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 Federal Budget 2020 and what it could mean for Aussie small businesses looking to adapt, recover and grow in response to COVID-19.
1. Tax benefits for sole traders and incorporated businesses
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 newly announced tax cuts 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 2019 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. 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 means that businesses can fully write-off any investment they make in assets and equipment. In practice, this 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. Incentives for apprentices and trainees
The Federal Budget’s $1.2 billion incentive scheme ensures employers receive a maximum of $28,000 towards the first-year salary of any apprentice or trainee they hire 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. This means 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
A small business can receive up to $10,000 towards an employee’s first-year salary if the employee is aged between 16 and 29. Or, if the employee is aged between 30 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. Hiring a young person can provide a business with a fresh set of eyes and ideas. Young people are generally digitally literate, so they can help a business thrive online or set up digital processes to help streamline and optimise its operations.
5. Incentives for innovation
An extra $2 billion 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 eligibility for innovation incentives 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 business, 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 works for them. And if their experience with your business isn’t convenient, then 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 budget benefits, you can reinvest in your business to be more digitally-led.