Small business was the winner of the federal budget 2018, benefiting from extended tax deductions and increased spending on tech and infrastructure. However, the rest was a mixed bag, with research and development in particular taking a hit and little effort made towards reducing the corporate tax rate.
Federal budget falls in favour of small business
Treasurer Scott Morrison has extended the instant tax write-off on spending under $20,000 to the next financial year, and has also announced up to $10,000 in wage subsidies for organisations who employ eligibile older workers.
He has also announced a crackdown on illegal "phoenixing", whereby companies are deliberately put into liquidation before the end of the financial year. The assets are transferred to a new business operating under the same owners, and the creditors of the old company go unpaid. This is a practice that has historically hurt small business and the crackdown is welcome.
While small business tax breaks are welcome, new limitations imposed on R&D have received a mix reaction. The Government had originally planned to cap R&D rebates to $2 million, but the startup community managed to convince the Treasury to raise this to $4 million. However, the cap may still impact high cost R&D such as biotech.
Increased tech and infrastructure spending
Though the Government is cutting business R&D, it has announced significant expenditure on its own research, tech and infrastructure projects. These include:
- $44.6 million to establish a Consumer Data Right in the financial services sector. This is a huge boost for fintechs and will make it easier for consumers to access their banking records and transfer information between financial institutions.
- $29.9 million on AI and machine learning.
- $24.5 billion in new major transport projects.
- $41 million to kick-start the Australian space sector over the next four years.
The Government hopes these investments in technology and transport will provide a boost for business, particularly those in rural Australia who often suffer from poor infrastructure.
Cracking down on the black economy
Morrison has also announced a crackdown on what's known as "the black economy," where businesses under-report revenue by paying cash in hand. The budget has outlawed cash payments above $10,000 to businesses for goods and services, and is spending $349 million on investigation and enforcement.
Where are the corporate tax cuts?
The Government's plan to reduce the corporate tax rate from 30 to 25 per cent is currently stalling in the Senate, which was reflected in the Budget. No corporate tax cuts were announced, despite Australia's being significantly higher than the world's largest financial centres: the rate in the US stands at 21 per cent, the UK at 19 per cent and Singapore at 17 per cent. Higher corporate tax rates significantly discourage foreign investment.
Whatever size or sector you operate in, the budget is going to impact you, and it's important you alter your business strategy to account for it. The expert business advisors at Alpin Advisory can help you do just that. Contact us today for more information.