Extension of the instant asset write-off
The instant asset write-off (temporary full expensing) has been extended for an additional 12 months until 30 June 2023. Under the scheme, businesses with turnover up to $5 billion can deduct the full cost of eligible business assets in the tax year they are purchased, delivered and installed. This also can be applied to funds used for purchasing used assets or improving existing assets. Find out more in Instant Asset Write Off 2021.
Temporary loss carry-back provision
This has been extended for another 12 months and will now include the 2019–2020 to 2022–2023 financial years. It will enable businesses with annual turnover under $5 billion to apply tax losses that occurred during these years to offset tax paid in 2018–2019 and the following years. So companies that experienced losses as a result of the COVID-19 pandemic can apply these losses to profitable years to reduce the tax they owe.
From July 1 July 2022, the patent box will tax income derived from Australian biotech and medical patents at the reduced rate of 17 per cent, down from the normal rates of 25 per cent for SMEs and 30 per cent for larger businesses. Currently, over 20 countries have patent boxes. The aim is to encourage businesses to conduct research and development in Australia and keep patents here.
Corporate tax cuts
From 1 July 2021, the corporate tax rate for SMEs will drop from 27.5 per cent to 25 per cent for SMEs.
Extension of the SME Recovery Loan Scheme
Building on the existing scheme, the government will increase the guarantee to participating lenders to 80 per cent, boost the maximum loan size to $5 million and increase the maximum loan term to 10 years. Loan interest rates are capped at 7.5 per cent and borrowers may be offered repayment holidays for up to 24 months for appropriate products.
Changes to intangible asset depreciation
Businesses will be able to assess the economic life of certain depreciable intangible assets (such as patents, copyrights and registered designs), instead of using effective lives determined by statute. This will enable businesses to bring deductions forward if they assess that assets have a shorter effective life than currently legislated. Businesses will still have the option of using effective life determined by statute when depreciating assets.
Increased rights to pause the collection of disputed ATO debts
The government is simplifying the ability of small businesses to pause or modify Australian Tax Office debt recovery actions related to cases under review by the Administrative Appeal Tribunal (AAT). The AAT will have broader powers to pause actions (such as debt recovery, garnishee notices, and penalties and interest) until the underlying dispute is resolved. SMEs (including sole traders) with a turnover less than $10 million per year will be able to apply to the AAT’s Small Business Tax Division to pause ATO debt recovery actions until their underlying case is decided by the AAT.
Increasing the ability of SMEs to win government business
SMEs have been disadvantaged when pursuing business with the Federal Government, as large businesses have the resources to navigate the process. To address this, the government will provide $2.6 million beginning in 2021–2022 to foster the participation of SMEs in Commonwealth procurement. The funding will provide for research to determine the pain points that SMEs face when trying to win government business; improve communication about procurement opportunities for SMEs; and target learning events to help SMEs access major projects.
Removing $250 exclusion from education courses
The current deduction exclusion that applies to education courses will be removed, so business owners and employees will have an increased incentive to upgrade skills and knowledge.
Funding of the Digital Economy Strategy
Starting from 2021–2022 the government will provide $1.2 billion over six years for the Digital Economy Strategy. Part of this will be $53.8 million to create a National AI Centre and four AI and Digital Capability Centres to help SMEs to implement artificial intelligence technologies. In addition, $15.3 million will be used to promote e-invoicing by business and government (to decrease payment times and improve cash flow) and $12.7 million will be used to expand the Australian Small Business Advisory Service Digital Solutions program to assist up to 17,000 SMEs. This investment in AI will catalyse SME growth, and ensure that adoption isn’t concentrated just among tech companies, but also reaches SMEs who are the engine room of our economy.
Modernising individual tax residency rules
The individual tax residency rules framework will be updated to reduce complexity, increase certainty and reduce compliance costs. The primary test for Australian tax residency will be residing in Australia for 183 days per year or more. The new framework will make it easier and less costly for businesses who hire globally-mobile professionals.
Boosting deregulation efforts
Over four years starting in 2021–2022, the Federal Government will spend $134.6 million to accelerate deregulation to enable businesses to more easily employ people and decrease the burden of interacting with the government.
Increased infrastructure spending
Over the next 10 years, the budget will deliver an additional $15.2 billion in infrastructure spending in addition to the existing commitment to provide $110 billion infrastructure spending. Although some SMEs will benefit directly from this increased spending, others will benefit from the flow-on effect throughout the economy.
Extended job training support
Under the new budget, $2.7 billion will be provided to extend the Boosting Apprenticeship Commencements program. This is a wage subsidy that reimburses $7,000 per quarter for 12 months for taking on new trainees and apprentices. In addition, $500 million will be added to the JobTrainer fund, depending upon matching contributions from state and territory governments. The goal is to provide 136,000 free and low-fee training places, including 10,000 places for digital skills courses.
2021 Federal Budget gets tick of approval from ASBFEO
These measures are all great news for Australian businesses. As the Australian Small Business and Family Enterprise Ombudsman Bruce Billson commented, “The Federal Government’s 2021 Budget is a clear acknowledgement that small and family businesses are central to the nation’s economic recovery and future prosperity.”