Federal Budget 2021-2022: 4 business tax incentives that can help your SME grow

It’s that time of year again! The Federal Budget for 2021-2022 was announced this week. What does it mean for SMEs?

The good news is that the government will continue to support small businesses in order to mitigate the impact of the pandemic on the small business sector and stimulate the post-COVID recovery and future prosperity of our country. 

To make it as easy as possible, we’ve summarised 4 important business tax incentives from the Federal Budget 2021-2022 and how they can help SMEs grow and boost the economy. 

1. Cut that tax right back

The government is aiming to cut tax for SMEs by more than $16 billion by 2021-24, which involves reducing the corporate tax rate for SMEs from 27.5% to 25% from 1 July 2021. 

The reduction of the corporate tax rate ultimately means that you will have to pay less tax. Therefore, you will have more money available to invest back into your business instead. Looking for some inspiration to grow your business? Check out our article: How funding can help revive your business in 2021. 

2. Keep claiming the full cost of eligible business assets 

Since the start of the pandemic the government has introduced specific tax incentives. These were designed to encourage small businesses to keep investing into their business. One of these incentives is the “instant asset write-off”. It essentially allows businesses to claim back deductions on business assets upfront rather than depreciating them over several years. 

In the Federal Budget 2021-2022 the government extended this incentive including the temporary full expensing of business assets for eligible businesses for an additional year until 30 June 2023. Check out the relevant business eligibility criteria on the Australian Tax Office (ATO) website.

This comes after encouraging numbers from the last December quarter showing that the investment rate for machinery and equipment is at its highest in seven years. 

3. Save tax by offsetting your losses against previous profits 

In addition to the instant asset write-off incentive, the government has also extended the temporary loss carry back tax offset for an additional year as well. 

This initiative lets businesses with an annual turnover under $5 billion offset tax losses against tax profits that were paid previously. This can help reduce your business’s tax bill or even result in a tax return. 

Let’s say your business will run at a loss in 2022-23. In this case you will be able to offset the loss amount against the tax profits you paid as far back as in the 2018-2019 income year. 

This combined with the “temporary full expensing” for instant asset write-offs will bring approximately an extra $20.7 billion in tax relief to businesses.

4. Temporarily pause collection of disputed ATO debts 

In the future it will be easier for small businesses, including sole trades, with an annual turnover of less than $10 million, to request the Administrative Appeal Tribunal (AAT) to pause or change ATO debt recovery actions against cases while they are being reviewed by the AAT. 

The AAT will have more options to pause actions including debt recovery, penalties, garnishee notices etc. until the dispute is officially resolved. 

With the End Of Financial Year (EOFY) fast approaching, it’s a great time for small businesses to invest in business assets and make the most of the tax incentives mentioned above. For instance, investing in business assets can help you reduce your taxable income including your tax rate. The extended tax incentives mean that you will be able to claim more deductions, offset losses and ultimately pay less tax.

If you’re looking for flexible business funding solutions to invest in business assets before the EOFY, reach out to our team at Lumi via phone on 1300 00 5864 or email us at support@lumi.com.au. 

We offer unsecured business loans and lines of credit from $5,000 – $150,000 and secured finance up to $300,000. 

In addition, we also offer Payment Pause* on selected term loans, which will allow you to pause loan repayments interest-free for four weeks whenever your business needs it. This means you can invest into your business with peace of mind. Knowing that you can manage loan repayments on your terms. 

All you need to apply are 3 things:

• A valid ABN/ACN

• Min. 6 months in business

• Min. $5K monthly turnover 

Bear in mind that the above criteria does not guarantee an approval of your business finance application. We assess applications on a case-by-case basis against your credit and risk profile. This allows us to offer bespoke funding solutions tailored to your specific needs. 

Are you ready to apply for a business loan with Lumi? Click here to start our easy 5 minute online application process. 

Your Lumi team

*Terms & Conditions and Eligibility criteria apply.