On Tuesday 6 October 2020, Treasurer Josh Frydenberg delivered the federal budget which has resulted in some significant tax cuts and even bigger infrastructure projects. If you look deeper into the Government’s Budget Paper, you will see some pretty nice wins for startups and small business. So, let’s breakdown the key takeaways for startups and small business under the budget.
Grants & Funding
The Government has revealed its plans for its second Women’s Economic Security Package. The package includes increases to grant funding over the next few years for the Women’s Leadership and Development Program and the Boosting Female Founders Initiative. There is also a funding boost for initiatives for girls and women to gain STEM skills and capabilities.
Tax – Concessions & Incentives
The Government is rolling out some sweet tax concessions to help reduce the amount of tax small businesses will pay. There are a few tax incentives on the cards for businesses too.
1. Small Business Tax Concessions
Currently, the $10 million small business entity turnover threshold restricts many businesses from accessing a range of small business tax concessions. But, under the budget, the Government proposes to increase this threshold limit to $50 million, resulting in businesses with an aggregated turnover between $10 million to $50 million now having access to new tax concessions. Below are a couple of key takeaways:
- From 1 July 2020:
- eligible businesses will be able to immediately deduct certain startup expenses and certain prepaid expenditure.
- From 1 April 2021:
- eligible businesses will be exempt from the 47 per cent fringe benefits tax (FBT) on car parking and multiple work-related portable electronic devices (such as phones or laptops) provided to employees.
2. R&D Tax Incentive
There are further refinements of the Research and Development (R&D) Tax Incentive for smaller companies with an aggregated annual turnover of less than $20 million. The R&D Tax Incentive helps to offset some of the costs your business puts into eligible Research & Development. Under this budget, for eligible businesses, the refundable R&D tax offset will be set at 18.5 % points above the company’s applicable tax rate.
3. Fringe Benefit Tax
FBT is payable when an employer provides training to redundant, or soon to be redundant, employees and that training does not have sufficient connection to their current employment. Under this budget, employers can claim an exemption from FBT where the ‘benefit’ may not be related to their current employment. This aims to incentivise employers to retrain their redundant employees in preparation for their next role or career.
4. Instant asset write-off
Earlier this year, the Government announced an increase to the instant asset write-off threshold to $150,000 and it expanded access to include businesses with an aggregated annual turnover of less than $500 million. The Government has extended the $150,000 instant asset write-off for an additional six months until 31 December 2020.
5. Cashflow boost
The Government is providing cash flow boosts of between $20,000 and $100,000 to eligible small businesses that employ individuals to support employers during COVID-19. Eligible businesses will automatically receive these cash flow boost payments upon lodgement of relevant activity statements for the March to September 2020 reporting periods.
Workplace & Recruitment
From 5 October 2020 to 30 September 2021, businesses of any size can claim the new Boosting Apprentices Wage Subsidy for new apprentices or trainees who commence during this period. Eligible businesses will be reimbursed up to 50 per cent of an apprentice or trainee’s wages worth up to $7,000 per quarter, capped at 100,000 places. The wage subsidy aims to support school leavers and workers displaced by the COVID-19 related downturn to secure sustainable employment.
- Fintech – will see a reduction in regulatory barriers over the next few years and enhanced support from the Government aimed to help springboard fintech startups into international markets and encourage foreign investment in the fintech industry within Australia.
- Blockchain – will see a reduction in regulatory barriers over the next few years with funding allocated to support industry-led pilots in demonstrating blockchain technology and its application all aimed at encouraging a broader take-up of blockchain by Australian businesses.
- Manufacturing – lots of funding allocated to a range of sectors and areas, including electric vehicles, technology, space industry, pharmaceuticals and medical products, recycling and clean energy.
- Construction & Infrastructure – all states and territories will see infrastructure investment and new projects kicking off.
- New Energy – there will be an increase in investment in new and clean energy options by continuing their funding of renewable energy sources and investing in low emissions technologies, network infrastructure, dispatchable generation and reliable supplies in the National Electricity Market.
- Science – will see a funding boost for the CSIRO to support essential scientific research.
Other great news!
- Mental Health – The Medicare Benefits Schedule (MBS) funded psychological services will see an increase from 10 to 20 psychological sessions. This will provide people with access to the right support and tools they need to respond to life’s challenges.
- Aussie Ocean Support- Over the next four years, we will see a $47.4 million boost in funding to support the health and management of Australia’s precious oceans, including the clean up of discarded fishing nets.
- Closing the Gap Funding – Additional funding has been allocated to support the National Agreement on Closing the Gap to achieve equality for Aboriginal and Torres Strait Islander people in health and life expectancy.
- Commencement of the National Consumer Data Right- Australia will begin its roll-out and implementation of the National Consumer Data Right with the government funding implementation in the Energy section. There is also additional funding to the Australian Competition and Consumer Commission (ACCC) to continue to progress the key elements of the Consumer Data Right.
Suppose you want to know more about the benefits for your business from a tax point of view. In that case, we’d recommend that you reach out to your accountant or tax professional. They will know the deeper ins and outs of the tax benefits and how they apply to you and your business.
The team at Bolter are here on standby if you need our help, guidance and support. We’ve got your legals covered, so you can focus more on your business and making it happen. Give us a call sometime.