The Impact Of The 2023-24 Federal Budget On Small Businesses

In Australia's ever-evolving economic landscape, small businesses are the lifeblood of the nation. They create jobs and contribute significantly to the country's prosperity. The Australian government's budget for the year 2023–24 showcases a comprehensive approach to supporting and bolstering small businesses, with a focus on alleviating immediate pressures, enhancing resilience, and addressing gender pay gap issues.

Let's dive into how the budget impacts small businesses in various crucial ways:

• Energy Price Relief Plan
• Small Business Energy Incentive
• Small Business Instant Asset Write-Off
• Improving Small Business Cash Flow
• Funds to adopt AI and quantum technologies
• Cybersecurity Initiatives
• Industry Growth Program and Buy Australian Plan
• Closing the Gender Pay Gap

National Energy Bill Relief

Small businesses have been grappling with soaring energy prices, largely driven by global events like Russia's invasion of Ukraine. The government's Energy Bill Relief Plan steps in as a saviour. It intervenes to limit the impact of international energy price shocks on Australia and provides direct bill relief to around 320,000 small businesses.

Eligible small businesses using less than 100 megawatt hours (MWh) of electricity per year will receive a one-off $650 bill relief payment towards their electricity bill. This initiative not only cushions businesses from immediate energy cost spikes but also offers a sense of financial security.

Small Business Energy Incentive

To encourage small and medium businesses to adopt energy-saving measures, the Small Business Energy Incentive has been introduced. This measure is expected to cost $314 million over the forward estimates, this tax break is set to support up to 3.8 million businesses. It allows businesses (with an annual turnover of less than $50 million) to claim a bonus 20 per cent tax deduction for eligible assets that support energy efficiency.

Up to $100,000 of total expenditure shall be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business. The initiative not only reduces energy bills but also promotes and supports sustainability in business operations.

Small Business Instant Asset Write-Off

With the announcement of the Budget, investing and growing has become more accessible for small businesses with the $20,000 instant asset write-off. Providing $290 million in cash flow support, this measure allows businesses with an annual turnover of less than $10 million to immediately deduct eligible assets costing less than $20,000. This cash flow boost empowers small businesses to make essential investments in equipment and infrastructure.

Improving Small Business Cash Flow

Recognising the importance of cash flow for small businesses, the government is halving the increase in quarterly tax instalments for GST and income tax in 2023–24. Instead of a 12 percent increase, instalments will only rise by 6 percent. This adjustment aligns with the current economic conditions faced by the small business sector, striking a balance between improving cash flow and managing tax liabilities.

Funds To Adopt AI And Quantum Technologies

Financial support of $101.2 million, spanning five years, has been allocated to assist small enterprises in incorporating artificial intelligence (AI) solutions to enhance their operational procedures and boost their competitive edge.

The initiative includes backing for a Critical Technologies Challenge Program, which will primarily prioritise quantum technology. Additionally, it will expand the National AI Center, strengthening its role in promoting the responsible use of AI. Furthermore, it will establish an Australian hub called the Centre for Quantum Advancement to foster connections and enhance Australia's quantum ecosystem.

Cybersecurity Initiatives

With the increasing digitalisation of small businesses, cyber threats have become a significant concern. The government is investing $23.4 million to help small businesses enhance their cybersecurity resilience. The Small Business Cyber Wardens program aims to train in-house cyber wardens to protect against cyberattacks, mitigating potential financial and reputational damage.

Industry Growth Program And Buy Australian Plan

Small businesses are vital contributors to the Australian economy. To support their innovation and growth, the budget allocates $392.4 million to the Industry Growth Program. This initiative assists small to medium-sized businesses and startups in developing new products and services to expand their operations.

Additionally, the Buy Australian Plan promotes government procurement from local businesses, fostering diversity in supply chains and stimulating innovation. Easier put, the "Buy Australian Plan" encourages the government to buy things from local businesses. When the government buys from local businesses, it helps them stay strong and creates more variety in the things you can buy. It's like giving a boost to local businesses and encouraging them to be more creative.

Closing The Gender Pay Gap

In a significant move towards gender equality, the government will publish the gender pay gaps of employers with 100 or more workers in early 2024. The Secure Jobs, Better Pay reforms made gender equality an object of the Fair Work Act, giving gender equality appropriate weight throughout the workplace relations framework. These steps aim to address the gender pay gap, promoting fairness and equal opportunities within small businesses and across industries.

Fairer Tax And Superannuation System:

While this section of the federal budget 2023-24 primarily pertains to superannuation and taxation policies rather than directly addressing small businesses, the changes in superannuation and tax policies can indirectly affect small businesses in the following ways:

Superannuation Payment Changes:

The requirement for employers to align the payment of superannuation with wages starting from July 2026 can impact small businesses as they will need to adjust their payroll processes to comply with this change. While this measure is primarily aimed at ensuring employees receive their superannuation entitlements promptly, small business owners must stay informed about these changes to ensure compliance.

Taxation Changes:

Any changes to taxation policies, such as the reform of the Petroleum Resource Rent Tax and the introduction of global and domestic minimum taxes, can indirectly affect small businesses. These policies can have implications for the overall economic environment and potentially influence the cost structure of businesses, including small enterprises.

Superannuation System Equity:

The adjustment of superannuation earnings tax concessions for individuals with balances exceeding $3 million is more relevant to high-income earners than to small business owners. However, it does indicate changes in the superannuation system's equity and sustainability, which can indirectly impact individuals who own and operate small businesses, so tread carefully.

Bottom Line

While the budget seems to be providing relief to small businesses and helping uplift them, does the budget truly empower small businesses, or should business owners be wary of the changes? Whether the budget is good news for businesses or whether they should be wary of the changes depends on their specific circumstances. While the budget includes measures to support businesses, it's essential for business owners to closely examine the details, assess their individual or industry-specific impacts, and consider the broader economic environment when determining how budget policies will affect them. Consulting with financial advisors or industry experts can provide valuable insights for making informed decisions.

Choose Tax App For All Your Accounting Needs

If you're a small business owner searching for an accounting firm to handle your finances, reach out to Tax App. We have a team of online accountants for small businesses and individuals in Australia that caters to clients from all over the country via our app , video calls, emails, etc.

We are a pioneering technology-driven accounting firm in Australia , and we have developed an innovative app to enhance our services. We're the first accounting firm in Australia to create such an app. Through our app, we offer a suite of valuable tools, including bookkeeping assistance, motor vehicle logbooks, and work-from-home logbooks, all at no cost to our users. Our app not only simplifies the financial management process but also empowers users to easily schedule appointments with our firm.

Take advantage of our comprehensive face-to-face consultations across Australia that allow you to better understand how Tax App can help your business reach new heights!