Broadly speaking, the Federal Budget 2021 provided support for small businesses in two key ways; firstly, it encouraged small businesses to move towards digitisation; and secondly, it included lower income taxes that aimed to build consumer confidence and encourage spending – which will ultimately benefit small businesses.

Incentives for hiring and upskilling employees

The Government is offering up to $32,000 for businesses to put towards a new employee’s salary and training if they are enrolled in a registered course in a key occupation or skills area, such as customer engagement or digital business. This could provide significant support for businesses that are looking to digitise but may not have the resources to outsource to a consultant or hire a new full-time employee.

Key tax benefits

A number of tax benefits have been extended or newly introduced to help businesses invest and grow.

1. The temporary loss carry-back measure is a tax scheme that will allow eligible businesses to carry back tax losses made in 2020-21, 2021-22 and now 2022-23 to offset tax paid on profits from 2018-19 onwards. This will be particularly useful for businesses that were successful before COVID-19, but took a significant hit due to the pandemic by helping to increase cash flow;
2. The temporary full expensing tax measure (now extended to 30 June 2023), enables businesses to apply a more accelerated depreciation rate on pre-existing eligible assets. This will increase deductions and reduce tax payable for businesses;
3. Businesses can receive a full tax write-off for the majority of new assets purchased for business purposes (like IT hardware and teleconferencing infrastructure). And in some cases, where the cost is paid for upfront, software (like collaboration tools and cyber security programs) will also be eligible.

Opening global markets

The Government has updated the Export Market Development Grants scheme. These grants provide businesses with additional financial support over several years to take their business to the world, and now they will be more flexible and responsive to the needs of eligible businesses.

Innovation, research and development

The Government has introduced a patent box, which means that small businesses in the medical and bioscience sectors that are creating patentable intellectual property will be able to pay a lower tax on the income these patents generate. Complementing the Government’s $2 billion investment in the Research and Development Tax Incentive announced in the Federal Budget 2020, this aims to encourage businesses to undertake research and development in Australia and help start-ups keep their business in the country when they succeed in commercialising their patents.

Julian Roffe

Practice Manager

Ezra Legal