2021 Federal Budget

2021 Federal Budget – What it means for businesses

Key points:

  • The instant asset write-off allows businesses to claim deductions upfront, rather than through depreciation
  • Businesses have already been taking advantage of the scheme to scale up and meet increased demand
  • The budget also includes tax breaks for gaming companies and microbreweries and distillers

Temporary full expensing – The temporary investment tax incentive announced in last year’s budget has been extended for a further 12 months until 30 June 2023. Businesses with a turnover up to $5 billion will be able to deduct the full cost of any eligible asset they purchase for their business, including the cost of improvements to existing assets, until 30 June 2023.

Temporary loss carry-back provision: Similarly, companies will now be permitted to carry back tax losses for an extra 12 months from the 2019-20, 2020-21, 2021-22 and now 2022-23 income years to offset previously taxed profits in 2018-19 or later income years.

Tax cuts: The corporate tax rate for SME’s will drop to 25 per cent from 1 July 2021 from 27.5 per cent.

Extension of loan scheme for small business: The government is extending the SME Recovery Loan Scheme which builds on the SME Guarantee scheme. It includes an increased government guarantee of 80 per cent, a higher maximum loan size of $5 million and maximum loan term of 10 years with interest rates capped at around 7.5 per cent. The Scheme is available to SMEs with a turnover of up to $250 million that were recipients of the JobKeeper payment between 4 January 2021 and 28 March 2021 or were affected by the floods in eligible Local Government Areas in March 2021

Digital economy strategy: The Government will provide $1.2 billion over six years from 2021-22 for the Digital Economy Strategy. For SMEs, $53.8 million over four years from 2021-22 to create a National AI Centre and four AI and Digital Capability Centres to drive and support SMEs to adopt and use transformative artificial intelligence technologies; $15.3 million over three years from 2021-22 to promote and accelerate the adoption of e-invoicing by businesses and across all levels of Government; $12.7 million in 2021-22 to expand the Australian Small Business Advisory Service Digital Solutions program reach to up to 17,000 small businesses.

Other measures:

  • The Government will allow businesses to self assess the economic life of certain intangible assets (such as patents) for tax depreciation purposes to encourage investment and hiring in innovative activity.
  • Government is broadening the scope of the Administrative Appeals Tribunal to help SME’s put a pause on any debt recovery action launched by ATO until the underlying dispute is resolved. More funding also made available the Australian Small Business and Family Enterprise Ombudsman to continue helping small businesses resolve disputes.
  • New efforts to give SMEs a bigger slice of the procurement pie. Government will provide $2.6 million over four years from 2021-22 to support and strengthen participation in Commonwealth procurement. Funding includes: scans of procurements to map any common ‘pain points’ for SMEs; increased communication of procurement opportunities to potential suppliers; targeted Government Procurement Learning Events for SMEs about how to access supply chains and work in major project environments; and a pilot of direct engagement of SMEs by the Department of Industry, Science, Energy and Resources for contracts up to $200,000.
  • Removal of current exclusion that applies to deductions for the first $250 spent on education courses, which will give more business owners (and their employees) a reason to learn new skills.
  • Small craft brewers and distillers will benefit from an increase in the cap for claims on the Excise Refund Scheme from $100,000 to $350,000 from 1 July 2021.
  • Almost $130 million to encourage entrepreneurship through the New Enterprise Incentive Scheme (NEIS) and Entrepreneurship Facilitators Program support people who want to start, run and grow their own business.

Overall, SMEs were among the winners in the 2021-22 budget.