This year’s pandemic has been particularly tough on business owners, particularly those of small businesses. But, the federal government recognises this and on 6 October, it announced a number of measures in its Budget that should help Australian businesses find their feet again.
Here’s an outline of what business owners can look forward to as a result of the Budget announcement.1
1. JobMaker Hiring Credit
The federal government is committing $4 billion to assist businesses to create jobs and hire younger workers. It is expected the JobMaker Hiring Credit will support around 450,000 jobs over the next 12 months.
Until 7 October 2021, business owners can receive credit each week for each new job they create, where they hire an eligible job seeker. To be eligible, these new employees need to be between 16 and 35 years old, work at least 20 hours a week and have received a JobSeeker Payment, Youth Allowance or Parenting Payment for at least a month in the previous three months at the time of hiring.
The government will pay employers $200 a week for 16- to 29-year-olds and $100 a week for 30- to 35-year-olds. Payments will be made quarterly and can be claimed by employers after 1 February 2021.
2. Apprenticeship Wage Subsidy
The government will also invest $1.2 billion to assist businesses in hiring apprentices and trainees. Businesses will be able to receive a subsidy of 50% of the cost of the wages of a new or recommencing Australian apprentice or trainee.
An extension of the existing scheme, the subsidy is now available to all businesses until a limit of 100,000 apprenticeships is reached. Employers will be able to access a maximum of $7,000 per quarter for each apprentice or trainee.
3. Tax relief and incentives
Changes to the tax legislation will improve cash flow for businesses in trouble, and encourage investment in capital assets and innovation. The following tax benefits are now available:
Temporary loss carry-back: Businesses with a turnover of up to $5 billion will be able to offset their tax losses against previous profits and tax paid during or since the 2018/2019 financial year. This will help companies running at a loss to access a cash refund now and keep their businesses running.
Temporary full expensing of eligible depreciating assets: An expansion of the instant asset write-off scheme, businesses with an annual turnover of up to $5 billion can now make an immediate tax deduction for the full cost of new eligible capital assets, and improvements to existing eligible assets, if purchased between 6 October 2020 and used or installed by 30 June 2022. Businesses with a turnover of under $50 million will also be entitled to an immediate tax deduction for the full cost of second-hand assets within the same time period.
In addition, businesses with a turnover of between $50 million and $500 million can claim an immediate deduction for the full cost of second-hand assets under $150,000, purchased before 31 December 2020 and installed by 30 June 2021. Businesses with annual turnover of less than $10 million can also deduct the balance of their simplified depreciation pool at the end of the financial year.
Research and Development Tax Incentive changes: From 1 July 2021, companies with an annual turnover of under $20 million will have their refundable R&D tax offset rate increased and their $4 million cap on annual cash refunds removed. Companies with an annual turnover of over $20 million will see a more generous non-refundable R&D tax offset, and the cap on claimable R&D expenditure increased to $150 million per year.
4. Easier access to credit
The government has committed to reducing the red tape in business lending. Ambiguous and overly prescriptive consumer lending laws have been applied to small businesses in the push towards “responsible lending”. The reforms are expected to help lenders lend to small businesses more quickly, more confidently and with less cost on both sides, supporting the flow of credit into businesses and the economy. The proposed changes should help business owners respond quickly to the challenges and opportunities of the current climate.
5. Insolvency reforms
For small businesses that are struggling financially, the new, streamlined and less expensive process will allow them to restructure their debts and stay in control of their company. This change, applicable from 1 January 2021, should help more small businesses avoid liquidation and continue to trade. For small businesses that are no longer viable, a new, simplified liquidation process will allow owners to wind up their companies more quickly and cheaply, and provide greater returns for their creditors and employees.
All these changes will help to reduce costs for business owners and assist with business investment. Ultimately, they should also contribute to boosting employment and stimulating our economy, a great outcome for us all.