In this year’s federal budget, the Government is encouraging industries and employers, including small businesses, to innovate, bring on new people and ultimately become more digital. Tech is a wise investment for the future of your business and to the expectations of your customers. Here are my five key takeaways from the 2021 Federal Government Budget and what it could mean for Aussie small businesses looking to adapt, recover and grow during and post-COVID-19.
1. Make the most of incorporated business and sole trader tax benefits
At the end of 2019, there were 2.3 million small businesses in Australia. Of those, 62% were structured as a sole trader or a partnership. The federal budget tax cuts announced in 2021 that apply to individuals also apply to those businesses, so they are going to be paying less tax on the income they earn from their business. The remaining 38% of small businesses are incorporated, or operating under a company structure. If an incorporated business has made a taxable loss during the period of COVID-19 but made a profit in 2020 and paid tax on that, they’re going to be able to get a refund for the first time. These tax benefits are an opportunity for small businesses to reinvest those extra dollars into the business, which includes building stronger digital capabilities.
2. Understand the small business tax offset for depreciable assets
One way to reinvest money into your business is to purchase business assets. A small business can now claim a full tax refund on depreciable assets (assets that lose their value over time, like devices, cars, computers and machinery) to any amount – you might hear this in accounting jargon as a “full write-off”. This 2021 tax offset means that businesses can fully write-off any investment they make in assets and equipment. In practice, buying depreciable assets might look like setting up new COVID-19-safe office desks, buying more work-from-home gear for your staff, or buying a new car so your business can manage its deliveries.
3. Consider traineeship incentives
The Federal Budget’s $1.2 billion government incentives for traineeships ensures employers receive a maximum subsidy for apprentices or traineesof $28,000 that would can go towards their first-year salary in the next 12 months. When they hear the word ‘apprentice’, most people think about a young person learning to be an electrician or a plumber, but a traineeship is a white-collar apprenticeship. Traineeship employer incentives mean that a business could hire someone to become a trainee in digital business to help grow its online presence by taking advantage of technology tools and services, or finding ways to create efficiencies in business processes. At Small Business Australia, we call these ‘digital business cadetships’ and we can help any small business find one for a team member looking to upskill.
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4. Incentives for hiring young people
One of the best benefits of hiring young employees is that a small business can receive up to $10,000 towards an employee’s first-year salary if the employee is aged between 18 and 26. Or, if the employee is aged between 27 and 35, a business can receive $5,000. A lot of young people are already out of work, and may remain out of work, as a result of COVID-19 policies such as hospitality restrictions. One of the main advantages of hiring young employees is that it can provide a business with a fresh set of eyes and ideas. Young people are also generally digitally literate, so they can help a business thrive online or set up digital processes to help streamline and optimise its operations.
5. Make the most of incentives for innovation
An extra $2 billion in innovation tax credits has been allocated to innovation for research and development grants. Innovation could mean product development, service development or process development. For example, a small business could apply for a grant if they need to develop a new website structure with language translation to serve the Chinese market living in Australia, if this requires eligible research and development. Or if a business is creating a new line of chai teas with a special blend of ingredients, they’ll need to experiment, work in new ways and get a design patent, making them a perfect candidate for these research and development grants. To ensure you’re eligible for incentives for innovation it always pays to get professional advice before embarking on the project. Sometimes, you need specific documentation from the start of these innovation initiatives to access the tax incentives.
With these tax write-offs and incentives, it’s up to businesses to intelligently invest in their future. Consider how your customers might now prefer to deal with your businesses, because it’s likely that COVID-19 has changed the way they like to interact. We know that people are using digital platforms more and more to find and engage with businesses in ways that work for them. And if their experience with your business isn’t convenient, they might not come back.
If COVID-19 restrictions have limited the way you can operate, you may have already adopted technology to find new ways to keep your business running. Now is the time to look for digital solutions that can help you optimise for efficiency and future growth. With these federal government budget benefits, you can reinvest in your business to be more digitally-led.