What it means for your business
In an environment of economic uncertainty due to a war in Europe, a continuing pandemic in addition to a looming election, on the 29th of March 2022 Treasurer Josh Frydenberg handed down a Federal Budget with very much a short-term focus.
The Morrison government appears focussed on cost of living measures, rolling back restrictions and other health policies, opening up borders and withdrawing pandemic support to businesses. As quoted by the Treasurer, he has “handed the reins of our economy back to the private sector, for business-led growth, to drive us forward” and “normalise our fiscal settings”.
In handing the reins back to the private sector, it has done so with a budget that has very little in it for the small to medium business sector. It is the performance of the economy that will be the biggest impact on small and medium business. Australia’s future is riding on the Federal Budget 2022–23.
For business, the 2022 Federal Budget is focussed on tax breaks and employee training – in addition to support for the tourism industry and major spending in infrastructure, health and defence.
The key announcements for business included:
Employee training boost
The good news is investment in employee training, skills and technology provide some benefits to all businesses. A 20% bonus deduction for upskilling employees via eligible training courses and expenditure on eligible digital technologies within businesses present opportunities for all businesses.
These external courses need to be provided to employees in Australia and provided by entities registered in Australia. Further detail has not been provided, but we expect registered will mean an RTO. The bonus for expenditure in the 2022 financial year will be claimable in the tax return for the 2023 year. This bonus applies for expenditure between 29 March 2022 and 30 June 2024.
Technology Investment Boost
Small businesses will be able to deduct an additional 20% of expenditure incurred on expenses and depreciating assets that support their digital adoption (annual cap of $100K). This is expected to include portable payment devices, cyber security systems or subscriptions to cloud based services. The bonus for expenditure in the 2022 financial year will be claimable in the tax return for the 2023 year. This bonus applies for expenditure between 29 March 2022 and 30 June 2023.
Employee Share Schemes
For those small businesses wanting to formalise an incentive arrangement with their employees, there are proposed changes to the rules around Employee Share Schemes to expand access and reduce some of the red tape.
The commencement date for these changes have not yet been announced – if you are keen to explore your options in this area please contact us.
Cost of Covid testing
The cost of taking a COVID19 test to attend a workplace are tax deductible for individuals from 1/7/21. Similarly, if a business provides tests to employees for this purpose, the ‘benefit’ will not be subject to Fringe Benefits Tax.
No change to the previously announced increase in the SG rate which will increase to 10.5% from 1 July 2022
Instant asset write-off (from previous budgets)
Will not extend past 30 June 2023
Australian Apprenticeships Incentive Scheme
Will come in to play from 1 July 2022 for employers and apprentices in “Priority Occupations”
What does the Federal Budget mean for the agricultural industry and regional areas?
Due to the growth of the agricultural industry over the past 2 years, together with current high commodity prices, the government has not implemented any major changes specifically for the agricultural industry.
While input costs are higher than they’ve ever been together with significant supply issues with obtaining inputs like fertiliser and chemical, no major updates have been provided at this stage.
Key announcements include:
- Rural and agricultural businesses have opportunity to take advantage of Australian Carbon Credit Units (ACCUs). Farmers will be able to treat revenue from the sale of carbon credits as primary production (PP) income giving access to income tax averaging as well as utilising FMDs to offset against it.
- Carbon credits (and obtaining them) have become more commonplace within the agricultural sector over the past few years so this announcement does provide more incentive for farmers to consider projects they can implement to access these provisions. Revenue from carbon credits will be recognised in the year of sale. This will commence from 1 July 2022.
- For eligible patents linked to agricultural innovations and patented technologies with the purpose of lowering carbon emissions, any eligible corporate income will have an effective tax rate of 17%. This is only for rights and patents either granted or issued after 29 March 2022 and for income years starting from 1 July 2023.
- A Regional Accelerator Program is expected to provide $2b over 5 years for economic growth and productivity in regional areas in the form of apprenticeships, housing and addressing labour shortages in regional areas.
- As part of Australia’s plan for a stronger future, the Government will reduce fuel excise by 50% for 6 months (ending 28th September 2022). This will see excise on petrol and diesel cut from 44.2 cents per litre to 22.1 cents per litre. The fuel excise reduction over the next 6 months means businesses that use heavy vehicles for road freight transport WILL NOT be able to claim fuel tax credits for the next 6 months.
While there are some benefits for small and medium businesses in the budget, particularly in relation to upskilling our workforce and removing red tape there are still a number of questions that remain unanswered.
Will businesses need to brace for wages growth in excess of what they have seen for the last few years?
Banks are predicting interest rates could rise as early as June 2022 and Australians could be paying the highest interest rates in the world. How many interest rate rises will we see over the next year or two to counter the anticipated inflation?
Economic performance across the economy will be key for business going forward.
Get in touch
Get in touch with us to learn more about how we can help your business take advantage of these measures.