How the 2022-23 Federal Budget Affects Businesses
It’s been several months since the announcement of the 2022-23 Federal Budget. The government provides numerous programs that will benefit businesses, especially small businesses. The focus is on economic growth whilst increasing employment rates as Australia moves forward from the pandemic.
This blog gives you a recap of the critical issues that the Federal Budget aims to address. Furthermore, we talk about the subsidies or schemes from which your business could benefit.
Proposals to Manage Shortages in Skilled Labour
Australia is facing a skilled labour shortage, but it is not a new challenge. The country has had this dilemma for many years now. Skilled labour or the workforce segment with specialised skills, training, and experience (not just routine jobs) is not enough. The Australian Bureau of Statistics states that although the country’s unemployment rate is only 3.9%, over 423,000 job vacancies exist. About 31% of Aussie firms find it hard to hire suitable workers.
Currently, the stats show that this shortage exists in every industry. To answer this pain point, the government seeks to support businesses in hiring and retaining skilled workers through boosting skills and training. The 2022-23 Federal Budget adds:
- A 120% bonus deduction for external training courses, which will help upskill employees
- Extensions for Boosting Apprenticeships Commencement or BAC (introduced in 2020) and Completing Apprenticeships Commencements or CAC (introduced in 2021)
- The Apprenticeships Incentive System, which simplifies subsidies, including CAC and BAC, merging them all into a single program starting July 2022
To qualify for the skills and training boost, the business should have an aggregated annual turnover that does not go over $50 million. If you meet the requirement, you can get a 120% tax deduction for every $100 you spend on training courses for your employees. The courses can either be in Australia or online but should only be delivered by Australian entities. Start today because the boost only applies to expenditures incurred from 29 March 2022 to 30 June 2023.
For small and medium enterprises (SMEs), the SME Recovery Loan Scheme is extended until 2023. In this scheme, SMEs dealing with coronavirus’ economic impacts can get easier access to cheaper loans that can be used to invest and recover from the pandemic’s aftereffects. The scheme is also available to self-employed individuals, as well as non-profit organisations that meet the following criteria:
- Turnover does not go over $250 million
- JobKeeper recipients from 4 January 2021 to 28 March 2021
- Located in areas affected by floods that occurred in March 2021
More information about the Scheme can be found on the Treasury’s website.
“Bonus” Relief on Digitisation
You do not have to be a fan of technology to notice the massive wave of businesses embracing digital transformation. Perhaps your firm is one of those seeking to deal with operational challenges through digitisation. If so, you’re in luck. The government has introduced the Technology Investment Boost, a scheme that gives small businesses a 120% deduction of their expenses. It’s also applicable to depreciating assets.
So, for instance, you pay for cloud-based services or do e-invoicing. You can get a bonus of 120% off for every $100 spent. Please note that the deduction is capped at $100,000 annually per income year and only applies to business expenses and depreciating assets.
But first, you need to know if you qualify. Only small businesses with less than $50 million in annual turnovers that use digital solutions can benefit from the 120% cost reduction. That includes services such as web design and cyber security. The boost immediately begins on 29 March 2022 and up until 30 June 2023.
Cash Flow Management Rewards
Supply chain issues continue to increase the cost of goods. The government promises to provide relief to individuals and businesses with a one-off cost of living offset. It also includes a fuel excise cut for six months.
Aside from the mentioned announcements, qualifying businesses will also receive temporary relief measures in consideration of the 10% Gross Domestic Product uplift rate. This rate applies to their PAYG and GST instalments, which effectively lower to 2% for 2022-23.
The tax savings will help SMEs manage their cash flow, especially in today’s economic challenges, by using them for appropriate instalment methods. Restrictions apply, particularly for GST instalments, where qualifying SMEs should have up to $10 million aggregated turnover only and $50 million for PAYG instalments.
Other Small Business Measures
Additional business measures were also announced, including:
- $5.6 million budget for dedicated units for unfair dismissal, protections against general disputes, and other similar cases
- $5.4 million to be provided for existing legal services to individuals, businesses, and producers in Queensland and New South Wales affected by the flood
- COVID relief per industry: $38 million for independent cinemas and other businesses in the arts sector, $146 million for the tourism industry, and $80 million for the overseas presence of SMBs
- $6.6 million budget for IT infrastructure to enhance single touch payroll (STP)
- Fuel and alcohol businesses with annual revenue of less than $50 million can lodge and pay excise and similar customs duty quarterly, rather than weekly or monthly, starting 1 July 2023
Along with the benefits mentioned above, the government also announced its plan to invest $650 million, which will go into the ATO’s Tax Avoidance task force to extend its operations until 2025.
Five Key Strategies That Will Help Your Business
Despite the low unemployment rate in the country, businesses continue to face a great number of challenges, including supply disruptions, higher costs, weak demand, and labour shortages. These issues may likely ease over time, but when? And during these uncertain times, small and medium businesses still require robust support from the government. With the Federal Budget publicised, business owners can take actions to strengthen their performance and achieve longevity. Here are our five recommendations:
1. Use Incentives to Upskill Workforce
The additional deduction for external training courses has no cap. You have every reason to use the skills and training boost to assist your workers in improving their knowledge and skills. Remember that the training should be provided by an Australian entity. Plan the courses accordingly because the added deduction incurred in 2022 cannot be claimed until 2023.
2. Invest in Business Digitisation
Should you invest in technology and digitising some of your services? All signs point to yes. You have one more boost to take advantage of before the temporary full expensing (TFE) measures end in June 2023.
This additional deduction is applicable for up to $100,000 on yearly digital adoption expenses, such as:
- Cloud-based service subscriptions
- Cybersecurity systems
- Portable payment devices
Make sure that you read more about business digitisation incentives since they can affect your tax savings per year. However, considering the 25% tax rate for base rate entities, tax savings will be capped to $25,000 yearly.
The deductions are only applicable to costs incurred in FY22, which you can only claim in FY23. If you are qualified for TFE, it’s important to note that the digital or technological asset is already installed and ready for use on or before 30 June 2023. Plan, so you take advantage of the mentioned incentives.
3. Don’t Ignore the Relevance of the Cost of Living
The Federal Budget focused on people’s cost of living. But this key theme is pertinent to SMEs. According to the government, the petrol excise rate will be halved temporarily for six months, starting the end of March.
Small and medium-sized businesses with less than $10 million in annual aggregated turnover should be aware of their eligibility for lower GST instalments. Meanwhile, you can benefit from lower PAYG instalments if you have less than $50 million in yearly turnovers. The Federal Budget included this measure to help reduce the Gross Domestic Product uplift factor on GST instalments and PAYG income tax. Instead of 10%, the rate applied will only be 2% for FY2023.
4. Digitise Your Tax Reports
Tax reporting measures include:
- The choice to lodge Taxable Payment Reports electronically alongside your Business Activity Statements (BAS)
- The use of accounting data in real-time to compute your PAYG tax instalments
- The ability to share Single Touch Payroll (STP) information with ATO and other revenue offices to make filling payroll tax returns easier
Digitising your records means increased data matching and sharing, as well as more pre-filling. However, it helps reduce your business’ compliance costs. The Australian Taxation Office also gains from digitisation by making it easier to match and share information with other revenue authorities.
5. Understand the Role of the ATO Tax Avoidance Taskforce
The ATO has received more funds to ensure everyone, especially multinationals, large businesses, private companies, and high-wealth individuals, pay their taxes accordingly. This extra funding is expected to increase government tax revenue by $2.1 billion by 2025.
As a business owner, you should anticipate more reviews and other programs that the ATO will run to track individuals and companies with tax issues. According to the ATO, problem areas are capital gains, trusts, Division 7A, and international dealings.
The government is commended for its dedication to decreasing the regulatory burden, especially on small businesses. With the 120% tax deductions, support for digitisation practices, and many business packages, SMBs can find ways to address key impediments to their operations. However, the 2022-23 Budget is not perfect. There are inadequacies, including the lack of relief measures to solve immediate problems, such as workforce shortages.
Do you have any questions about the Federal Budget 2022-23? What about other tax deductions you can claim? Let us help you find the answers and get further information. Contact an Origin Business Consultant today.