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How the budget can help small businesses in 2021


The budget isn't easy to decode. Here's what it could mean for your business – in real terms.

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The federal budget is important, but it's hardly a page turner. So there's no judgement from us if you haven't had the chance to sit down and figure out what applies to you yet.

Even so, if you're a small business owner or sole trader, you'll be glad to know there might be provisions in this year's budget that could make life a little easier over the year ahead.

From individual grants to industry-wide funding, there are a few different ways the government is putting its money behind Australia's small businesses. But, as always, there are some things to be wary of too. Here are just a few of the big ones to watch.

There's still a tax offset for low-mid earners

The Low and Middle Income Tax Offset (LMITO) has been extended, so if you earned less than $90,000, you may be able to claim a tax offset of up to $1,080.

"If you earn between $48,000 and $90,000, you'll get the maximum offset of $1,080, but if your taxable income is as low as $37,000 or as high as $126,000, you'll still benefit from the offset to an extent," said Mark Chapman, director of tax communications at H&R Block.

Be aware though, LMITO is a tax offset, not a rebate. That means it can only be used to lower your tax bill and can't be used to generate a tax refund or pay your Medicare levy.

So how do you apply for it? Well, it's probably easier than you think. The offset is actually applied automatically when you lodge your tax return. You don't have to do anything to benefit.

A woman browsed jewellery on a market stall.

You can get help with digitisation

Wish you were more tech-savvy? The budget can help. The government has stumped up an additional $12.7 million to help small businesses improve their digital skills.

The money is going to the Australian Small Business Advisory Service's (ASBAS) Digital Solutions program, which provides low-cost advice to small businesses.

Advice can cover a variety of areas, including business software, websites and online selling, online security and data privacy, and social media and marketing.

"The additional spending on digital capability will help SMEs to improve their cash flow, increase productivity, reduce administrative tasks and make payments faster," said Domenic Calabretta, CEO of business advisory firm Mackay Goodwin.

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There's more money for training and apprenticeships

If you've been keen to train up an extra pair of hands, the Boosting Apprenticeship Commencements wage subsidies might be able to help – especially since the program is set to get a $2.7 billion boost over the next 4 years.

The subsidies reimburse employers for the wages of new apprentices and trainees by up to 50% for as long as 12 months. There's no cap on the number of spaces either.

"In terms of growing their businesses, the extra funding for training, apprenticeships and upskilling employees in industries experiencing skills shortages will be very welcome," said business advisor Calabretta.

An older man trains a younger man about machinery in a factory.

There's major tax relief for distillers and brewers

In a very Australian move, the government is supporting micro-breweries and small distilleries with the same tax cut that helped the wine sector spread its wings 30 years ago.

The excise refund cap is being more than tripled, from $100,000 to $350,000. That means from 1 July 2021, eligible brewers and distillers will be able to receive a full refund on any excise taxes they pay, up to an annual cap of $350,000.

Currently, eligible brewers and distillers are entitled to a refund of 60% of the excise they pay, up to an annual cap of $100,000.

A bearded man drinks beer while standing in front of commercial brewing equipment.

Loss carry-back has been extended

The government has extended its loss carry-back measures for another 12 months. In short, incorporated businesses will be able to use recent tax losses to offset previously taxed profits.

Unfortunately, this isn't open to sole traders, partnerships or trusts. But if you are among the eligible companies, when you lodge your 2022-23 tax return, you'll be able to offset previously taxed profits from as far back as the 2018-19 income year to receive a tax rebate. Nice!

The value of the rebate is limited though, and the amount carried back can't be more than the earlier taxed profits.

A woman uses a calculator while filing her taxes.

Full expensing is being extended

The government has extended its full expensing scheme to 2023. That means over 99% of businesses can now immediately deduct the full cost of capital items.

That's things like fixtures and fittings, technology and security equipment, tools and machinery, motor vehicles, solar systems and even office furniture.

According to Treasurer Josh Frydenberg, this has seen spending on machinery and equipment increase at the fastest rate in nearly seven years – but there are some potential pitfalls.

"Some business owners have rightly pointed out that claiming an immediate deduction for purchases of capital assets is not necessarily in the best interests of their business," said tax guru Mark Chapman.

The concern is that, if a business is already running at a loss, or the deduction for capital assets will cause a loss, the business may struggle to make use of that loss.

"Sole traders, for instance, could find themselves losing access to the tax-free threshold, meaning that the depreciation deductions are basically wasted," said Chapman.

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There's extra funding for the arts

If your small business is involved in the arts, or you're an independent performer, you might be able to cash in on some extra funding from the government.

The Restart Investment to Sustain and Expand (RISE) Fund was allocated an additional $125.6 million over two years. The fund provides financial support to cultural projects, activities and events as well as projects that involve tours and use local regional support.

There was also $50.8 million for the film and television sector to kickstart local productions, $20 million to support independent cinemas and $5 million to support plays touring nationally through Playing Australia.

Support Act, which provides one-off grants of $2,000 to artists and arts support workers, also received $10 million of funding from the government, while $11.4 million will be spent to support regional tourism and arts.

A woman sings and plays guitar in a recording studio.

A good year for SMEs

Of course, this is just a glimpse into some of the budget bits that could impact small businesses. There is still plenty more to sink your teeth into if you're so inclined.

While there are controversial elements, and a few oversights, there is still plenty in the budget that small businesses can be happy about. So let's hope the next 12 months are better than the last.

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Disclaimer: This is general advice only. Consider the product information (including its terms and conditions) and your own circumstances before you make any decision about the topics or products discussed. Compare your options and get advice if you are uncertain. Hive Empire Pty Ltd ACL 385509; CAR 432664.

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