On Tuesday 11th May, the Australian unveiled what’s been described as one of the most important and hotly anticipated federal budgets in recent decades.
As Australia aims to bounce back from the covid-19 pandemic, there is a huge focusing on needing to ensure that Australia maintains a strong economic recovery, with the goal of supporting jobs and essential services one of the budgets top priorities.
The COVID-19 recession will see our deficit reach $161 billion this year, falling to $57 billion in 2024–25. With more Australians back at work, this year’s deficit is $52.7 billion lower than was expected just over six months ago in last year’s budget” outlined the Treasury.
It is projected that net debt will increase to $627.5 billion or 30 percent of GDP this year and peak at $980.6 billion or 40.9 percent of GDP in June 2025.
These figures are considered low by international standards. As a share of the economy, net debt is around half of that in the UK and US and less than a third of that in Japan.
The Federal Government believes that Australia is currently in a better place than nearly any other country to meet the economic challenges that lie ahead. Consumer sentiment is currently at the highest it has been in 11 years. Business conditions recently reached record highs and more Australians are in work than ever before.
List of Measures from the 2021-22 Federal Budget That Specifically Impact the SME Community
Business incentive expansion
As part of its plan to create more jobs, The Treasury announced that the federal government will be extending temporary full expensing and temporary loss carry-back for an additional year until 30 June 2023. This will see an additional $20.7 billion in tax relief to businesses over the forward estimates period.
Combined, the extension of these two measures is projected to deliver an additional $20.7 billion in tax relief to businesses over the forward estimates period. An estimated $320 billion worth of investment is expected to be supported by these incentives.
“The temporary full expensing and temporary loss carry-back measures are estimated to boost GDP by around $2.5 billion in 2020–21, $7.5 billion in 2021–22, and $8 billion in 2022–23, and create around 60,000 jobs by the end of 2022–23” contends the Treasury.
Furthermore, the Australian government plans to deliver more than $16 billion worth of tax cuts to small and medium businesses by 2023-24, with close to $1.5 billion flowing in 2019-20. This according to the government will include reducing the tax rate for small and medium companies, from 30 percent in 2014-15 to 25 percent from 1st July 2021.
“Small and family businesses are the engine room of our economy, they are at the heart of every local community,” said the Treasury.
The Government believes that for small and family businesses to recover from the covid-19 pandemic, there needs to be a tax system that works for them, not against them. The government wants to give small business the peace of mind that an independent umpire will stand between them and the ATO when it comes to debt recovery actions.
Broadening AAT Powers
In May 2021, the federal government declared that the Administrative Appeals Tribunal (AAT) now has the ability to pause or modify ATO debt recovery actions while a small business is in a dispute, in a move the government hopes will make things “easier, faster and cheaper” for SMEs.
The government hopes that this will provide a pathway for small businesses to ensure they are not required to start paying a disputed debt until the matter has been determined by the AAT.
In line with its aspirations to make Australia a digital economy in the next decade, the government will invest $1.2 billion in its Digital Economy Strategy for three major reasons.
1. To build digital skills and capabilities.
2. To encourage business investment.
3. To transform government services.
The Treasury believes that establishing a new national network of artificial intelligence centres will drive business adoption of these new technologies.
The government plans to expand Australia’s cyber-security innovation fund to train the next generation of cyber-security experts and enable them to undertake a digital skills cadetship trial which combines workplace and vocational training.
“This measure will complement the government’s $2 billion investment in the Research and Development Tax Incentive (R&DTI) which was announced in the 2020–21 budget. The government has asked the Board of Taxation to review the administrative framework of the R&DTI before the end of 2021,” the budget papers noted.
Increasing AusBiz proposition
In a bid to attract more business to Australia and create more Australian jobs, the federal government has introduced a new Global Talent visa and Temporary Activity visa and “will modernise the framework for individual tax residency, to encourage highly skilled individuals to relocate to Australia”.
Furthermore, the government’s Deregulation Agenda continues to support Australia’s economic recovery, helping unlock business investment and create more jobs.
An additional $134.6 million in this budget will make it easier for businesses to employ people and reduce the regulatory burden for businesses interacting with government. It is project that this will on average $430 million in annual compliance costs.
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