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2020 Federal Budget – the expected wins for small business

2020 Federal Budget: What small businesses need to know | Prospa
From hiring credits to funding for mental health coaching, Australia’s small businesses are expected to benefit from the 2020 Federal Budget.

At a glance

Here’s a snapshot of the big-ticket budget items that are likely to impact Australian small business owners:

  • Tax breaks designed to spend on new equipment, machinery and staff. 
  • $4 billion on JobMaker Hiring Credit– a 12-month scheme for employers who bring on young people (aged 16-35 years).
  • Instant write-offs for the full cost of capital assets used or installed by 30 June 2022.
  • Access to free mental health support for small business owners.

Following the 2020 Federal Budget announcement, Prospa CEO and Co-Founder, Greg Moshal, said: “Small businesses are vital to the recovery of the Australian economy and also our local communities. We’re pleased to see the Government prioritising support through the significant business tax relief initiatives and investment incentives announced.

“These are exactly the kind of measures that will give confidence to small businesses to start planning, investing and hiring for the future.”

Here’s a break-down of some of the potential wins for Australian small business owners in the 2020 Federal Budget:

1. JobMaker hiring credit

While the JobKeeper wage subsidy is set to be phased out as of late March 2021, a new $4 billion JobMaker Hiring Credit scheme will help subsidise businesses that hire younger workers.

Under the scheme, employers will receive a credit for each new job they create, for which they hire an eligible job seeker. The amount of the credit is dependent on the employee’s age – $200 a week for 16-to-29-year-olds, and $100 a week for 30-to-35-year-olds. Importantly, employers can’t claim both JobKeeper and JobMaker Hiring Credit at the same time.

Conditions will apply, including the need for the prospective employees to have been on JobSeeker, Youth Allowance or Parenting Payment benefits.

John Scutt, Managing Director of business advisory firm Lindfield Partners, believes JobMaker, tax breaks and measures such as putting $800 million on the table to help businesses improve their access to digital services are designed to act as building blocks for the post-COVID-19 recovery.

“There’s a big incentive to actively start to build or restart their businesses again,” he says.

The Federal Government has also announced $1.2 billion towards the Boosting Apprenticeship Commencements Wage Subsidy, which aims to get over 100,000 new apprentices and trainees into the workforce. This subsidy will cover the cost of 50% of the wages (capped at $7,000 per quarter) for commencing apprentices and trainees in any industry of any business size. The subsidy is currently set to end on 30 September 2021.

2. Tax breaks and profit-loss offsets

Businesses are estimated to get $31.6 billion in tax breaks via the 2020 Federal Budget. The hope is they’ll spend a proportion of that money on items to meet growing customer demand, such as  new equipment, machinery and staff, to help reboot the economy, according to the official 2020 budget website.

Under this new budget, eligible small and medium enterprises will be allowed to offset tax losses they incur up until 30 June 2022, through what is called a ‘loss carry-back’ scheme. This means a business that was previously profitable but is now making a loss because of COVID-19 can claw back some of the taxes it has paid in or after 2018-19.

“There’s a big incentive to actively start to build or restart their businesses again.” John Scutt, Managing Director of Lindfield Partners

BDO Australia Tax Partner, Mark Molesworth, says this contrasts with the response to the global financial crisis, when the Federal Government focused on incentives for household spending. Now it’s seeking to put money in the hands of businesses and encourage spending.

“The Government is not being shy about this,” he says. “It’s saying that this needs to be a business-led recovery.”

The Federal Budget also includes a $112 million package that will reset the fringe benefits tax (FBT) treatment of employee training.

Businesses will now be exempt from paying the 47% FBT on retraining that’s provided to employees who’ve been made redundant or who could soon be facing redundancy, so they can upskill and be given a new role in the business.

By doing this, employers will be encouraged to help workers transition to new employment opportunities within or outside their business.

The budget increases the small business entity turnover threshold from $10 million to $50 million, which will give more small businesses access to tax concessions for things such as car parking fees and portable electronic devices provided to employees.

3. Expansion of instant asset write-offs

In one of the biggest wins for small businesses, Treasurer Josh Frydenberg has revealed that small businesses will be among those that can instantly write-off the full cost of capital assets bought after 6 October 2020 that are first used or installed by 30 June 2022.

The expanded program costs $26.7 billion and will simplify depreciation rules, cut red tape and provide incentives to set up new manufacturing and business operations, drive growth and pump money into the economy.

That’s probably the biggest stimulus to small businesses that I can think of in a long time.” – Mark Molesworth, BDO Australia tax partner

According to Molesworth, the combination of the asset write-offs and the loss carry-back rules have the potential to inject confidence and unlock spending among business owners.

“That’s probably the biggest stimulus to small businesses that I can think of in a long time.”

4. Free mental health coaching

Acknowledging that the COVID-19 crisis has been a trigger for higher rates of anxiety and depression in the workplace, the Federal Government has revealed it will allocate $4.26 million to support the mental health of Australian small business owners.

To be delivered by Beyond Blue, the expanded service will deliver free one-on-one telehealth sessions with specially trained coaches.

“[The Government] is conscious that being able to deal with mental health issues in the workplace is still fundamental to the long-term success of SME businesses,” Scutt says.

For more detailed information on the measures proposed in the 2020 Federal Budget, read more here.

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The information in this post is provided for general information only and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information as at the date of publication, Prospa, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information for any reason, including due to the passage of time, or any loss or damage suffered by any person directly or indirectly through relying on this information.

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