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Federal Budget 2020: What are the Opportunities for Business Finance Brokers?

federal budget 2020

The Federal Budget for 2020-2021 released in early October included a number of developments designed to help small-to-medium businesses recover from the COVID-19 pandemic and grow. Some of these measures will motivate business owners to consider new finance options. Here we cover some of the budget measures and what they can create opportunities for finance brokers.

Updated instant asset write-off program under the Federal Budget 2020

One of the biggest changes of the Federal Budget 2020 that will impact businesses seeking finance is the instant asset write-off. The program has evolved over the years to increase the amount that could be deducted in the year that assets were purchased, delivered and installed. Most recently, the maximum amount per asset was $150,000. The new version, which went into effect on 6 October 2020, has no maximum limit per asset and is scheduled to run until 30 June 2021. 

Businesses with a turnover less than $5 billion are eligible. This means that most businesses in Australia qualify for the instant asset write-off. Businesses looking to acquire new assets are now able to deduct the entire amount in the year they were purchased. Businesses with a turnover less than $50 million will also be able to write off the full cost of used assets as well. 

This instant write-off applies to most assets – from business laptops to industrial machinery. There are a few exclusions, including capital works, horticultural plants, intangible assets (such as customer lists), and assets allocated to a software development pool. 

For businesses wanting to purchase new or used equipment, the challenge is getting the funds needed. While the asset purchase will reduce the tax bill for the current financial year, the return on investment is not immediate. An unsecured business loan from Moula can be the solution for SMEs looking to reap the tax benefits of the instant asset write-off.

To find out more, check out How to Use the Extended Instant Asset Write-Off in 2020.

Increased support for manufacturing

The COVID-19 pandemic revealed the risk of relying on international sources for essential products in Australia. In response, the Federal Government introduced the Modern Manufacturing Initiative (MMI). The aim of the  $1.3 billion MMI is to drive lasting change for Australian manufacturers. It will help Australian manufacturers scale-up, collaborate and commercialise, with a focus on the following sectors:

  1. Resources technology and critical minerals processing
  2. Food and beverage
  3. Medical products
  4. Recycling and clean energy
  5. Defence
  6. Space.

The initiative is still being developed and will lead to future growth in manufacturing in the prioritised sectors. SMEs operating in these areas or providing products or services to them will need business finance for growth.

Boost to infrastructure spending under Federal Budget 2020

The Federal Budget 2020 includes an increase in infrastructure spending from $100 billion to $110 billion over the next 10 years. This will support more than 10,000 direct and indirect jobs in all Australian states and territories. The funds are being offered on a ‘use it or lose it’ basis in order to encourage quick action. Although large projects will take time to ramp up, small projects such as local road safety improvements and upgrades to local facilities such as sports facilities, community halls and footpaths. 

The infrastructure spending will increase demand for raw materials and engineering and construction services. Businesses such as construction companies fulfilling infrastructure projects will need finance to meet the cash flow gaps between beginning work and getting paid. Moula helps many construction companies with short-term finance to cover these cash flow shortages. One example is Melbourne Paving which has accessed business loans from Moula to bridge the gap between spending and getting paid for construction projects.

If you have clients in construction or related industries, they could be looking for business finance to provide the working capital they need to fulfill projects supported by the Federal Budget 2020. In addition, companies that sell raw materials and other supplies to businesses can boost their cash flow with Moula Pay, a smarter way for businesses to offer their customers payment terms. Companies that sell construction materials use Moula Pay as a way to get funds quickly, instead of waiting for invoices to be paid. When their customers pay with Moula Pay, Merchants get paid upfront. Customers enjoy up to 12 months to pay, with the first 3 months interest and repayment-free.

When your business finance clients become Merchants, they:

  • Get paid upfront: they can give their customers great payment terms that improve their cash flow
  • Stop chasing payment: they outsource the pain of chasing receivables, and let Moula take the risk of unpaid invoices
  • Sell more, more often: providing customers with access to more funds means they can spend more with the business.

Learn more about how Moula Pay can give your business finance clients a way to offer great payment terms and eliminate the need to chase overdue invoices. As with our business loan product, we offer brokers a commission for Merchant referrals.

JobMaker, JobTrainer and apprenticeships

The Federal Budget 2020 includes these initiatives to boost skills and employment. JobMaker is a $4 billion wage subsidy to encourage businesses to hire workers in the 16 to 35 age bracket. Employers participating in the program will get up to $200 per week for a year. The JobTrainer program will invest $1 billion to create 340,000 free or low-cost training places for school leavers and job seekers. In addition, the Federal Government will also spend $1.2 billion to subsidise up to 50 per cent the wages for an apprentice, with a cap of $7,000 per quarter available until 30 September 2021. This is available for 180,000 positions.

What does this mean for finance brokers? Boosting employment will lead to business growth and many of these businesses will require finance as they grow. For example, a construction business hiring new employees and apprentices will need to purchase additional tools and equipment. Small business loans from Moula can be used to purchase assets and other resources as businesses increase staffing levels.

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All the thoughts, ideas and musings from the Moula team! Covering everything from work/life balance to general finance tips plus everything in between!

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