Federal budget 2021: A snapshot for businesses

After the difficult year that was 2020, there was no surprise that when Treasurer Josh Frydenberg announced 2021 Federal Budget on 11 May 2021, the focus was post COVID-19 recovery and support for Australian businesses and individuals.

So, when it comes down to it, how has the estimated $300 billion been distributed and what does the 2021 Federal Budget mean for your business?

Small and medium businesses

Small businesses account for more than 97% of Australian businesses and employ around 41% of the total business workforce in Australia. Whilst some small businesses thrived throughout the pandemic and during lockdowns (particularly those with online businesses), others struggled to continue trading altogether.

In response, the Federal Budget has extended the temporary full expensing and temporary loss carry-back for an additional year. The full expensing incentive means that businesses with a turnover of up to $5 billion can deduct the full cost of any eligible asset they purchase for their business up until 30 June 2023. The temporary loss carry-back incentive means that eligible businesses can carry back tax losses for an extra year from the 2019-20, 2020-21, 2021-22 and now 2022-23 income years to offset previously taxed profits in 2018-19 or later years.

The extension is aimed at enabling small and medium businesses experiencing COVID-19 related supply disruptions, or considering investing in projects requiring longer planning times, to take advantage of those incentives.

The Government will also deliver tax cuts for small and medium businesses. Tax rates for such businesses will be reduced from 27.5% to 25% from 1 July 2021.

Additionally, 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.

Alcohol manufacturing sector

Previously, there was limited assistance given to brewers and distillers compared to wine producers (who receive certain tax relief under the Wine Equalisation Tax Producer Rebate).

From 1 July 2021, all eligible brewers and distillers will receive full remission (up from 60%) of any excise they pay on the alcohol they produce. The refund has now been increased from $100,000 up to a cap of $350,000 per financial year.

The Government has indicated there will be no requirement for the excise duty to be paid when the excise return is lodged, with the remission equating to a full offset of the excise duty liability until the maximum amount has been reached. This aims to align alcohol manufacturers with wine producers.

Agriculture sector

The gross value of agricultural production is forecast to reach a record $66 billion in 2020–21, boosted by Australia’s second‑biggest winter crop on record and it appears as though the agricultural sector has navigated the COVID-19 pandemic relatively well, especially when you consider the impacts of panic buying and external demand for red meat throughout 2020-21. However, a key challenge for agribusinesses has been the lack of labour availability due to border closures. Further, Australians of course understand the devastation that droughts and bushfires can have on agribusinesses as was the case in 2019-20.

The Government is pouring $850.4 million into the agriculture sector to help farmers reach their goal of increasing farm gate output to $100 billion by 2030. The Government will deliver:

(a) $400 million to safeguard Australia from exotic pests and diseases;

(b) $96.7 million to grow agricultural exports;

(c) $228.9 million for soil programs;

(d) $5.4 million to work with perishable agricultural goods supply chains to identify market transparency issues and co-design and co-fund the development of tools to improve price and market transparency;

(e) $34.8 million to drive innovation for collaboration, commercialization and update to grow agricultural productivity and competitiveness; and

(f) $29.8 million to help farmers attract and retain skilled workers in the long term.

Summary

Small and medium businesses will now have more time to utilise the full expensing and loss carry-back incentives which have been extended until 30 June 2023, tax rates for small businesses will be down to 25% and debt recovery action for tax debts incurred by small businesses can now be paused or modified.

The alcohol manufacturing sector is receiving tax relief for an estimated 400 distillers and 600 brewers, meaning those distillers/brewers receive full commission of any excise they pay on alcohol produced (which will be capped at $350,000 per financial year).

Agriculture has been given a significant $850.4 million input with an aim to establish a $100 billion industry by 2030, with almost half being directed to biosecurity and pest management. If the agriculture sector continues to thrive as it did during the 2020-21 year, a $100 billion industry by 2030 looks achievable.