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2022 Federal Budget: What it Means for Small and Medium Business & Individuals

For business, the 2022 Federal Budget revolved around tax breaks and apprenticeships – plus a helping hand for a struggling tourism industry.

It was not surprising that with a looming election and the promise by the Opposition of a new budget if elected, there is considerable uncertainty over how many of the announced measures will be implemented.

That said, the focus of spending was largely as expected. Cost of living measures were a centrepiece, including halving the petrol excise for 6 months (worth 22c per litre), an extra $420 on the LMITO, and a one-off special payment of around $250 for pensioners and welfare recipients.

Other measures included tax benefits for SMEs to invest in training and technology and an extension and expansion on home loan guarantees for housing.

As always, the team at Abbotts will review how the potential tax-breaks can be applied to your personal and group affairs. If an opportunity to utilise the below concessions is available, we will ensure that it is factored into your strategic year-end planning.

What did the Business sector want?

CPA Australia noted the current challenging conditions for business, and that despite Australia’s low unemployment rate, “many businesses face labour shortages, supply disruptions, increasing costs and weak customer demand”. While these challenges are likely to ease, “the risks of weaker than expected global growth, further supply and labour shortages, and future COVID-19 outbreaks and variants are real, adding considerable uncertainty to the short-term outlook”. They also urged Government to consider a number of recommendations to support small business including:

  • Significantly increase funding to assist small businesses to improve their capability and capacity to digitally transform.
  • Make temporary full expensing (TFE) permanent for small businesses.
  • Increase the size of the skilled labour pool.
  • Back-off on new regulatory requirements to give businesses breathing room to focus on current challenges.
  • Access to business advice for small businesses, especially those in difficulty. An incentive could be in the form of a voucher or grant (the CPA suggest around $1,500).
  • Fiscal strategy to prioritise economic transformation, as opposed to debt repayment.

Chartered Accountants ANZ urged Government to: further extend temporary full expensing and commit to an ongoing, simplified instant asset write-off regime for eligible small business taxpayers; make the loss carry-back permanent; support the implementation of small business CGT changes proposed in the Board of Taxation’s review of small business tax concessions; and review the PAYG instalment system with a view to making it easier for micro and small businesses to comply on an opt-in basis.

More generally, small businesses hoped to see: further cuts to red tape to relieve them of onerous compliance tasks and reduce the cost of doing business; help with digital tools and processes; further reductions to the company tax rate; the creation of more assistance packages for businesses impacted by COVID and have struggled to stay afloat during the pandemic; and more measures to help hire and manage employees, such as low cost training and re-skilling packages and incentives to hire workers.

What did the Budget deliver?

  • Small business skills and training boost: businesses with aggregated turnover of up to $50 million will be able to deduct an additional 20 per cent of expenditure incurred on external training courses provided to their employees.
  • Small business technology investment boost: businesses with aggregated turnover of up to $50 million will be able to deduct an additional 20 per cent of expenditure (capped at $100,000) incurred on business expenses and depreciating assets that support digital adoption (e.g. subscriptions to cloud-based services, cyber security systems, portable payment devices).
  • Varying the GDP uplift factor for tax instalments: GDP uplift factor for PAYG and GST instalments set at 2 per cent for the 2022-23 tax year (compared to 10 per cent that would have applied under statutory formula), subject to legislation being passed in parliament. The 2 per cent uplift rate is capped at $10 million annual aggregated turnover for GST instalments and $50 million for PAYG instalments.
  • Skills and training: $2.8 billion in funding for an overhauled apprenticeship incentive scheme to grow the number of qualified trades people by subsidising the wages of select apprentices and trainees, providing up to $5,000 payments to new apprentices (in priority sectors) and up to $15,000 in wage subsidies for employers who take them on.
  • Other Measures:
    • $5.6 million over 4 years from 2022-23 for the Fair Work Commission to establish a dedicated unit to support small businesses, including unfair dismissals and general protections disputes.
    • $25.2 million over 3 years ($18.4 million in 2022-23) to support small business including:
    • $10.4 million over 2 years from 2022-23 to enhance and redesign the Payment Times Reporting Portal and Register to improve efficiency and reporting;
    • $8.0 million in 2022-23 to the Australian Small Business and Family Enterprise Ombudsman to work with service providers to enhance small business financial capability;
    • $4.6 million over 2 years from 2021-22 to support the New Access for Small Business Owners program delivered by Beyond Blue to continue to provide free, accessible, and tailored mental health support to small business owners; and
    • $2.1 million over 2 years from 2021-22 to extend the Small Business Debt Helpline program operated by Financial Counselling Australia to continue to provide financial counselling to small businesses facing financial issues.
  • Tourism Support: Around $146.5 million to support the recovery of the Australian tourism sector in response to the pandemic impact, including further assistance for travel agents. Almost half will be rolled out globally as part of a government bid to reignite international tourism after nearly two years of border closures due to COVID-19.
  • Export Support: $80.0 million over 4 years from 2022-23 to provide additional support for small and medium export businesses to re-establish their presence in overseas markets through the Export Market Development Grants program.
  • Government Contracts: More help for SMEs to secure Commonwealth contracts. Under proposed changes, Government departments will be required to split up major projects to give smaller contractors a greater chance to compete for work. The Government has also authorised the Department of Defence to undertake limited tenders with SMEs for procurements up to $500,000 from 1 July 2022.

Small businesses were among the winners in the 2022-23 Budget. They will be pleased the government has increased tax breaks for SMEs investing in new technology and skills, as well as taxation reforms which should help improve business cash flows. Extra funding in apprenticeships will also be welcomed by small businesses, while extra spending to reduce the burden of red tape should assist in bringing down the costs of doing business.

Should you wish to discuss some of the proposed measures above and how they might apply to your business, please contact our office.

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