Welcome to our yearly summary of how the Federal Budget impacts small businesses. The last few years have been chaotic to say the least for business owners. We take one step forward in terms of opening things up to take another step back with people in isolation again. Supply chain issues continue to cause havoc amidst global uncertainty so the commitments in the budget for spending in domestic capability are a welcome announcement.
Alan and Steph sat down this morning to talk about all things budget. Grab some coffee and a snack for an update on what this means to you. NOTE these are just announcements at this stage and need to be passed. We will update you before this happens.
the economy
The Australian economy has continued to show it’s resilience throughout the last few years compared to other countries. The forecast budget deficit is $78 billion for FY23 which is significantly lower than the previous prediction.
Unemployment is expected to fall to 3.75% in the September Quarter which is the lowest rate in the past 40 years. There are also now 220,000 apprentices in training, the highest level since 1963.
As we are all aware, inflation is on the increase with the last 3 quarters of over 3%. This is expected to stay high in the short term.
for small businesses
Backing small businesses - Skills & Training Boost
A new skills and training boost to help small business upskill employees is being introduced.
If your turnover is less than $50million you will be able to deduct an additional 20% of your expenditure. Ie if you spend $1,000 on a training course and you operate as a Company you effectively get $250 back on tax. Under this new regime you get to claim $1,200 as a deduction ie $300 back on tax. You of course need to be profitable and paying tax for this to happen.
There are a few 'fine print' details with this. The course needs to be an external course you pay for and delivered by entities registered in AU. If you pay for these between now and 30 June 2022 you will claim this additional amount in the FY23 year. Anything spent post 1 July 2022 will simply be claimed in the year you spend the cash. This boost will be available until 30 June 2024.
Nice incentive to continue to upskill your team.
Backing small businesses - digital technologies
The government are encouraging small business investment in digital technologies to help boost productivity. Similar to the skills and training boost, small businesses with less than $50mill in turnover will be able to claim 120% of the cost of business expenses that 'support digital uptake'. This will be capped at $100k in expenditure per year.
This includes things like online sales platforms, digital inventory tracking systems, cyber security, cloud computing subscriptions, portable payment devices, basically all digital tools and any depreciating assets that support digital adoption.
If you spend $30,000 on these platforms (and you are a company who is profitable and pays tax) you would normally get $7,500 tax back. Under these new rules you will get $9,000 back. If you pay for these between now and 30 June 2022 you will claim this additional amount in the FY23 year. Anything spent post 1 July 2022 will simply be claimed in the year you spend the cash. This boost will be available until 30 June 2023.
We have been banging on for what seems like forever about #banadmin and using systems to give you good data. This will now be a fantastic time (between now and 30 June 2023) for you to look at what your business needs to invest in for the future. Our resident tech guy Beau is super excited for this so reach out and organise a time to chat about implementing some of these digital systems in your business.
Apprentice + Trainee Scheme
The boosting apprenticeship wages subsidy has been extended again. This will apply to apprentices and trainees who are hired between now and 30 June 2022. Employers are eligible for a rebate of 50% of the apprentices wages up to a maximum of $7k per quarter for the first 12 months of the apprenticeship. The current scheme also includes 10% of wages for the 2nd year of the apprenticeship capped at $1,500 per quarter and 5% for the 3rd year capped at $750 per quarter.
Remember your existing apprentices are already qualified so you will continue to claim for that wages rebate each Quarter. Keep sending your forms to the amazing Erin in our office and she will sort for you.
Apprentices will also receive $1,250 in Training Support Payments every 6 months for 2 years. This will commence post 1 July 2022 and will be for apprentices in “priority” occupations.
From 1 July 2022 the existing boosting apprentices wage subsidy will be replaced with a new apprentice wage subsidy. It will only be available to employers of apprentices in “priority” occupations, and will cover 10% of the wages for first and second year apprentices, and 5% for third year apprentices.
Employers of apprentices in non-priority occupations will receive a one off payment of $3,500 upon hiring the apprentice.
Currently, the priority occupations are age care, child care, disability care and nursing.
Changes to Quarterly PAYG Instalments
This was one of the sneaky things that was announced before the budget.
For those of you who pay Quarterly Tax Instalments your Instalments will be lower for the 2023 financial year than they normally would be (ie from 1 July). Each year the ATO looks at your last year's tax, adds 10% and then divides it by 4. That is what you then pay each quarter. Next year they will only add 2% rather than 10% therefore reducing your Instalments during the year.
This isn't exciting. If you are continuing to grow your profitability you will just end up with an amount of tax to pay at the end of the year.
Employee Share Schemes
Whilst some additional reductions in regulatory red tape have been announced for Employee Share Schemes no new tax concessions have been made.
You can now purchase up to $30,000 worth of shares each year unless there is an imminent sale or listing of the company in which case there is no cap. The previous cap was $5,000 so this certainly increases that level. This is also now being extended to independent contractors.
Export Market Development Grant
An additional $80 million in funding over 4 years has been allocated to the Export Market Development Grant program. This program is designed to support export-ready Aussie businesses to establish themselves in international markets.
Patent Box
Last year’s budget announced concessional tax treatment for income associated with new patents in the medical and biotechnology sectors. This legislation is currently still before parliament but effectively taxes this income at 17% instead of normal tax rates. This is now being extended to patents linked to agricultural and veterinary chemical products as well as patients relating to low emissions technology. As with last year the mechanics of this will be worked on with Industry.
Cutting Red Tape
None of the measures announced to help small businesses reduce red tape are ready to go now, however there are strides to make things like Payroll Tax easier to manage with data from Single Touch Payroll being shared with revenue offices and Taxable Payment Summaries being easier to lodge with your BAS rather than at the end of the year. Xero already makes the Taxable Payment Summaries easy to complete provided you are using contacts correctly, so I’m sure they will be all over this when the time comes.
The ATO also has a big chunk of money for data matching for those trying to avoid tax.
We welcome anything that helps reduce red tape for small businesses, we just have 1 thing to say…..go faster with the rollout……please
Don’t forget…..
Scrapping of the $450 threshold amount
At the moment if you earn less than $450 in a month as an employee your employer isn’t required to contribute to super for you. That threshold is being scrapped. Which means everyone over 18 will now be paid Super on every dollar they earn. This commences on the 1st July 2022.
Super Guarantee Rate Change
EMPLOYERS TAKE NOTE
From 1st July the amount of Super you need to contribute for employees (including yourselves) will increase from 10% of salary and wages paid to 10.5% of salary and wages. If your employment contracts are written as wages + super, note you will be adding an extra 0.5% to your overall employees costs for the year. Note the super amount is set to go up 0.5% every year until it reaches 12% in 2026.
Period | General super guarantee (%) |
1 July 2020 - 30 June 2021 | 9.5 |
1 July 2021 - 30 June 2022 | 10 |
1 July 2022 - 30 June 2023 | 10.5 |
1 July 2023 - 30 June 2024 | 11 |
1 July 2024 - 30 June 2025 | 11.5 |
1 July 2025 - 30 June 2026 and onwards | 12 |
spending in general
In fantastic news domestic manufacturing is still a focus. We of course need more investment in this area so the $1b to supercharge investment in 7 key areas is certainly welcome. The key product areas are :
- Semiconductors
- Agriculture chemicals
- Water treatment chemicals
- Telecommunications equipment
- Plastics
- Pharmaceuticals
- Personal protective equipment
One thing we are passionate about at Growthwise is bringing smart manufacturing back to Oz. Good to see the Modern Manufacturing Strategy announced in last year's budget has also been updated.
There is $250mill to help manufacturers translate good ideas into commercial outcomes. This is aimed at supporting businesses to improve manufacturing processes and propel goods into new markets.
$53.9mill to fund a 3rd round of the Manufacturing Modernisation Fund which provides co-funded grants to support manufacturing and job growth
$2b Regional Accelerator Program to diversify growing regional economies, create new jobs and invest in infrastructure, advanced manufacturing, apprenticeships and higher education.
$150mill in Equity funding over 5 years to expand CSIRO Innovation Fund (Main Sequence Ventures).
We are looking forward to diving into the detail around this cash
for smsf…..super updates
Not a lot to report here, which isn’t necessarily a bad thing as it means the strategies we have put in place over the last few years will remain.
Minimum Pension Amounts
For those of you who are lucky enough to be retired and taking a pension….. the minimum pension drawdown amount was decreased in 2020, meaning you only needed to draw 50% of your normal yearly pension amount. This is now being extended again until 30 June 2023 meaning next years pension amount will continue to be 50% of the normal amount. Don’t stress, Alan and Chris will remind everyone in the next few months what those amounts are.
Works Test
This was announced in last year's budget but starts on the 1st July 2022. If you are aged between 67 & 75 at the moment you need to work 40 hours over 30 consecutive days before you can contribute to super. This is being scrapped and everyone up to age 74 can now contribute to super. Note, only employer contributions meet this definition. If you want to make tax deductible contributions personally, you still need to pass the 40 hours or work within 30 days.
Downsizer Contributions
Another one from last years budget with a start date of 1 July 2022. If you are aged over 60 and you sell your family home, you can contribute $300,000 per person into super. This is currently the case if you are over 65.
For example. At 30 June 2022, Trish is 61 and has $1.4m in super. There have been no changes to the general transfer balance cap or the concessional contribution cap since 1 July 2021. She intends to sell her house and would also like to transfer some shares she owns personally into the fund as an in specie contribution using the bring forward rules.
In Trish’s mind the two events are not connected but in fact timing is everything. If Trish sells her house and makes a $300,000 downsizer contribution in 2022/23, she may find that her total super balance rules her out of making large non-concessional contributions in 2023/24.
In contrast, if she makes both contributions in 2022/23, she’ll be fine (her 30 June 2022 balance will be low enough to allow the normal three year bring forward allowance).
Equally, she could use the bring forward rules in 2022/23 and even sell the house in 2023/24 (making a downsizer contribution that year) because – fortunately – the size of her 30 June 2023 balance doesn’t matter when it comes to making a downsizer contribution.
Another crucial point – bringing downsizer contributions into play earlier means they will be preserved. If Trish wants to start a retirement phase pension with her downsizer contributions as soon as they have been made she will need to ensure that she’s either permanently retired (and doesn’t intend to work 10 or more hours per week in the future) or she will need to end a paid employment arrangement after she makes the contribution. This is not something we’ve had to contemplate to date because downsizer contributions have only ever been made after 65 – at which point preservation is no longer an issue.
for individuals
The focus for individuals in the budget was on Cost of Living
Low Income Tax Offset
More money.
The low income tax offset has been extended. People with less than $126k in taxable income are up for an additional ‘lamington’ bonus. $420 will be coming your way when you lodge your 2022 Income Tax Return. Note there is a lot of ‘talk’ about this amount being $1,500. Don’t be fooled, you already have the $1,080 as it’s included in your tax withheld throughout the year.
It’s important to note that this is the last year of the Low Income Tax Offset. That means from 1 July 2022 you will pay more tax in your weekly/fortnightly/monthly wages as the $1,080 offset will be removed.
Temporary Fuel Excise Relief
The excise on petrol and diesel will be temporarily halved from 44.2 cents per litre to 22.1 cents per litre for the next 6 months to 28 September 2022. This likely means you will save $10 per 40 litres. Expect to see this within the next 2 weeks at the pump. Note ACCC will be monitoring the price behaviour of retailers to ensure this excise rate is passed on.
One off Cost of Living Payment
A one-off income tax-exempt payment of $250 will be made to eligible pensioners, welfare recipients, veterans and eligible concession card holders in April 2022 to assist with increased cost of living. This payment will be tax exempt so won’t need to be reported in your tax return.
Home Saver & Guarantee Scheme
The Home Guarantee Scheme – which allows first-timers to buy a property with just a five per cent deposit or two per cent for single parents has increased to 50,000 places. This will be made up of
- 35,000 guarantees to support first homebuyers with a deposit as low as 5%,
- 10,000 guarantees to support first homebuyers in regional areas with 5% deposit
- 5,000 guarantees to help eligible single partners with children buy their first home or re-enter the market with a deposit of as little as 2%
The First Home Super Saver Scheme has also been expanded, increasing the maximum amount of voluntary contributions that can be released from $30,000 to $50,000.
Paid Parental Leave
Some changes to Paid Parental Leave. Important to note that this can be accessed for those with collective household income of up to $350,000. 20 weeks of paid parental leave will be eligible to be shared between working parents, meaning you can split this how it suits your family rather than 18 weeks for mum’s and 2 weeks for dad’s. Single parents can access the full 20 weeks. This leave can be used at any time within 2 years of of the child’s birth.
Expect this to be ready to go by 1 March 2023.
COVID-19 test expenses deductible
Costs of taking a COVID-19 test in order to attend a workplace are tax deductible from 1 July 2021. Note, you will need to have kept receipts for these tests in order to be able to make a claim.
what next
As usual all of these need to be legislated.
We were due to have Friday Drinks and a q&a on all things Federal Budget related. Given how many of our clients (and team) are still in isolation we will postpone this months drinks and kick things off again on the 29th April. Any questions you have in relation to the budget feel free to shoot these through to one of the team or post up on our socials. We will keep the answers coming on Facebook, Instagram and in Ninja News.