductible and employers who provide employees with COVID-19 tests will not incur FBT.
Additional measures will include
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- Making it easier for small businesses to win contracts and have government invoices paid more quickly
- The establishment of a dedicated small business support unit within the Fair Work Commission
- $480 million investment to improve wireless NBN access
Labor’s budget reply
In reply to the Government’s budget, Anthony Albanese delivered Labor’s budget response which pledged over $2.5b to address issues with the aged care system, infrastructure investments, bolstering TAFE and more affordable childcare.
Anthony Albanese also confirmed that the ALP would not stand in the way of any measures announced in the 2022-2023 budget. Also noteworthy, the ALP have dropped their tax reform agenda from the last election, meaning changes to negative gearing and the taxation of trusts are off the table if the ALP are elected.
Where to from here
It’s also important for businesses to consider is the instant asset write off program has not been extended past 30 June 2023. Australia’s unemployment rate is also the lowest it’s been in 48 years, sitting at 4% and is expected to reach 3.75% by September 2022.
We encourage you to speak with your accountant to understand the full potential impact from the budget announcements, so you can make the best financial decisions for yourself and your business.
As sponsors of Albury Business Connect, Business Edge Advisors and RSM Albury are wonderful supporters of our business community. Both organisations are available to discuss your current situation and can be contacted through their websites.
Information in this article has been provided by Business Edge Advisors and RSM Albury and has been lightly edited for length and clarity for publishing.