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Federal Budget 2021: What’s small business hoping for this year?

There’s a strong hope that this year’s Budget will help some of the SMEs still struggling post-pandemic to recover from the impact of the coronavirus pandemic more quickly.

The Federal Budget will be delivered in Parliament by Treasurer Josh Frydenberg on Tuesday 11 May, 2021.

Key takeaways:

  • Budget Night will be held on 11 May this year
  • Small businesses that have been hit hardest by pandemic-related disruption are hoping to see targeted tax incentives and funding 
  • Digital enablement and more support for women may become hot topics on the night, as they did in 2020

Pre-budget submissions have been collated, and SMEs don’t have much longer to wait to understand whether the SME-friendly budget they’re hopeful for will eventuate.

Here are some of the many things that small businesses are hoping for on their wish-list.

A more even playing field

Mark Chapman has his finger on the pulse.

The director of Tax Communications at H&R Block says that SMEs are hopeful to see a more favourable outcome in this year’s Budget, given the amount of focus given to bigger business, construction and infrastructure in 2020.

“The last Budget contained some major improvements, but the consequences of those improvements flow unevenly – small businesses lost out, and the government has a chance to rectify those issues this time,” said Chapman.

Small businesses were hit particularly hard by the pandemic, and the financial toll on many industry sectors was significant and for some businesses, insurmountable. Hospitality, transport and retail were among those hit hard. And while business confidence has improved in recent months, it was from a very low base after serious disruption during periods of lockdowns and travel restrictions.

“In a broader sense, small businesses are hoping for a business-friendly Budget which doesn’t contain any measures hostile to businesses, such as extra costs or extra regulation,” said Chapman.

Meaningful impact needed

In the last Budget, the government introduced a Temporary Full Expensing (TFE) measure to allow businesses to realise a loss from capital purchases. It also amended the rules for companies with losses to carry those losses back to earlier years.

This means that companies can obtain a loss from (TFE) then carry the loss back to earlier profitable years resulting in a cash tax refund.

“Larger businesses can opt out of the TFE to prevent the creation of an unwanted tax loss. Smaller businesses [using simplified depreciation rules] cannot — and then typically also cannot carry losses back against earlier year’s profits either,” said Chapman, calling out a clear difference in treatment for small businesses, which have less opportunity to opt out.

A further welcome change would be the small business Capital Gains Tax concessions.

“At the moment, for most income tax purposes, a small business is defined as any business with a turnover less than $50 million, but the threshold for the small business CGT concession is still at $2 million — a wide disparity which makes no sense.”

Bolster tech and innovation

The R&D tax incentive helps to offset some of the costs you put into eligible Research & Development. But what this incentive will bring moving forward is unknown.

Brodie Haupt is the chief executive of digital lending and payments platform WLTH. He thinks it’s important that the government continues to build on the changes from last year, particularly when it comes to targeted business relief for those still in need of support.

“In this year’s Budget, there’s a big opportunity to help the technology industry to continue to grow and develop, giving the opportunity to early-stage tech companies and continue to support the growth in the technologies industry to improve business in Australia.”

Revisit subsidies

Now that JobKeeper payments have ended, it’s important for the government to revisit the JobMaker subsidy.

“There has only been a small number of businesses taking advantage of the offer, and for SMEs, it provides a great opportunity to hire staff, at a subsidy,” said Haupt.

This could bring new workers into a business with a fresh approach, as well as skilled workers who have been receiving parenting payments and a subsidised rate, he says.

A digital lifeline

Two constant pain points facing the economy are that businesses are increasingly left behind by digitisation, and regional and rural areas need more businesses and young people. It may not seem it, but the internet is a common thread between these challenges, according to small business owner Nathan Schokker.

Based in Brisbane, Schokker also represents and advocates for thousands of SMEs as president for the Brisbane Junior Chamber of Commerce.

“SMEs are outgunned with digitisation time and time again, often simply because they don’t have internet reliability, or the cost of internet is too prohibitive – even in metro areas,” he said.

“When it comes to regional and rural areas, it’s even more dire, with vast areas seeing zero coverage, or such a small amount it’s not worth trying to use it – plus, it’s even more expensive. Then we wonder why these regions find it hard to retain, let alone attract businesses and young people.”

By unlocking and treating internet as a basic human right, SMEs won’t have to hold back or reconsider a tech change or adaption, and people won’t have to worry about where they live. Best of all, most of the infrastructure to carry this forward is already in place, he says.

For many SMEs, taking the first leap to digital is the hardest. MYOB has been calling for the government to consider incentivising the uptake of digital cloud-based tools to enable those not online to get up to speed.

“The TFE works well predominantly for tangible assets, like a computer or a tablet,” said MYOB tax expert Jacqueline Lim.

“With the world moving to subscription-based digital tools however, there’s an opportunity to bridge that adoption gap for small businesses by incentivising uptake of these types of technology,” she said.

“A tax incentive would take away one less thing of concern, that is, cost.”

Financial help for startups

While there are measures and grants in place to support startups and entrepreneurs, more could be done in our post-pandemic world, according to small business owned Sharon Melamed.

The founder of supplier site Matchboard believes that the government offers support for innovation, in the form of grants or funds to solve problems.

“We certainly have many pressing problems to solve in society, and if the government can identify them and offer entrepreneurs strong incentives to solve them, it’s a win-win for all,” said Melamed.

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