Budget 2022 - Small and Medium Business

Budget 2022 -  Small and Medium Business

By

Tristan Bowman, Director
Anne-Marie Tassoni, Partner


Posted 30 March 22

Recent budgets have focused on incentivising capital expenditure through tax breaks and innovation, themes which have been carried through to this year’s Federal Budget but with firm focus on skills and regional development. Whilst it might seem light on in terms of any real productivity reforms, there are incremental red tape cuts which will help business run more smoothly and the focus on skills will deliver dividends, but perhaps not immediately.

Skilled worker shortage

Labour shortages have proved problematic for business across Australia and will continue until migration rates return to pre-pandemic levels. To address that, the Coalition government has unleased $6.5 billion of spending across apprenticeship and training programs.

Apprenticeships Programs

$2.8 billion over five years to increase apprenticeship take up, including $5,000 payments to apprentices over the first two years of their apprenticeship and $15,000 to qualified employers by way of wage subsidies (10% for first and second-year apprentices and 5% for third year).

Example:
Bob is an apprentice doing his Certificate III in Bricklaying. Bob will receive $1,250 every six months for two years to help with the cost of his training. Bob is paid $40,000 a year and therefore his employer, Larry’s Layers, can access payments of $4,000 in his first and second years, and $2,000 in his third year for a total of $10,000 of incentive payments.

The employer cash incentives might seem generous, but they are significantly lower than the 50% subsidy currently available until 30 June 2022. Using the example above, Larry’s Layers is $11,000 worse off under the new scheme.

Priority Skills Training

In conjunction with states and territories, $3.7 billion to deliver an additional 800,000 training places. What this actually means is unknown as state and federal governments must first resolve a new National Skills Agreement.

Targeting specific skilled shortages is admirable and something prior governments have attempted with varying degrees of success. The timing of these skills hitting the labour market will be some way off, but the measures do provide incentives to draw school-leavers away from less-productive university degrees and into vocational education.

Upskilling through the powers of deduction

Small business with turnover under $50 million a year will be able to claim additional deductions for external training courses provided to employees, either in person or online.

For every $100 spent by small business on these courses, they will be able to deduct $120.

Example:
Bob’s bricklaying course is going to plan but he needs some help with his admin skills to manage jobs. Bob’s employer, Larry’s Layers, enrols Bob and his nine colleagues in an Administration course at Swinburne University at a cost of $430 per employee. In addition to the ordinary $4,300 deduction, Larry’s Layers can claim an additional $860 deduction, being 20% of the expense, which reduces Larry’s Layers tax liability by a further $215.

Digital spending program

This budget gives a nudge to less tech-savvy small businesses still operating by paper invoicing. The digitisation program is broad ranging and allows the same 20% additional deduction as the above training boost program for spend that relates to “digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud-based services.” The deduction only applies to spending from now until 30 June 2023. Cynically, you could argue this is an attempt to move business away from undeclared cash earnings, but at a total cost of $1 billion over three years, it is not insignificant.

PAYG relief

Small business will receive a cash flow boost through reductions to Pay As You Go (PAYG) and GST instalments, decreasing the GDP uplift factor from 10% to 2%.

In totality with individual PAYG instalment payers, this will add $1.85 billion in cash flow support in FY2023. The total cost to the Tax Office is nil as any overpaid amounts are eventually refunded back on lodgement of the tax return. However, it is a simple change that will have a positive effect on freeing up cash flow in the immediate term.

Further flexibility for Employee Share Schemes (ESS)

The 2021 budget included a technical, but important change to the taxation of Employee Share Schemes. This year’s budget goes a step further and increases the limit on the value of shares an employer can issue to their employees, up from $5,000 to $30,000.

In combination with last year’s changes, it puts Australia on somewhat of an equal footing with international peers and will continue to foster a start-up culture.

Other measures

There are several smaller measures that deserve a mention:

  • $80 million to help small and medium enterprise re-establish their presence in overseas markets.
  • Better access to tender for smaller Commonwealth contracts.
  • $146.5 million to assist the tourism sector, including travel agents.
  • Support for small business in dealing with unfair dismissal and general protections disputes.
  • Funding for small business owners to access free mental health support.

Budget 2022

As partners in your investment journey, we monitor, examine and navigate change. The Federal Budget is one such factor in our highly considered investment strategy and wealth management process.

This article is one part of our 2022 Budget series. To read more of our Budget commentary, click the links below:

Individuals and Families
Economic and Fiscal Implications

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