Support for SMEs and start-ups, energy price relief, and industry commercialisation initiatives are key parts of this year’s federal budget.
Treasurer Jim Chalmers announced the establishment of the National Reconstruction Fund Corporation (NRFC) to oversee the NRF program, an Industry Growth Program targeting SMEs and start-ups, changes to skilled migration, and the instant asset write-off scheme.
Australian Food and Grocery Council (AFGC) CEO Tanya Barden said, "We congratulate the government on its responsible decision to bank most of the windfall gains we see in this year’s budget. It is important to work to stabilise the economy now as we still face great global economic uncertainty.”
HLB Mann Judd Tax Consulting and Tax Committee leader, Peter Bembrick said, “With the Budget’s focus elsewhere, the only measures of great interest for small business are the reinstatement of the $20,000 instant asset write-off until 30 June 2024 and the 20 per cent bonus deduction under the Small Business Energy Incentive to help businesses become more energy efficient.”
National Reconstruction Fund
The NRFC will receive $61.4 million over 4 years from 2023–24 (and $1.2 million per year ongoing), with $53.2 million of that going to the establishment and operational costs of the NRFC in 2023–24. Chalmers said it was expected that ongoing operations would be funded from revenues earned on investments made.
The remaining $8.2 million over 4 years from 2023–24 (and $1.2 million per year ongoing) will go to the Department of Industry, Science and Resources to support the establishment and oversight of the NRFC.
The NRF will earn estimated receipts of $188.7 million over the forward estimates from the $15 billion of investments in loans, equity investments and guarantees, with the returns to be reinvested to ensure the NRFC’s sustainability.
The seven NRF priority areas are renewables and low emissions technologies, medical science, transport, value‑add in agriculture, forestry, and fisheries, value‑add in resources, defence capability and enabling capabilities.
A spokesperson for the Minister for Industry and Science told Food & Drink Business that while food and beverage had never been specifically mentioned as a priority area, “food and beverages – and specifically the manufacturing industry surrounding the food and beverages industry – fit within the value add in agriculture, forestry, and fisheries priority area”.
Employer association AiGroup chief executive Innes Willox said, “The Government’s much-touted $15 billion National Reconstruction Fund receives seed funding of only $550 million this year, almost stalling it at the starting line. This represents 3.6 per cent of the promised total NRF funding.”
Instant asset write-off
$290 million has been allocated to instant asset write-off, providing a $20,000 instant asset write-off. Small businesses with aggregated annual turnover of less than $10 million will be able to immediately deduct eligible depreciating assets costing less than $20,000, which are first used or installed ready for use between 1 July 2023 and 30 June 2024.
The $20,000 threshold will apply on a per asset basis, so small businesses can instantly write off multiple assets. The $20,000 instant asset write-off is estimated to provide around $290.0 million in cash flow support for small businesses over the forward estimates.
RSM Australia national leader, Manufacturing, Jessica Olivier, said, “Manufacturers will be disappointed on the asset write-off front. While this budget increased the previous $1k instant asset write-off to $20k instant per asset write off, the current Temporary Full Expensing (“Covid”, TFE) measures were not extended.
“So, any manufacturing company waiting on delayed equipment delivery will no longer access the TFE provisions and it’s also unlikely to benefit them given strict criteria (e.g. <$10m turnover, asset costing $20k or less).”
Improving small business cash flow
Roughly 2.1 million eligible small businesses will be able to access cashflow relief by halving the increase in their quarterly tax instalments for GST and income tax in 2023‑24.
Instalments will only increase by six per cent instead of 12 per cent, which better reflects the economic conditions currently faced by the sector.
The budget also included a lodgement penalty amnesty program for small businesses with aggregate turnover of less than $10 million, to encourage them to re-engage with the tax system. The amnesty will remit failure-to-lodge penalties for outstanding tax statements lodged in the period from 1 June 2023 to 31 December 2023 that were originally due during the period from 1 December 2019 to 29 February 2022.
The Single Business Service will continue, with $39.6 million over 4 years from 2023–24 (and $11.0 million per year ongoing) to support SMEs’ engagement with all levels of government.
Energy Price Relief Plan
The budget’s Energy Price Relief Plan will limit Australia’s exposure to international energy price shocks and provide around 1 million small businesses with direct bill relief, Chalmers said.
Small Business Energy Incentive
The Small Business Energy Incentive is designed to encourage businesses to shift to higher efficiency energy systems. It will provide $310 million in tax relief to around 3.8 million businesses that invest in installing batteries, upgrading to high-efficiency electrical goods, and electrifying their heating and cooling systems. make investments like electrifying their heating and cooling systems, installing batteries and upgrading to high‑efficiency electrical goods.
Businesses with annual turnover of less than $50 million will have access to a bonus 20 per cent tax deduction for eligible assets supporting electrification and more efficient use of energy, from 1 July 2023 until 30 June 2024.
Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business.
This is in addition to $62.6 million towards energy efficiency grants for small and medium enterprises in the October Budget.
AFGC CEO Tanya Barden said the energy incentive would provide “important support” for small businesses transitioning to clean energy.
Barden said, “This budget provides much-needed cost of living relief while initiatives such as the Small Business Energy Incentive can help small and medium food and grocery manufacturers invest in upgraded, energy-saving plant and equipment.
“This is sensible support for a vital industry that keeps supermarket shelves stocked but is still facing fragile supply chains, soaring input costs and subsidised foreign competitors.
HLB Mann Judd Tax Consulting and Tax Committee leader, Peter Bembrick said, “With the Budget’s focus elsewhere, the only measures of great interest for small business are the reinstatement of the $20,000 instant asset write-off until 30 June 2024 and the 20 per cent bonus deduction under the Small Business Energy Incentive to help businesses become more energy efficient.”
Cyber security
A program to train “in-house cyber wardens” was allocated $23.4 million with the goal of helping small businesses build their resilience to cyber security attacks.
The cyber wardens would held mitigate and reduce the impact cyber-attacks have on small business. associated with on small business. It will be delivered by the Council of Small Business Organisations Australia.
Pounder said, “This is not just a priority for the tech sector but for all Australians to keep their data and privacy safe and secure in an increasingly digital world.
“The establishment of the new Coordinator and National Office for Cyber Security is an important reform which has the potential to significantly improve the way we respond to major cyber incidents and review lessons learned.”
“The measures announced by the Government tonight will play an important role in continuing to drive us towards our shared goal of 1.2 million tech jobs by 2030 and are well aligned with the priorities outlined in our pre-budget submission.”
Industry Growth Program
Funding of $431.9 million over four years has been allocated for SME businesses and start-ups, with $392.4 million over four years (and $68 million per year ongoing) to establish the Industry Growth Program that would support Australian SMEs and startups commercialise their ideas and grow their operations.
FIAL managing director Mirjana Prica said she was delighted with the budget announcement on the program.
“Targeting this cohort of businesses is critical as our sector is made up of 98 per cent of SMEs. They are the future engines to propel our sector towards the $200 billion GVA potential,” Prica said.
Willox from the AiGroup was less impressed, saying the program was “a cut-down, half-funded, government-run version of the existing Entrepreneurs' Program, which has provided support for smaller businesses to strategically plan for growth and expansion. Government-run programs providing direct support for business rarely achieve their objectives”.
The Tech Council of Australia (TCA) CEO Kate Pounder welcomed the initiative, “The creation of the new Industry Growth Program will help spark early-stage commercialisation in strategic industries and grow Australian start-ups. We welcome the adoption of an end-to-end approach that connects the pipeline of projects from this program to the National Reconstruction Fund.”
Regional focus
The Regional Australia Institute (RAI) CEO Liz Ritchie welcomed the budgetary measure of establishing a Regional Investment Framework, saying it answered the RAI’s call for a holistic and strategic approach to regional growth.
The Framework has four priority areas for regional investment: People, Places, Services, and Industry, which align closely to targets in RAI’s 10-year regional plan.
The government also announced it would restore the ‘State of the Regions’ report to provide a “pulse check” on progress towards reducing the inequities experienced in regional Australia.
$600 million was also announced for the Growing Regions Program for community and economic infrastructure projects in regional and rural Australia.
Skills and training
RAI said the budget’s measures to address the regional skills gap and future skills development was a “significant highlight”.
Ritchie said, “Through progressing the National Skills Agreement, Skills and Training Minister Brendan O’Connor has ended a decade-long stalemate between the Federal Government and States and Territories and started the process for a more fit-for-purpose, more accessible vocational education system.
“We welcome the additional $3.7 million invested in the National Skills Agreement which includes a focus on bolstering training pathways for careers in the care sector - aged and early childhood care -skills so badly needed in regional Australia. The RAI recognises the much-needed wage increase in aged care workers.
“Regional and remote students are over-represented in the non-completion of apprenticeships and other vocational education. The National Skills Agreement’s prioritisation of assisting students with barriers to completion, is highly positive.”
Willox said: “The announcements around improving Australia’s skills base are the major positive, including the prospect of $3.7 billion in additional funding for vocational education and training, assuming a National Skills Agreement can be struck. This will be essential to building a TAFE system fit for purpose to meet the demand for additional TAFE places the Government hopes to create. The focus on increasing the basic language, literacy, and numeracy skills that Australian industry reports is holding them back is also welcome.
“The focus on skilled migration remaining the core of our national migration program of 190,000 migration places is also welcome as industry seeks to fill growing skills gaps across our economy.”
The government flagged a review of the migration system, which would see a sizeable increase in the Temporary Skilled Migration Income Threshold (TSMIT) from $53,900 to $70,000 from July 1, the first increase in the threshold in 10 years.
Olivier said, “While this will likely put significant pressure on the lower paid hospitality and care industries, from a manufacturing perspective it is hoped that this will attract (and retain) genuinely skilled migrants to Australia with trades to be utilised in this sector.”
She added it would “greatly assist” in increasing productivity due to resourcing constraints which have affected the sector since Covid (as well as a more general shortage of skilled tradespeople affecting the industry as highlighted across the manufacturing, construction, motor and mining sectors back in 2018).
“Economists predict that such an increase will see a sharp drop in the number of migrants and their families, however if compared to the minimum wage for migrants in the UK (~AUD$49k) then Australia may well seem a more attractive location to those looking to relocate overseas.
“The proposed TSMIT is also higher compared to the *average* annual pay of a migrant worker in the USA of ~AUD$62k, noting the minimum hourly wage in the US differs between states. Closer to home, this puts the Australian minimum wage above New Zealand which was increased to ~$AUD$65k in October last year,” Olivier said.
