Top budget announcements for small business

The Coalition government delivered its budget on Tuesday evening, setting out its spending plans over the next year, given it remains in power following next month’s federal election.

In what has been declared a win for the SME sector, the government revealed it is further increasing the instant asset write-off cap to $30,000, after it announced plans in January to lift it from $20,000 to $25,000 and extend it out until 30 June 2020.

Medium-sized businesses with an annual turnover of less than $50 million have also been added to the scheme, reportedly covering an additional 22,000 businesses employing 1.7 million Australians. 

That policy is predicted to cost the budget $400 million over four years.

According to the Treasurer, more than 350,000 businesses have already taken up the instant asset write-off, with more set to join shortly.

The Institute of Public Accountants has welcomed the increase in the instant asset write-off, but is disappointed that, in leaving the deadline at 30 June 2020, the government has ignored calls for the scheme to be made permanent.

“The increase in the instant asset write-off from $20,000 to $30,000 along with the increase in the turnover threshold from $10 million to $50 million is welcomed but we believe this should be a permanent fixture of the tax system and not just an extension through to 2020,” IPA CEO Andrew Conway said.

“Every year this initiative, a signature policy recommendation of the IPA, is a dangling carrot come the federal budget. It needs to be permanent to give small business certainty in making reinvestment in their business decisions.”

Increases to unincorporated small business tax discount rate brought forward

The government also announced as part of its budget that it will bring forward the increases to the unincorporated small business tax discount rate, rising from 8 per cent currently to 13 per cent in 2020-21 and to 16 per cent from 2021-22. 

"While it is also pleasing to see that the unincorporated small business tax discount will be increased to 16 per cent by 2021-22, it is disappointing, however, that the cap has remained up to $1,000 each year," said Mr Conway.

"This $1,000 cap is now out of kilter with company tax rates that have been progressively reduced in recent years, putting unincorporated entities at a disadvantage."

Furthermore, the government pledged to cut taxes for “hard-working Australians” by more than doubling the low- and middle-income tax offset.

Low- and middle-income earners will receive a benefit of up to $1,080, that's up to $2,160 for a dual income family. Taxpayers will be able to access the offset after they lodge their end of year tax returns from 1 July 2019, which is in 13 weeks.

The IPA, however, explained that although some of Australia’s unincorporated small businesses may welcome the news of personal income tax cuts, many will not reap the benefit this year.

"The current low- and middle-income tax offset has in effect been increased from $550 to a new maximum of $1,080 but only for those within the income bracket level of $48,000 to $90,000. Those beyond this bracket will be waiting until 2024-25," Mr Conway said.

"In other words, tonight’s announcement provides an increase of $550 in tax offset, for the chosen few."

Skills package

Moreover, the budget includes funding for a new skills package in the amount of $525 million, which is seen to create 80,000 new apprenticeships in sectors with skill shortages.

Additionally, businesses that hire apprentices in these industries will receive incentive payments worth $8,000 per placement, double the previous amount.

The government also pledged to invest $62 million to boost literacy, numeracy and digital skills and provide further funding to increase participation for women and girls in STEM. In order to remedy youth unemployment in regional areas, it announced 10 "training hubs" across Australia.

Apart from reaffirming its commitment to establishing a $2 billion Australian Business Securitisation Fund, the government has provisioned over $60 million in the budget to help SMEs looking to capitalise on the recent free trade agreements signed by the government.

Black economy

The government on Tuesday reiterated its focus on the black economy, revealing it is extending funding for the ATO's Tax Avoidance Taskforce until 30 June 2023.

The extension is expected to raise a further $4.6 billion in liabilities over the next four years.

It also confirmed additional resources will be provide to financial regulators following the banking royal commission.

Economic outlook

The government has forecast a budget surplus of $7.1 billion in the next financial year. Mr Frydenberg also outlined the growth of surpluses to a total of $45 billion over four years. 

“Surpluses will continue to build toward 1 per cent of GDP within a decade,” the Treasurer said.

“Through disciplined budget management Australia is again well-positioned to respond to challenges both here and abroad.”

Additionally, the Coalition promised to eliminate debt by 2030, if it remains in government, while predicting net debt of $360 billion next financial year.