You are viewing an article that is not currently active

What’s in the Federal Budget for SMEs?

May 14, 2023

We’ve had the big reveal for the 2022/23 Federal Budget. Here’s how small and medium enterprises can benefit.

In essence, there are three main ways the Albanese Government’s 2022/23 Federal Budget has offered support to SMEs. Let’s break it down.

  1. Direct support for SMEs

The new Labor Government’s second Federal Budget has delivered several initiatives focused on Australia’s SME community:

  • The Energy Price Relief Plan – this will give eligible small businesses relief on their power costs to the tune of up to $650 from July 2023. With many businesses (and households) facing skyrocketing power bills, any relief here is great. That said, it’s a fair bet many enterprises will see the $650 relief as a mere drop in the ocean of annual energy expenses.
  • The Energy Incentive – this is one of those deals where businesses need to spend to save. A 20% bonus tax discount can be available to small businesses (annual turnover below $50 million) that electrify heating and cooling equipment, switch to more efficient white goods, and install induction cooktops, batteries and/or heat pumps. The maximum tax bonus is $20,000 so only the first $100,000 of spending is eligible. 
  • $20,000 instant asset write-off – until mid-2024, small businesses will be able to claim 100% of the cost of assets such as plant and equipment up to a value of $20,000. This not a tax saving per se. Rather it brings forward tax breaks for assets that would otherwise be depreciated over several years. Many small businesses will undoubtedly waive this technical point aside, and grasp the opportunity to save on tax upfront by investing in new equipment that can increase productivity, help a business automate or explore new revenue opportunities.
  1. Household support for cost of living increases

The cost of living support doled out in the Federal Budget won’t send a tsunami of cash flowing into households. Instead, it’s more of a trickle.  

Even so, energy price relief, lower out of pocket health costs and an increase in JobSeeker payments especially for over-55s, can offer indirect benefits to SMEs.

There’s been a lot of belt tightening among consumers over the past year since rates started heading north, and any initiatives that free up extra cash for discretionary spending have the potential to bring more revenue into SMEs.

  1. Maintaining the status quo on property investments

It’s probably fair to say that Labor has learned (the hard way) that property is a favourite investment among Australians, and tinkering with the tax treatment of their favourite is a high risk strategy for any government.

So, quite sensibly, the Labor Government has left negative gearing and capital gains tax discounts untouched. That’s great news for many Australians – not just SMEs.

Commercial property is a popular investment, and in recent years we have seen a remarkable trend for SMEs to buy rather than rent their commercial premises. This doesn’t just provide certainty of tenure. According to Angus Raine, Executive Chairman, Raine & Horne, it also allows business owners to benefit from the investment in their enterprise combined with the value of the commercial property while enjoying valuable tax breaks.

More broadly, the Budget forecast is for continued economic growth (albeit at a slower rate this year) coupled with low unemployment. Both are good news for SMEs.

With many experts predicting a fall in interest rates within the next 12-24 months (something we’re already seeing in fixed home loan rates), now could be the ideal time to give your SME the certainty of long term premises without the uncertainty of rent hikes.

Talk to your local Raine & Horne Commercial team to know the properties available in your area. It’s often surprising to discover how affordable commercial property can be.