Budget 2022: How does it affect small business?

The much-anticipated ‘pandemic recovery’ or ‘re-election’ Budget has been delivered by Federal Treasurer, Josh Frydenberg. This year’s focus is on small business incentives aimed at boosting the skills and capability of Australian workers and the digital infrastructure of Australian businesses. In addition, a range of temporary consumer confidence boosting measures to help ease the cost-of-living pressures have been proposed.

Here’s our summary of the big-ticket items that apply to small and medium sized businesses from tax incentives to business support initiatives.

Skills and training boost

Many businesses have felt the pain of not being able attract skilled employees, particularly in hospitality and technology. As part of addressing this gap, the Government will introduce a skills and training tax boost to support small and medium-sized businesses with an aggregated annual turnover of less than $50 million to train and upskill their employees.

This tax incentive will allow you to deduct an additional 20% of expenditure incurred on external training courses provided to your employees, and applies from 29 March 2022 until 30 June 2024.

Note: The external training courses will need to be provided to employees in Australia or online and delivered by entities registered in Australia. However, there are exclusions, i.e. in-house or on-the-job training and expenditure on external training courses for anyone other than your employees.

Technology investment boost

If your business has an aggregated annual turnover of less than $50 million you will be able to deduct an additional 20% of what you spent on business expenses and depreciating assets that support the adoption of digital technology by your business. For example. things like portable payment devices, cyber security systems or subscriptions to cloud-based services. This incentive will apply from 29 March 2022 until 30 June 2023.

Bottom line: If your business invests in skills, training and digital technology you could claim a tax deduction of $120 for every $100 spent in these areas up to $100,000 a year. 

State Business Covid-19 Support Programs

If your business received a payment from a state or territory COVID-19 business support programs, this income might be classed as non-assessable non-exempt income (‘NANE’) for income tax purposes until 30 June 2022. This includes the NSW 2022 Small Business Support Program, which we outlined in our previous blog: https://falangaco.com.au/small-business-support-program/

Upgrade to Tax Reporting Systems

For businesses with employees, you will be able to choose to have PAYG instalments calculated based on current financial performance, extracted from your business accounting software (with some tax adjustments). This will ensure instalments reflect current performance, giving you a clear picture of your business’ cash flow. However, the systems aren’t anticipated to be in place until 31 December 2023.

A similar streamline will apply to reporting taxable payments reporting data, where you will be able to synch these with your activity statements reporting cycle.

Varying the GDP uplift factor for PAYG and GST instalments

The Government will set the GDP uplift factor for PAYG and GST instalments at 2% for the 2023 income year. This is lower than the 10% that would have applied under the statutory formula and will provide cash flow support to small businesses, including sole traders and other individuals with investment income.

Small Business Support Package

To help small businesses recover from the economic disruption of the pandemic, the Government will fund a range of initiatives over the next 3 years including:

• Reporting: $10.4 million on enhancement and redesign the Payment Times Reporting Portal and Register to improve efficiency and reporting.
• Financial capability: $8.0 million to the Australian Small Business and Family Enterprise Ombudsman to work with service providers to enhance small business financial capability.
• Mental health: $4.6 million to support the New Access for Small Business Owners program delivered by Beyond Blue to continue to provide free, accessible, and tailored mental health support to small business owners.
• Financial debt counselling: $2.1 million to extend the Small Business Debt Helpline program operated by Financial Counselling Australia to continue to provide financial counselling to small businesses facing financial issues.

Personal Income Tax

You may be eligible to receive a once-off $420 ‘Cost of Living Tax Offset’ for the 2022 income year. This will be provided in the form of an increase to the existing Low middle income tax offset. This will increase the maximum benefit to $1,500 for individuals and $3,000 for couples, and will be paid from 1 July 2022 when you submit your personal tax return for the 2022 income year.

How Falanga & Co. can help

The ‘devil is in the detail’ and there is quite a lot to unpack for small and medium businesses in this year’s proposed Budget. If you have any questions about how these incentives will apply to your business, or you’d like to talk to us about other ways in which we can help, please get in touch.