Budget 2021: What's in it for Small and Medium Business

The recently announced 2021-22 Federal budget includes a range of support for Australian business owners and employers, that could assist in the recovery from COVID-19. Here’s what’s in it for small and medium-sized businesses.

Temporary full expensing

Known as the ‘instant asset write-off scheme’ in previous iterations, one of the most popular tax incentives for small and medium businesses has been extended for a further 12 months until 30 June 2023.

The scheme is available to all businesses with an aggregated turnover of less than $5 billion, allowing them to deduct the full cost of any eligible new assets they purchase for their business. It also covers the costs of improvements to existing assets.

To be eligible for temporary full expensing, the asset must be:

• New asset or second-hand asset if the business turnover is below $50 million.
• First held by June 30, 2023
• First used or installed and ready for use by June 30, 2023.

Temporary loss carry-back provision

Announced in October of last year, this loss carry-back measure has also been extended by 12 months.

Eligible businesses (with an annual turnover of less than $5 billion) that had an income tax liability in a relevant year and have subsequently made taxable losses can claim a refund tax offset up to the amount of their previous income tax liabilities.

The extension means companies can now carry-back tax losses from 2019-20, 2020-21, 2021-22, and 2022-23 income years to offset previously taxed profits in 2018-19 or later income years.

Tax cuts

The corporate tax rate for small and medium businesses will drop from 27.5% to 25% from 1 July 2021.

Digital economy strategy

To assist small businesses to use digital technology and improve their digital capability, there will be:

• $53.8 million over four years from 2021-22 to create a National AI Centre and four AI and Digital Capability Centres to drive and support businesses to adopt and use transformative artificial intelligence technologies;
• $15.3 million over three years from 2021-22 to promote and accelerate the adoption of e-invoicing by businesses and across all levels of Government;
• $12.7 million in 2021-22 to expand the Australian Small Business Advisory Service Digital Solutions program reach to up to 17,000 small businesses.

Employment contract tool

The budget has set aside $7.2 million to maintain and improve a new Employment Contract Tool.

This tool helps small business employers to make a basic employment contract that complies with workplace laws. It can be used to create a contract for an employee under the national industrial relations system.

The tool will help businesses navigate the hiring process and encourage growth.

For a full overview of the Budget 2021-22, please visit the Australian Government website: https://business.gov.au/news/budget-2021-22 

The information provided here is general in nature. Please consult your tax professional to find out how these budget measures apply to your personal situation.