Published on 08/10/2020 by Any Business.Com.Au

Federal Budget: What's in it for Small Business?

Business owners across the country have faced a year of uncertainty and, for many, extreme hardship as Australia and the world deals with the fallout from the coronavirus pandemic.

Many business owners will have been searching for some good news from the Federal Government's budget announcement this week, and they may have gotten some too.

So what's in it for Small Business? We'll try and break it down for you.

Training and Upskilling

The Government will introduce an exemption from FBT for employer provided retraining and reskilling benefits provided to redundant, or soon to be redundant employees where the benefits may not be related to their current employment. This measure applies from announcement.

Currently, FBT is payable if an employer provides training to redundant, or soon to be redundant, employees and that training does not have sufficient connection to their current employment.

Tax Concessions

The Government will also expand the eligibility for a range of small business tax concessions.

Now, businesses with a turnover of up to $50 million will be eligible for 10 different concessions, up from the previous threshold of $10 million.

Instant Asset Write-Off

The instant asset write-off was one of the key announcements and represents one of the largest Budget spends ever announced, with an expected cost of $27 billion.

Once the announcement passes into law, any business with a turnover of less than $5 billion will be able to write-off the full purchase value of any asset that was acquired between 7:30pm 6th October 2020 and 30 June 2022.

This is expected to cover 95% of businesses and is a clear incentive to get businesses to purchase new equipment (as opposed to second hand equipment).

Full expensing in the year of first use will apply to new depreciable assets and the cost of improvements to existing eligible assets.

For small and medium sized businesses (with aggregated annual turnover of less than $50 million), full expensing also applies to second-hand assets.

Businesses with aggregated annual turnover between $50 million and $500 million can still deduct the full cost of eligible second-hand assets costing less than $150,000 that are purchased by 31 December 2020 under the enhanced instant asset write-off.

Businesses that hold assets eligible for the enhanced $150,000 instant asset write-off will have an extra six months, until 30 June 2021, to first use or install those assets.

This measure doubles as an incentive for businesses to purchase new equipment, whilst also presenting a marketing opportunity for businesses of all sizes which supply depreciable assets.

Carry Back Tax Losses

The Government will allow eligible companies to carry back tax losses from the 2019-20, 2020-21 or 2021-22 income years to offset previously taxed profits in 2018-19 or later income years.

Corporate tax entities with an aggregated turnover of less than $5 billion can apply tax losses against taxed profits in a previous year, generating a refundable tax offset in the year in which the loss is made.

The tax refund would be limited by requiring that the amount carried back is not more than the earlier taxed profits and that the carry back does not generate a franking account deficit.

The tax refund will be available on election by eligible businesses when they lodge their 2020-21 and 2021-22 tax returns.

Business Support Grants

The Government will make the Victorian Government's business support grants for small and medium business as announced on 13 September 2020 non-assessable, non-exempt (NANE) income for tax purposes. Normally grants of this nature would be subject to income tax.

Eligibility for this treatment will be limited to grants announced on or after 13 September 2020 and for payments made between 13 September 2020 and 30 June 2021.

Changes to Tax Concession Thresholds

Access to a range of Small Business Entity (SBE) measures will become available to many more businesses, as the Government plans on increasing the turnover threshold to qualify for SBE status.

Current SBE tax concessions apply to businesses with aggregate turnover of under $10 million. This threshold will be increasing to $50 million.

This will be done in three phases:

From 1 July 2020: immediately deduct certain start-up and prepaid expenditure.

From 1 April 2021: exempt from FBT on eligible car parking and multiple work-related portable electronic devices (such as phones or laptops) provided to employees.

From 1 July 2021: simplified trading stock rules will be available, along with monthly settlement of excise and duty under SBE concessions. There will also be a 2 year amendment period, except for entities that have "significant international tax dealings or particularly complex affairs".

Research and Development Tax Incentive Changes

The Government is making further enhancement to measures announced in the 2019-20 MYEFO update.

For small companies, those with aggregated annual turnover of less than $20 million, the refundable R&D tax offset is being set at 18.5 percentage points above the claimant's company tax rate, and the $4 million cap on annual cash refunds will not proceed.

For larger companies, those with aggregated annual turnover of $20 million or more, the Government will reduce the number of intensity tiers from three to two.

The R&D premium ties the rates of the non-refundable R&D tax offset to a company's incremental R&D intensity, which is R&D expenditure as a proportion of total expenses for the year.

The marginal R&D premium will be the claimant's company tax rate plus:

8.5 percentage points above the claimant's company tax rate for R&D expenditure between 0 per cent and 2 per cent R&D intensity for larger companies

16.5 percentage points above the claimant's company tax rate for R&D expenditure above 2 per cent R&D intensity for larger companies

The Government will defer the start date so that all changes to the program apply to income years starting on or after 1 July 2021, to provide businesses with greater certainty as they navigate the economic impacts of the COVID-19 pandemic.

All other aspects of the 2019-20 MYEFO measure will remain unchanged, including the increase to the R&D expenditure threshold from $100 million to $150 million per annum.

JobMaker Hiring Credit

In spite of opposition to the idea, the Government is intent on ending JobKeeper on 28th of March,2021 as currently scheduled.

They want businesses to drive the economic recovery and part of the transition away from JobKeeper is the implementation of the new JobMaker Hiring Credit, targeting at those hardest hit by recent unemployment. It is budgeted as a $4 billion program.

The JobMaker Hiring Credit will be available to eligible employers over 12 months from 7 October 2020 for each additional new job they create for an eligible employee. Eligible employers who can demonstrate that the new employee will increase overall employee headcount and payroll will receive:

$200 per week if they hire an eligible employee aged 16 to 29 years; or
$100 per week if they hire an eligible employee aged 30 to 35 years.

The JobMaker Hiring Credit will be available for up to 12 months from the date of employment of the eligible employee with a maximum amount of $10,400 per additional new position created.

Eligibility criteria is:

The employee will need to have worked for a minimum of 20 hours per week, averaged over a quarter, and;

Received the JobSeeker Payment, Youth Allowance (other) or Parenting Payment for at least one month out of the three months prior to when they are hired.

Boosting Apprenticeships Wage Subsidies

From 5 October 2020 to 30 September 2021, businesses of any size can claim the new Boosting Apprentices Wage Subsidy for new apprentices or trainees who commence during this period.

Eligible businesses will be reimbursed up to 50 per cent of an apprentice or trainee's wages worth up to $7,000 per quarter, capped at 100,000 places.

Supporting Apprentices and Trainees

The Supporting Apprentices and Trainees (SAT) wage subsidy has been extended, which is intended to keep apprentices and trainees employed.

The Supporting Apprentices and Trainees (SAT) wage subsidy reimburses eligible businesses up to 50 per cent of an apprentice or trainee's wages. Subsidies are capped at $7,000 per quarter, per eligible apprentice or trainee.

From 1 July 2020 to 31 March 2021, small and medium-sized businesses (of less than 200 employees) can claim the SAT wage subsidy for apprentices or trainees who have been in-training with the business as at 1 July 2020.

A wage subsidy is also available to eligible Group Training Organisations where the Host Employer of any size is receiving the JobKeeper payment and retains their apprentice or trainee.

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AnyBusiness.com.au

Curtis is a leading expert in the business-for-sale industry, serving as a senior content creator at anybusiness.com.au.

With a career spanning over fifteen years, Curtis has accumulated extensive knowledge in the domain of business sales, acquisitions, and valuations. His deep understanding of market dynamics and his ability to translate complex industry jargon into accessible insights make him a trusted resource for entrepreneurs and business owners looking to buy or sell businesses.