The National Retail Association (NRA) has praised the Federal Budget announced by Treasurer Josh Frydenberg last night. The Budget will provide wins for small and medium sized businesses, but operators in areas reliant on international tourism have been left in the cold.
Business tax measures will aid small business owners
NRA CEO Dominique Lamb said the measures aimed at boosting customer spending and encouraging business investment are welcome additions.
“Extending tax cuts for low and middle-income earners will mean that everyday Australians will now have more disposable income to spend at the shops, providing an adrenaline boost to retailers bottom lines,” Ms Lamb said.
Additionally, a 12-month extension to the temporary full expensing measures until 30 June 2023 and a 1-year extension of the temporary loss carry back will allow businesses to invest in their future.
“The NRA has been advocating for the continuation and expansion of the instant asset write-off since before COVID-19 came along. Local cafes, family-owned restaurants and small clothing shops to name just a few will now be able to make investments in their business that would otherwise be unaffordable.”
Simplifying the murky industrial relations system
The Federal Budget has allocated $134 million over four years on its deregulation agenda, including investing in regulatory technology (regtech) to support smaller employers comply with modern awards, provide data on pay and conditions and help with accuracy in payroll software.
“Most people outside the sector think we’re exaggerating when we say that since 2013 retailers have had to deal with nearly 14,000 different rates of pay depending on variables such as whether the employee is casual or permanent, their age, their classification and the times at which the work is performed. This number easily doubles if you consider shift workers, baking production employees, apprentices and those working under the supported wage system,” Ms Lamb said.
“The NRA applauds the Federal Government for recognising the complexity of the system, and taking steps to improve compliance.”
“We look forward to working with the Morrison Government to ensure Australia’s small business owners are well-served by these measures.”
Business restructuring measures patchy, particularly for tourism hotspots
We expect to see an increase in distress for businesses exposed to international travel and events due to prolonged border closures, despite short term stimulus measures. The $1.2 million support package for the aviation industries is welcome but will not be enough for many struggling retailers, particularly those suffering from decreased foot traffic in airports and CBDs.
“We need to work on getting people back into these areas. Small and family owned businesses are the cornerstone of the hospitality and tourism sector, and it’s crucial they receive support to ensure they’re still here, ready to do business, when borders reopen,” Ms Lamb said.
Investing in the digital economy paramount after 2020
“People spent 2020 predominantly at home, shopping from the comfort of their living rooms and couches. While we’ve certainly seen spending in store return to normal in many parts of the country, it’s now the time to invest in the digital economy,” said Ms. Lamb.
“Particularly coupled with incentives for entrepreneurs, investment in digital skills is a great move for retail. Many entrepreneurs, a significant percentage of these being women, start their businesses with their laptop. Investing in digital skills and infrastructure will give more retailers the opportunity to start, and boost, their business.”
Focus on women in Federal Budget a good start, and Government must continue to build on this foundation
The Australian retail industry continues to be a key employer of women, providing a variety of opportunities in both sales, and non-sales roles. Measures aimed at providing economic security for women are a welcome sign of progress towards equality.
“Certainly, the access to childcare subsidies will give women the freedom to create their own businesses and participate economically. Removing the $450 per month threshold under which employers are exempt from paying employees, predominantly women, will also provide certainty for these women as they look towards retirement. It’s of paramount importance that Government, and retailers, continue to work towards equal opportunity in leadership opportunities.”
Budget highlights for business
Click on each heading to skip to the relevant section.
- Digital Economy Strategy
- Temporary Full Expensing Extension
- Extension of Loss Carry Back rules for companies
- Extension of powers for the Administrative Appeals Tribunal in relation to small business taxation decisions
- Women-focussed measures
- Download the full report from BDO
- Federal Budget webinar
Federal Budget extends JobTrainer
The JobTrainer Fund was initially established as an investment measure to combat the employment issues arising from the COVID-19 pandemic. It operates on a state-by-state basis, with a goal to upskill younger, under-employed members of the workforce. $506 million will be spent over two years from 2021-22 to provide 163,000 training places in industries of critical importance.
The Apprenticeship Commencements Wage Subsidy has expanded ($2.7 billion over four years), with a key focus to increase the number of women in trades. Additional support for job seekers is also funded ($213.5 million over four years) to expand the ‘Local Jobs Program’, with tailored approaches to accelerate reskilling, upskilling, and employment pathways in selected regions.
The budget also incorporates a range of structural reforms aimed at better ensuring governments, employers and students invest in the training that strengthens Australia’s skills base. This includes the establishment of up to 15 industry-owned Skills Enterprises ($149.2 million over four years), the establishment of a new VET National Data Asset ($69.1million over five years) and the redesign / rebuild of the National Training Register ($30.9 million over four years).
A number of specific purpose payments were announced or re-announced in addition to the JobTrainer extension, including the ‘National Infection Control Training Fund’ ($31.6 million), revitalising TAFE campuses ($50 million over two years) and the ‘Skilling Australians Fund’ ($248 million over two years to signatory states).
Digital Economic Strategy
The Government has introduced a $1.2 billion Digital Economy Strategy aimed at taking advantage of the accelerated digital transformation resulting from COVID-19. As part of this strategy, it has introduced a 30% refundable Digital Games Tax Offset to make Australia an attractive destination for digital talent.
- Over $100 million to support digital skills for Australians including a new pilot program for work-based digital cadetships that offer a flexible way for workers to build digital skills, investments in the cyber workforce, and scholarships for emerging technology graduates.
- Building Australia’s capability in Artificial Intelligence with $124.1 million in initiatives, including a National Artificial Intelligence Centre led by CSIRO Data 61, supported by a network of AI and Digital Capability Centres to drive adoption of AI across the economy.
- Enhancing Government services through a $200.1 million investment to overhaul myGov, making it easier than ever for Australians to find the services they need, as well as a $301.8 million investment to enhance the My Health Record and an expansion of the digital identity system.
- Investment incentives to support business growth, including a Digital Games Tax Offset of 30 per cent to support Australia taking a greater share of the $250 billion global game development market, and changes to the way Australian businesses can claim depreciation of intangible assets like intellectual property and in-house software.
- Helping small and medium businesses build their digital capacity through a $12.7 million expansion of the Digital Solutions – Australian Small Business Advisory Service, and $15.3 million to drive business uptake of e-Invoicing.
- $35.7 million to support emerging aviation technologies like drones, including grants to support the use of these technologies to address priority needs in regional Australia.
- Unlocking the value of data in the economy and setting the standards for the next generation of data management, including $111.3 million to accelerate the rollout of the Consumer Data Right in banking, energy and telecommunications.
- Strengthening safety, security and trust with over $50 million to enhance cyber security in government, data centres and future telecommunications networks.
Temporary Full Expensing Extension (Instant Asset Write Off)
The Government has announced a 12 month extension to the temporary full expensing measures until 30 June 2023. These measures initially announced as part of the previous budget, provide eligible businesses with an immediate deduction for the full cost of depreciating assets.
Under the current law, eligible businesses with aggregated turnover of less than $5 billion are entitled to an immediate deduction for the cost of depreciating assets purchased after 7:30pm AEDT on 6 October 2020, and first used or installed ready for use by 30 June 2022.
For those entities with aggregated turnover exceeding $5 billion, they may also be entitled to an immediate deduction under the ‘alternative test’. The ‘alternative test’ requires Australian income of less than $5 billion, and the cost of depreciating assets for the 2017, 2018 and 2019 income years to exceed $100 million.
The proposed measure extends the immediate deduction for a further 12 months to apply to assets that have been first used or installed ready for use by 30 June 2023.
We welcome the extension of this very generous concession by the Government. As Australia recovers from the economic impacts of COVID-19, it will be critical businesses can continue to invest in capital assets to ensure a smooth economic recovery.
However, the continued use of the aggregated turnover definition in the legislation adds complexity to the eligibility requirements. Particularly for those entities with foreign parents, it will be critical that all connected entities and affiliates are appropriately identified in order to assess the eligibility for the write-off. For entities with aggregated turnover exceeding $5 billion, all may not be lost as they may still be eligible under the ‘alternative test’. The requirements of such a test should be carefully considered by businesses.
Extension of Loss Carry Back rules for companies
The Government has announced an extension to the temporary loss carry-back rules announced in the 2020 Federal Budget. This extension will allow eligible companies to carry back and use tax losses from the 2022-23 income year to offset tax paid on profits from the 2019 and subsequent income years. This refund of tax paid in previous income years when a loss is incurred in a later year is described as a ‘loss carry-back’.
Currently, companies with an aggregated turnover of less than $5 billion may only carry-back losses incurred in the 2020-2022 income years to the 2019 income year onwards. Companies that do not elect to use the loss carry-back rules will continue to carry forward losses as normal. The extension of the loss carry-back provisions will provide further support to companies for an additional year.
The following limitations will continue to apply with respect to the loss carry-back measure:
- Losses carried back cannot be more than the earlier taxed profits
- The loss carry-back amount must not generate a franking account deficit.
Companies that elect to apply this measure will receive a tax refund in the loss making year equal to the amount which has been offset by the losses carried back.
The NRA and partner, BDO, are pleased the Government has chosen to extend this measure providing much needed support to companies experiencing a delayed downturn from the COVID-19 pandemic. This should also allow companies to better use the extended temporary full expensing measures which the Government announced as part of the 2021 Federal Budget
Extension of powers for the Administrative Appeals Tribunal in relation to small business taxation decisions
The Administrative Appeals Tribunal (AAT) will be given the power to pause or modify ATO debt recovery action in relation to disputed debts under review by the AAT’s Small Business Taxation Division (SBTD). The measure applies to tax debts disputed by small businesses with annual turnover of less than $10 million.
Under current laws, a stay on ATO debt recovery action, such as garnishee notices, can only be obtained through the court system. This is an expensive and time consuming process for small businesses, and provides no guarantee as to whether the stay will be granted.
The changes come following a recommendation from the Australian Small Business and Family Enterprise Ombudsman in April 2019, which called for a legislative amendment extending the AAT’s powers to pause tax debt recovery action. The measures are intended to reduce legal fees and red tape for small businesses.
Under the new laws, taxpayers who file an application before the SBTD will be able to apply for a pause or modification of ATO debt recovery actions until the underlying dispute has been decided. In determining applications, the AAT will be required to consider the effect on the integrity of the tax system and ensure the underlying dispute is genuine.
The National Retail Association welcomes the re-introduction of the Women’s Budget Statement and $3.4 billion of new budget measures, including:
- $1.1 billion for women’s safety, addressing violence against women and children, and sexual harassment
- $1.9 billion for women’s economic security, including support for childcare, an investment in the aged care workforce, superannuation payments for low-income workers, and further investment in STEM skills and
- $351.6 million for women’s health and wellbeing including funding for cervical and breast cancer, endometriosis and reproductive health.
The Budget also includes:
- A new Family Home Guarantee for single parents who have a 2 percent deposit, helping single parents and low-income earners move from renting to owning their own home.
- The rollover of the Low & Middle Income Tax Offset which will benefit lower paid workers, two thirds of whom are women.
- The allocation of $17.7 billion for aged care funding to address recommendations from the Aged Care Royal Commission. Investment in aged care supports gender equality as women represent over 87 percent of sector workers, and women tend to outlive men.