Welcome to our yearly summary of how the Federal Budget impacts small businesses you the taxpayer.

This year's budget is certainly not the norm, it's all about spending to continue to stimulate the economy. Specifically aimed at hiring and investment along with some tax cuts thrown in.

For Small Businesses

We’ve summarised the key points that will impact small businesses, hiring, investment and some tax changes

To incentivise hiring

Boosting Apprentice Wage subsidy

For those of you who have businesses still growing there are certainly some great incentives to hire an apprentice! The Boosting Apprenticeship wages subsidy is for any new apprentice you hire after the 5th October 2020. This can be a 1st year brand new apprentice or an apprentice that you take on who is mid-way through an apprenticeship. The subsidy is 50% of the gross wages paid from 5th October 2020 to 30th September 2021, up to a maximum of $7,000 per Quarter. The amounts will be paid at the end of each Quarter via your Apprenticeship provider.

It’s important to note this scheme will be limited to the 1st 100,000 Apprentices.

On top of this we still have the Supporting Apprentices & Trainees program that commenced in March 2020. For those of you with Apprentices at 1 July 2020 who are no longer receiving Jobkeeper payments will go back to the 50% wage subsidy up to $7,000 per Quarter per apprentice. This will be paid at the end of each Quarter and is available until March 2021.

So if you have an existing apprentice they will either be getting Jobkeeper (extension), or the previously announced 50% of gross wages rebate.

JobMaker

Designed to move young Australians from Jobseeker into the workforce, the Jobmaker hiring credit is for eligible employees between 16-35 years of age, employed after the 7th October 2020 and before 6th October 2021.

The credit will be :

• $200 per week for employees aged 16 to 29
• $100 per week for employees aged 30 to 35

In order to qualify :

• Your business can’t be on Jobkeeper
• The position must be an ‘additional’ position created in your business, ie your headcount needs to increase (this is based on your headcount at 30th September 2020) along with your payroll amount
• Employee needs to work a minimum of 20 hours per week each quarter
• The employee must have received Jobseeker, Youth Allowance or Parenting Payment in at least one of the three months prior to their employment
• This will be available for each new job created from 7th October 2020 to 6th October 2021
• You need to have an ABN, be up to date with tax lodgements, be registered for PAYG withholding and report via Single touch payroll

The logistics :

• Jobmaker will be administered by the ATO
• Payments will be for the 1st 12 months of employment
• Payments will be made quarterly in arrears from 1 February 2021

To incentivise investment

Full expensing of assets

Assets purchased from 7.30 on 6th October to 30 June 2022 will be able to be claimed as a tax deduction in full in the year they are ‘installed’.

This ‘full expensing’ applies to ‘new’ depreciable assets as well as the cost of improvements to existing eligible assets, and for businesses with a turnover of less than $50 million the ‘full expensing’ also applies to 2nd hand assets.

For any assets already purchased between 1 July 2020 and 6th October, if the cost is less than $150,000 and the asset is installed ready for use before 30 June 2021 you will still be able to claim in full.

Small businesses with a turnover less than $10 million can also deduct the balance of any simplified depreciation pools at the end of the year while the full expensing rules apply.

Remember this is a tax deduction and not a hand out from the government. You still need to be able to fund this purchase.

What this means in practice is…..let’s assume you are a manufacturer who purchases a new piece of machinery that costs $300,000. Assuming you are making a profit & trade as a Company, you would save $78,000 in tax in this current financial year.

R&D

Instead of the proposed cuts to R&D tax incentive, we are now looking at an additional $2 billion being added to the program.

For those with a turnover of less than $20 million, the R&D tax offset is 18.5% on top of the Company Tax Rate. This will start from 1 July 2021. There will be no cap on the refund amount either which is great news.

Tax

Loss Carry-Back for Companies

If you normally make a loss in your business this ‘loss’ gets carried forward to future years for you to offset against future profits. These new rules allow you to ‘carry-back’ these losses effectively giving you a refund of prior tax paid.

Losses that you incur in FY20, FY21 or FY22 will be able to carry-back against profits made in or after the FY19. These tax refunds will be able to be claimed when lodging the FY21 Income Tax Return. It’s important to note that the carry-back amount can’t exceed the prior year profits and can’t put the franking account into deficit.

Let’s assume in FY19 you made a profit of $500,000 for the year, and therefore paid $137,500 in tax. Due to COVID you made a loss of $100,000 in FY20 and you purchased some additional equipment and made a loss of $300,000 in FY21. The loss that would qualify for the carry-back is $400,000, ie FY20 + FY21. In this example you would receive $110,000 as a refund when you lodge your FY21 Tax Return.

As a side note don’t forget the Company Tax Rate is 26% for this current year and then 25% for the FY22 year.

Other small business impacts

There have been a few different spending & reform announcements that may also impact your business depending on your Industry.

Modern Manufacturing strategy

$1.5 billion to be spent over the next 5 years to improve competitiveness, scale & resilience in Australian Manufacturing. The focus will be on 6 key areas :

• Resources technology & critical minerals processing
• Food & beverages
• Medical products
• Recycling & clean energy
• Defence
• Space

Funding will be delivered through 3 programs

• Modern Manufacturing Initiative
• Supply Chain Resilience Initiative
• Manufacturing Modernisation Fund

Modern Manufacturing Initiative

$1.3 billion co-funding for large manufacturing projects. Grants will open in the 1st quarter of next year.

Supply Chain Resilience Initiative

$107.2 million program to support businesses in establishing or scaling capabilities. Focus on health and medical products

Manufacturing Modernisation Fund

$52.8 million for a 2nd round of this fund which gives grants to support transformational technologies and processes

Investment

$7.5 billion has been earmarked for national-level infrastructure projects.

State by State :

Victoria - $1.03 billion for Ports, Rail and Roads

ACT - $155m for Bridges & Roads

NSW - $1.968 billion, notable mentions include:

• $15m for planning of faster rail between Newcastle & Sydney
• $560m for the Singleton bypass
• $360m for the Newcastle Inner city bypass
• $490m for Coffs Harbour bypass
• Other amounts for road, port and rail upgrades

QLD - $1.12B for Roads, Port and border strengthening

SA - $612m for Road and Rail upgrades

TAS - $306m for Road and Bridge upgrades

WA - $933m for Road, Rail and Bridge updates

$18 billion has been earmarked for technology investment roadmap which prioritises renewables, storage and carbon capture. The policy includes (among others) :

• $1.43 billion for Australian Renewable Energy Agency to invest in new projects including backing technologies to cut emissions in agriculture, manufacturing, industry and transport.
• $95.4 million for a new technology co-investment fund to support businesses in agriculture, manufacturing, industrial & transport sectors to adapt technologies to increase productivity & reduce emissions

Additional funds are also being earmarked for nurturing a digital economy :

• $4.5 billion to upgrade NBN fibre network
• $256.6 million to develop a Digital Identity system to access gov services
• $1.67 billion to boost cyber security
• $3.6 million towards mandating the adoption of Electronic Invoicing from 1 July 2022 for all gov agencies
• $9.6 million to support fintechs to export financial services and attract inward investment
• $6.9 million for two blockchain pilots directed at reducing business compliance costs

Mental health aid for small business owners

Mental health received another important boost last night, with the Government announcing another 10 Medicare funded psychological services, bringing the yearly total to 20. (ie 20 bulk billed psychology sessions without being out of pocket in a year).

Insolvency reforms

The Government is also assisting business owners who are facing the prospect of closing their business with two main announcements.

• Statutory demands will have a temporary extension and allow the business 6 months to respond to a claim (instead of 21 days).
• Temporary relief for directors from any personal liability for trading while insolvent, with respect to and debts incurred in the ordinary course of business.

Of course anyone facing the prospect of this option should contact us so we can assist you through this process.

Job Trainer

Another important aspect of the Government’s job plan is the Job Trainer initiative. This is designed to assist Business’s train or retrain people into new areas of employment. This is part of the $2b skills package and we will update this area as more details are revealed.

For Individuals

Non businesses are also set for benefits in this Budget.

Tax Refunds / Rate Changes

Everyone loves tax cuts!

Last year's budget announced a three-phase personal income tax plan. Phase 1 was introduced last year. Phase 2 is being fast tracked to start on 1 July 2020.

What’s changing :

• The top threshold of the 19% bracket moves from $37,000 to $45,000
• The top threshold of the 32.5% bracket moves from $90,000 to $120,000
• The Low and Middle Income Tax Offset will be retained for 2021

What that means in practical terms…….as soon as legislation is passed the tax tables will be updated and people will receive more money each week/fortnight/month depending on when they get paid.

Someone who earns $45,000 to $89,999 a year will save $1,080 in tax, $95,000 will save $1,305 and those earning $120,000 will save $2,430 per year. These are all tax savings for this current financial year.

Don’t stress, Xero will be all over updating the rates so stay tuned for our update once this legislation is passed for next steps.

For those of you eager to find out how much tax you are saving you can use this calculator to find out now.

Superannuation

Whilst the budget has absolutely nothing for SMSF’s there were a couple of announcements for non SMSF’s.

An employees existing super account will now be ‘stapled’ to them to avoid the creation of a new superannuation account when someone changes employment. From 1 July 2021 employers will be able to access the employees existing super information directly from the ATO. This means no more default super funds.

The Government is deploying a lot of effort in this regard to get people to notice their super and take action! They will be providing an interactive comparison tool as part of “Your Super” and will allow you to benchmark the performance and fees of your Fund relative to others. This will include identifying if your Fund is ‘underperforming’ so you can be aware of your Super performance. This is expected to roll out from 1 July 2022.

More Cash for Pensioners

Pensioners will receive another 2 x $250 lump sum cash payments. One before xmas and the other in early 2021

This will be available to Age Pension, Disability Pension, Veterans, People on Carer payments & Family Tax benefit recipients.

Self Funded retirees can also potentially benefit, with Commonwealth Seniors Health Card & Pensioner concession card holders also qualifying for the payments.

What next

As usual all of these need to be legislated. Stay tuned to our Facebook page or Ninja News for updates.

If you are contemplating hiring or need some additional equipment just let one of the growthwise ninja's know. We can then walk you through options for your business.