Federal Budget 2021-2022 – Small Business Highlights

The Federal Government have handed down its 2021-2022 budget. Below is a breakdown of what’s in store for small and medium business.

Coming off the back of the COVID-19 Pandemic, the Treasurer cited a need to maintain and focus on the nation’s economic recovery. A commitment to supporting jobs & essential services is of the utmost importance. Josh Frydenburg has said “The Covid-19 recession will see our deficit reach $161 billon 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”.

The incentives rolled out in the federal budget specific to the SME community include tax cuts, business incentive expansions, technology boosters and more. We have expanded on the incentives available below.

Business incentive expansion

As part of the commitment to create jobs, the Treasurer announced the government will be extending temporary full expensing and temporary loss carry-back for an additional year. This means it will be available until 30 June 2023 instead of the initially proposed 30 June 2022.

Tax Cuts

The Treasurer said the government will deliver more than $16 billion in tax cuts to small and medium businesses by 2023–24, with around $1.5 billion flowing in 2019–20. This, he said, “includes reducing the tax rate for small and medium companies, from 30 per cent in 2014–15 to 25 per cent from 1 July 2021”.

Broadening AAT powers

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. This will save significant legal costs for small business.

Technology booster

In line with its plans to make Australia a digital economy in the next decade, the government will invest $1.2 billion in its Digital Economy Strategy for three key reasons.

1. To build digital skills and capabilities.
2. To encourage business investment.
3. To transform government services.

Increasing AusBiz proposition

As the Treasurer announced, “Australia is an attractive place to do business”, with “our way of life, our safe, clean cities and our proximity to Asia” desirable to foreigners.

In a commitment to attract more business to Australia and create more Australian jobs, Mr Frydenberg flagged that the 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”.

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Workcover claims drop but mental health claims increase

Whilst employee numbers have increased by almost 20% in 2018-2019, Workcover claims have declined by 12%. Although men account for more physical injuries sustained, women account for a higher proportion of diseases such as mental health. Women are three times as likely to sustain mental health injuries at work as men.

Healthcare & social assistance were the top industries where women are disproportionately injured compared to male colleagues with women also having higher claims in the education & training sector.

Statistics highlight the need for work health & safety regulations in the workplace that address mental health hazards, there are over 20 formal workplace health & safety regulations that provide guidance for physical hazards, but none for mental health hazards.

It is expected that the 2019-20 statistics with the Covid-19 pandemic will create a number of unprecedented issues that affect mental health & well-being as well as reliance on essential services & their workers. The latest figures illustrate the need for regulations that help employers understand their obligations when it comes to the mental health of their workers.

With an increase in conversations around the importance of sound mental health & well-being, our workplace health & safety standards should evolve to reflect that.

Annual Wage Growth Stuck at Historic low 1.4%

The latest figures from the Australian Bureau of Statistics show that the annual wage growth has been maintained at the historically low annual growth rate of 1.4% for 2 quarters of 2020. The October to December 2020 data showed a seasonal adjustment to the wage price index rise of 0.6%. The latest data showed a large proportion of the private sector wage growth came from the continued restoration of hourly wages back to pre-pandemic levels following reductions made in the June and September 2020 quarters.

The Annual wage growth of the December 2020 quarter ranged from 0.3% growth of the accommodation & food services industry to 2.4% of the education & training industry. The moderate growth was influenced by businesses rolling back short-term wage reductions, returning wages to pre-Covid levels. The phased implementation of the Fair Work Commission annual wage review also had a small positive impact on wages.

Wage freezes have also had an impact on the public sector with its lowest annual wage increase (1.6%) since the commencement of the series.

Keep track of your work-from-home costs ahead of tax time!

Amid the Covid-19 pandemic, to simplify the process of claiming home office expenses, the ATO introduced the shortcut method where taxpayers can choose to claim a fixed rate of $0.80 per hour for all running expenses for the 2020-21 Financial Year. However, it has been cautioned that to utilise this method, a diligent log must be kept by both business owners & employees working from home.

In step with the rest of the world, our working patterns have changed and it is important that Australians are aware of their entitlements under ‘the new normal’. Record-keeping means that taxpayers must maintain a logbook of actual hours worked from home or a diary representative of a 4 week period. This amount of use can then be applied over the year to determine the full claim. If you haven’t filled out this log, you have the next 7 weeks to get it done.

If you are working both in the office and at home, it is important to keep a record of the different hours worked. The short-cut is the easy method, but individuals can still claim based on actual expenses incurred. If claiming expenses incurred, individuals will still need to comply with necessary complex record-keeping requirements.

Working-from-home claims can be calculated as follows:

  1. $0.80 per work hour for all additional running expenses
  2. $0.52 per work hour for heat, cooling, lighting, cleaning, declining value of office furniture + calculate work-related portion of phone, internet, computer consumable, stationery & decline in value of computer or laptop
  3. Claim the actual work-related portion of all running expenses, which taxpayers need to calculate on a reasonable basis

The ATO has also reminded taxpayers that the three golden rules for deductions still apply:

  1. Taxpayer must have spent the money themselves & not have been reimbursed
  2. The claim must be directly related to earning income
  3. There must be records to substantiate the claim

Expenses you can claim:

  • Electricity expenses associated with heating, cooling and lighting the area from which they are working and running items they are using for work.
  • Cleaning costs for a dedicated work area.
  • Phone and internet expenses.
  • Computer consumables (for example, printer paper and ink) and stationery.
  • Home office equipment, including computers, printers, phones, furniture and furnishings; you can claim either the  
    • Full cost of items up to $300
    • Decline in value (depreciation) for items over $300.