What Is the Impact of the Federal Budget 2023–24 on Small Businesses?

Small to medium enterprises, or SMEs, have been called the “lifeblood” of the Australian economy. They make up 99% of all businesses in the country, which makes them extremely important to the economy. Also, they employ the most people and make up most of the economic activity of the Australian population. 

These SMEs, however, have faced many challenges over the last few years. COVID and the resulting lockdown affected sales and revenue. Since these businesses don’t have the financial backing of bigger corporations, such a sharp drop in sales resulted in a cash crunch for most of them. Some of them even shut down. 

The economy has recently recovered from the COVID slump, with travel and purchases having bounced back. But now the world, including Australia, is facing a severe cost of living crisis. This is again affecting owners of small businesses and leading to a drop in sales, as people have less spending power. 

In this scenario, everyone has been looking to the Federal Budget 2023–24 for some relief. But this Budget is a mixed bag of blessings. As the Industry body, the Council of Small Business of Australia (COSBOA), said when describing the place of SMEs in the budget, it is “not on the sideline, not in the spotlight”.

Federal Budget 2023–24

Federal Budget 2023–24 has seen some positive changes that will help citizens navigate a world with high costs and inflation, including SME owners. Let us have a look at the changes:

• Tax cuts – These are expected to come into effect from 1 July 2024 and will directly help Australians.
• Payday superannuation – Federal Budget 2023-24 also says that employers are expected to pay employee superannuation at the same time as their salary and wages. While this increases the paperwork load for employers, it is good news for employees, as this policy change is expected to make payments more regular and certain. This change will be implemented from 1 July 2026.
• Concessional superannuation rate – A 30% concessional tax rate applied to future earnings for superannuation balances above $3 million has also been included in the Federal Budget 2023-24. This will create a greater tax burden for individuals with high balances as well as employers.
• Increase in visa application charges – While the visa application charges are set to increase in the Federal Budget, it will become easier to get permanent residency as restrictions are reduced on applying for and obtaining permanent residency. This shift is expected to attract more foreign skilled labour to make up for the current shortage faced by the country. 

How does the Federal Budget affect SMEs?

While some features of the Federal Budget 2023-24 are helpful for employees and not so helpful for employers, it is a different ball game for SMEs. As an SME owner, there are some provisions and specific programs that can help you save money and grow your business, or rebates and write-offs that allow your business to save on taxes. Some of these measures also come in the form of technical support, which makes navigating paperwork easier for you and protects your business from cyberattacks. Let us examine the key features of the Federal Budget 2023-24 for you. 

Write-offs and Rebates: Will it boost opportunities for you?

The Federal Budget has proposed some write-offs and tax rebates that will help your small business save money and thus handle the cost-of-living crisis better: 

• A sum of $18.1 million has been set aside for the Department of Finance. This will go towards government procurement from SMEs, thus increasing your sales.
• An instant asset write-off, up to an amount of $20,000, has also been reinstated for businesses with turnover below $10 million. This write-off is valid for 12 months, and the scheme will come into effect from 1 July 2023. 
• A new Small Business Energy Incentive Scheme has been introduced in the Federal Budget 2023-24. This will provide businesses with a bonus 20% tax reduction for energy-saving upgrades to eligible depreciating assets. The asset value is capped at $100,000, and the businesses are categorised as having a turnover of less than $50 million. The total amount of the rebates comes to $20,000. 

This measure will help your business to make investments to install batteries and upgrade to efficient equipment.

• In other taxation benefits, quarterly tax instalments for GST and income tax will increase by only 6% instead of the standard 12%. This will result in much relief at the SME level. 
• The Federal Budget also declares cashflow assistance to SMEs by reducing the GDP uplift on PAYG and GST.
• To encourage SMEs to engage further with the tax system, a lodgement penalty amnesty program has been put in place, meaning that you will receive relief from penalties even if you fail to lodge or file, your taxes in time. It is directed at businesses with a turnover of less than $10 million. 
• Starting from 1 July 2025, you will have four years to amend your tax returns. Along with this, tax agents will be able to file multiple Single Touch Payroll forms on their client’s behalf. This will be implemented earlier, from mid-2024.

These measures, which involve much fund allocation, are being implemented to help your small business handle your taxes better. It is also directed at making the taxation system easier to navigate for you. The expectation is that these will lead to greater coverage of tax payments. Conversely, the Tax Office has also been allotted more funds for an easier crackdown on GST avoidance. 

Technical and Other Support: Initiatives to bolster your business?

Along with these direct financial benefits, there have been other developments mentioned in the Federal Budget to help SMEs. 

• Improvement in AusTender – The supplier portal AusTender is being improved for increased transparency. This will reduce the amount of paperwork you need to do as an SME owner.
• A smoother mechanism for lodging complaints – The Australian Competition and Consumer Commission (ACCC) is establishing a mechanism for complaints. This will allow SME advocacy groups to lodge complaints and point out flaws within the system more smoothly. This way, the issues can be addressed at the systemic level.
• Handling cyber threats – An allocation of $23.4 million has been made to help SMEs better handle cyber threats. Since small businesses don’t usually have the funds to invest in the best cyber security, they are often at much greater risk of exposure and attack. The CyberWardens Program is part of this Federal Budget that will serve to protect them through cyber awareness and education. It also includes an accreditation program that is specifically created for SMEs by SMEs.
• Funding for education and training – Additional funding has also been set aside in the Federal Budget 2023-24 in a Productivity, Education and Training Fund. This will help towards engagement and practical activities, especially in the domain of workplace reforms.

To sum up

While many of these measures and support in the Federal Budget 2023-24 have been long awaited and provide much-needed relief to small businesses, they are just a start. Forbes has quoted Thomas Fu, founder and executive director of Motor Culture, as saying, “For the most part, SMEs have been left to fend for themselves in a time of immense economic uncertainty.”

This level of support must increase as the collaboration between the government and associations improves. This way, the level of coverage for SMEs will automatically increase and address the issues that SMEs face on a day-to-day basis, eventually making them more sustainable and profitable.

So dear entrepreneurs, having read the key highlights of the Budget 2023-24 and understood its benefits for you, you may focus on growing your dream and your business and let Sleek handle your tax, bookkeeping and compliance.