When Treasurer Josh Frydenberg handed down the last federal budget in October 2020, it contained a raft of measures designed to stabilise an Australian economy reeling from the pandemic. And it worked.
In fact, it’s worked so well some incentives, such as asset write-off and loss carry-back, have been extended.
While nobody thinks we’re out of the woods just yet and with the economic future of other countries remaining uncertain, let’s look at what the 2021 Federal Budget means for small business.
Supporting the economy as we slowly emerge from a recession
In 2020, Australia fell into recession for the first time in almost three decades. Despite continued reports of fiscal doom and gloom, by December our economy had started to rally. And while the recovery is proving a little bumpy, and the threat of lockdown remains, we’re in a much better position than anyone anticipated.
Small businesses are being encouraged to keep spending, further stimulating the economy.
If you’re keen to download a quick overview of the Federal Budget, we’ve got you covered. As well as what we cover in this blog, we also talk about patent box corporate tax concessions and the ATO debt recovery for small businesses.
Temporary asset write-offs extended for one year
If you’re a small business with an annual turnover of less than $5 billion, you’ll be pleased to know the government’s temporary full expensing scheme has been extended for one year. Your business can immediately deduct the full cost of eligible depreciating assets that were purchased by your business after 7:30pm on 6 October, 2020 and first used or installed before 30 June, 2023. This also includes the cost of improvements to existing assets and there is no cost limit for this deduction
This extension gives you more time to use the incentive, to plan and buy new equipment. Very useful if you have more long term projects in the pipeline.
At this stage, normal depreciation arrangements will apply from 1 July, 2023.
Temporary loss carry-back extended
Initially announced in the October federal budget and now extended for a further year. For the 2021, 2022 and 2023 income years, if your business has an annual turnover of less than $5 billion, you can offset previously taxed profits from as far back as the 2018-2019 financial year. You can opt to do this when you lodge your 2020-21, 2021-22 and 2022-23 tax returns, as long as your business has lodged tax returns for the loss year and the previous five years.
If your company doesn’t want to do this, you can carry forward losses as normal.
There are limits on this so if you’re unsure, contact one of our specialist Kelly+Partners team members to help you out.
Tax cuts for SMEs
From 1 July, 2021, the corporate tax rate for small businesses will drop from 27.5 percent to 25 percent.
Self-assessing intangible assets
From 1 July, 2023, businesses will be allowed to self-assess the economic life of certain intangible, depreciating assets such as patents, registered designs, copyrights, and in-house software. The government hopes this initiative will encourage investment into the digital economy.
Student visa holders can work more hours
With international borders remaining closed until mid-2022, there’s a shortage of workers in hospitality and tourism. To tackle this shortfall in struggling industries, student visa holders who previously could only work up to 40 hours a fortnight can take on more work. This means business owners who hire student visa holders will have an easier time with rostering and staff attendance as the 40 hour limit is temporarily lifted.
Keeping people in work - JobMaker
Now that JobKeeper has officially ended (it finished up on March 28, 2021, despite calls for it to be extended), the focus has now shifted to keeping young people employed.
The Jobmaker credit was introduced in the October 2020 federal budget to boost hiring and employment across Australia. It was created for businesses to benefit from the partial subsidising of the wages of eligible young employees (those aged from 16-35 years).
Available for up to twelve months from the employment start date, a business can claim:
- $200 per week for hiring eligible employees aged 16 to 29 years
- $100 per week for hiring eligible employees aged 30 to 35 years
- up to $10,400 for each additional job created.
Keeping people in work - JobTrainer
Introduced in October 2020 to help boost youth employment, the JobTrainer subsidy has been extended until 31 December 2022.
The $1 billion subsidy allows thousands of Australians aged between 17 and 24 years to take advantage of low-fee or free courses in areas such as IT, aged care, childcare, hair and beauty and hospitality. The courses available will depend on each state’s own TAFE system. To be eligible, students must be:
- aged between 16 to 24
- receiving welfare
- unemployed, or;
- expected to become unemployed.
What does the employer receive? You get a 50 percent wage subsidy of up to $28,000 per year for hiring a young person in the scheme.
Superannuation increases every July
In a welcome move for employees, the government announced that the percentage of an employee’s wage contributed to their super account will increase in July each year. Beginning in 2021, superannuation will rise by 0.5 percent every year on 1 July, 2021 until 1 July, 2026, until it reaches 12 percent.
In just a few weeks’ time, superannuation will increase from 9.5 percent to 10 percent.
The usual talk of balancing the budget is now well and truly a thing of the past. At least for the next decade or so with our national debt set to reach an eye watering $1 trillion in 2025.