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Federal Budget 2021 Summary – Business Highlights

Federal Budget 2021

With the unveiling of the 2021-2022 Federal Budget on May 11, the Australian Government has highlighted key initiatives that will speed Australia along on its road to economic recovery from COVID-19.

Key economic highlights from the budget showed that Australia has made a rapid recovery, with economic growth up to 1.25% for the 2020-2021 FY and projected to increase to 4.25% next year.

Through the rollout of the Job Seeker, Job Keeper and Job Trainer programs, the unemployment rate managed to remain at 5.5% this year, well below the worst-case predictions of 8%.

With these positive signs for the economy, the economic outlook for Australia is looking strong.  Let’s dive into the initiatives that are being rolled out to help individuals and businesses and continue our country’s road to recovery.

Income Tax & Super

Low and Middle Income Tax Offset Extension

The key highlight of this budget for most people is the extension of the Low and Middle Income Tax Offset.  Through this offset, individuals will receive an additional supplement to their refund based on their income.

At the low end of the scale, taxpayers earning less than $37,000 will receive $255 with the amount scaling across income tax brackets to $1080 for individuals in the $48,000-$90,000 income tax bracket.  Couples will be able to receive a maximum amount of $2160.

Self-education deductions

In order to encourage re-education and upskilling to boost workforce productivity and job prospects, the government has removed some restrictions around tax deductions.  Previously, the first $250 of self-education expenses was not tax deductible, but from 1 July 2021, individuals will be able to claim any eligible self-education expenses.  This could include items such as tuition fees, textbooks, stationery, etc.  Visit the ATO website to learn more about eligible self-education deductibles.’

self education deductibles

Low Income Superannuation

The previous $450 minimum salary threshold for superannuation guarantee eligibility will be removed on 1 July 2022.  These changes will simplify the rules for employers in regards to paying superannuation, and make the system fairer for low income earners.

Business Growth Initiatives

Full expensing of eligible assets

Businesses with a turnover of less than $5 billion or corporate tax entities that meet the requirements of the $5 billion total income test, will be able to write off the full value of eligible depreciating assets.  Claims can be made for items that were acquired from 7:30pm on 6 October 2020 and have been installed, used or made ready for use by the 30th of June 2023.  Standard depreciation rules will apply from the 1st of July 2023.

For intangible assets such as patents, registered designs, copyrights, and in-house software, businesses will be able to self-assess their effective life or claim depreciation over their statutory effective life.   These choice methods can be used from 1 July 2023.

Temporary Loss Carry-Back Extension

The Temporary Loss Carry-back Measure that was rolled out in the 2020-2021 budget, has been extended.  When lodging their 2022-2023 tax return, companies with an aggregated turnover of less than $5 billion will be able to carry back tax losses from that year to offset profits from as far back as the 2018-2019 financial year.  This also applies to any losses incurred during each of the financial years between 2019-2020 and 2022-2023.  Get in touch with our fantastic accountants at POP if you need assistance or advice claiming these offsets.

Patent box regime for Medical and Biotech Innovations

For small and medium businesses, income derived from patents in medical or biotech categories will only be taxed at 17% as opposed to the usual 30% business tax rate.  Patents applied for after 11 May 2021 will be eligible for the program, however the reduced tax rate will only apply to income generated after 1 July 2022.

Debt Recovery

The government is enacting changes to how small businesses can paus or modify the tax debt recovery actions performed by the ATO. The government will allow small business to apply directly to the Small Business Taxation Division of the Administrative Appeals Tribunal (AAT) to modify tax debt recovery actions taken by the ATO rather than going through the court system.

This measure is a welcome initiative for small business taxpayers as it should allow them to focus their resources on the substantive matter before the ATT rather than costly and complex debt collection issues, particularly where the liability would be extinguished if the taxpayer is successful in the substantive matter before the AAT.

Small business entities (including individuals carrying on a business) with an aggregated turnover of less than $10 million per year will be eligible to use this approach, which should be available in respect of proceedings commenced on or after the date of Royal Assent of the legislation.

E-invoicing

The government also seeks to transition the country, and particularly government service departments to e-invoicing systems.  $15.3 million has been allocated to fund this transition, where the Treasury and Australian Peppol E-Invoicing Authority will work with payment platforms such as EFTPOS, Visa and Mastercard, to integrate e-invoicing systems with Australian businesses.

This program will help fund the education of business owners to boost awareness of e-invoicing and its ability to ensure businesses get paid faster.  This program will also help develop supply chains to drive adoption and other activities to continue this transition.

If you’re interested in getting set up with an e-invoicing system, reach out to POP where we can get you set up with Xero accounting software and e-invoicing for a 20% discount.

Other Initiatives

Support for eligible small businesses and breweries will continue with the remission of excise paid by breweries increasing from 60%, capped at $100,000 annually to 100% with an annual cap of $350,000.  These changes will come into effect from 1 July 2021.

The SME Loan Guarantee Scheme is ongoing, with businesses able to receive loans of up to $5 million, repayable over 10 years with a 24-month repayment holiday.  Visit our full article to lean more.

The R&D Tax Incentive continues to provide tax incentives for small and medium businesses.  It is now being supplemented with a 30% refundable tax offset for digital games development.  To learn more about the R&D Tax Incentive, visit our full article.

Job Growth

Job Trainer

The Federal government has increased Job Trainer funding by $500 million, with each state and territory government to match this amount.  The program has also been extended until 31 December 2022.  The ongoing success of this program will continue to provide support and training in retraining and upskilling for 163,000 people.

Job Keeper

Job Keeper will be replaced with targeted measures for industry sectors that are in need of support.  Programs targeted at these affected industries will be announced over the coming months.

Apprenticeship Commencements Program

Under this program, the government continues to subsidise the hiring of apprentices and trainees.  For 12 months following their hiring, the government will pay a 50% wage subsidy, capped at $7,000 per quarter, per trainee.  Hiring must occur before 31 March 2022.  The budget for this program was increased by $2.7 billion, which is expected to support the hiring of 170,000 employees by March 2022.

job training

Patrick Sargent

Patrick Sargent

Patrick Sargent is a Chartered Accountant and registered Tax Agent who is passionate about helping business owners and individuals achieve their goals. He co-founded the cloud and tech-focused accounting firm POP Business back in 2018. Since then, Patrick and his team have won numerous awards and accolades including the 30 Under 30 ‘Tech Innovator of the Year’, and coming in as a finalist in the Australian Accounting Awards 2020.   He has expertise in helping small businesses with a range of accounting services, including tax preparation, financial advisory, accounting and bookkeeping, and personal tax planning, as well as company, trust, and partnership tax returns and more.

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