Experts Speak Out: Small Business & the Federal Budget

JobMaker: Highly Discriminative?

According to the Australian Small Business and Family Enterprise Ombudsman, 89% of the Australian business population are either micro businesses (which constitutes one to four employees) or sole traders.

However, the JobMaker Hiring Credit– a wage subsidy recently announced in the Federal Budget and set to commence in February 2021– has been classed as ‘highly discriminative’ by the Institute of Public Accountants (IPA).

If legislation is passed for the JobMaker Hiring Credit (with a report due on 6 November, 2020), the wage subsidy will pay employers in arrears for each new employee aged between 16 and 35. However, JobMaker specifies a strict eligibility criteria.

Employers need to be registered for pay-as-you-go (PAYG) withholding, hold an Australian business number (ABN), and have met their tax lodgement obligations. However, they also need to be reporting through STP- which some have issue with.

Whilst micro companies and sole entities exempt from reporting through Single Touch Payroll (STP) up to 30 June 2021, accounting professionals believe many SME (Small to Medium Entity) businesses will find themselves ineligible from a recently introduced wage subsidy.

Tony Greco, the IPA’s general manager of technical policy, told Accountant’s Daily that “JobKeeper did not discriminate between employers who were on STP versus those that were not,” adding “this is highly discriminative towards smaller employers.”

“By excluding such entities, this does not accord with the policy objective of incentivising all employers to take on additional employees.”

Instant Asset Write Off- Warnings for Small to Medium Business

In further small busines news, SME’s have been cautioned of risks associated with the instant asset write off also proposed in the Federal Budget earlier this month.

Gavan Ord, CPA Australia manager of business and investment policy, warns that small businesses will be the targets of sellers encouraging businesses to use the instant asset write-off to buy more products.

The budget stipulated that the government will allow businesses to write off the full value of assets acquired after Tuesday, 6 October 2020, and first used by mid-2022. If an asset is not eligible for temporary full expensing because it was acquired before the 2020 budget time, the time by which the asset must be first used or installed (and ready for use) to qualify for the enhanced instant asset write-off is extended until 30 June 2021.

Small businesses need to ensure they know the rules involved. While the write-off applies to a wide range of assets, it does not apply to all assets or their uses.

“Do not take advice on your eligibility from someone trying to sell you a product. Only take tax advice from a registered tax agent,” Ord told My Business. “Consider the rules which apply to the instant asset write-off and whether purchasing the asset makes good business sense.”

Under temporary full expensing, small-business entities (with an aggregated turnover of less than $10 million) are able to deduct the full cost of:

  • eligible depreciating assets that are first held, and first used or installed ready for use for a taxable purpose between the 2020 budget time and 30 June 2022;
  • the second element of cost of these assets and of existing eligible depreciating assets incurred between the 2020 budget time and 30 June 2022; and
  • the balance of their general small business pool.