Budget 2022: 18 things business owners need to know

The SmartCompany team is headed to the budget lockup in Canberra for the afternoon, preparing to bring you the breaking news in a special evening edition of our newsletter tonight.

In the meantime, there’s plenty we know about what’s coming up tonight… plus a few things we don’t.

Here’s everything you need to know about tonight’s budget:

What we know:

Boosting apprenticeships

The government has said it will funnel a further $365 million into its Boosting Apprenticeship Commencements scheme — a program that subsidises half of an apprentice’s wages, up to $7000 per quarter, over their first year of employment. Employers can access smaller subsidies in years two and three of the scheme.

Sign-ups will now close at the end of the financial year, instead of March 31, a shift Treasurer Josh Frydenberg claims will support 35,000 extra apprentices and trainees.

Some industry groups say the extension won’t go far enough. The Australian Chamber of Commerce and Industry wants the scheme to operate for another two years, and the Australia Institute’s Centre for Future Work is calling for a total overhaul of the vocational education and training sector.

Some in the tech sector are also calling for a modernisation of apprenticeships to help get more local talent into the ecosystem.

PAYG changes

Changes to the pay-as-you-go (PAYG) tax model are on the way. 

Many small businesses that regularly pay the Australian Taxation Office a portion of their expected tax liability are currently subject to a 10% ‘uplift’ rate, adding a significant buffer onto their scheduled payments. Those that end up paying more than their actual liability can apply for a refund at the end of the financial year.  

The new tweak, confirmed by Frydenberg, will see businesses pay a 2% uplift rate through the 2022-23 financial year, allowing them to keep more of their cash in the here and now.

This shift — along with updates to the tax reporting regime — is projected to improve business cash flow to the tune of $1.85 billion, the Treasurer said. However, those tweaks will require new legislation, and a Coalition government post-election.

Investment in digital skills

The federal government has committed $10.7 million to a digital skills cadetship trial, to train applicants in fields such as cybersecurity. 

However, industry bodies say the measure reflects the Coalition’s piecemeal approach to growing the digital economy. It’s also debatable as to whether this is budget funding at all ⁠— $12.7 million was allocated to digital skills training in last year’s papers.

MYOB on Monday called on the Morrison government to commit even more funding to digital skills programs, saying it was a “critical moment” to support the small business community with ‘micro-credentials’ focused on digital business management skills.

Changes to employee share schemes

The Treasurer has pledged to make further changes to employee share scheme regulations, intended to make it easier for local tech companies to attract talent, both locally and from overseas.

Changes include increasing the value cap of $5000 on shares to a monetary cap of $30,000 ⁠— a measure that has been debated since last year’s budget ⁠— and new rules treating shares in Aussie companies in the same way as those in overseas companies.

The changes will reportedly be rolled into the Budget Measures Bill, meaning they will likely be passed into law before the impending federal election, and will come into effect from July.

Fuel excise cuts

Frydenberg has all but confirmed a six-month cut to the 44-cent fuel excise in an effort to curb skyrocketing petrol prices — that have seen Australians paying more than $2 a litre in several metro markets. It’s not yet confirmed what the cents-per-litre reduction will be, however News Corp reported it will be somewhere between 10 and 20 cents a litre.

The announcement will come alongside a package of cost-of-living measures being handed down tonight, with the fuel-specific change expected to see bowser charges drop as soon as midnight.

Cost of living package

This year’s federal budget will include “temporary targeted measures” designed to combat rapidly rising costs of living, Frydenberg has said. The government has also been facing calls to extend the low and middle income tax offset (LMITO) for another year.

However, in an interview with ABC Radio National earlier this month, Frydenberg declined to confirm whether or not LMITO would be included in tonight’s budget. Frydenberg instead said it will include “further measures to support families to meet the cost-of-living pressures, in a targeted and proportionate way”, although those measures have yet to be disclosed.

Hiring subsidies for seniors with disabilities

Speaking on Sky News’ Sunday Agenda, Frydenberg also reportedly announced a $44 million measure to encourage businesses to hire older people with disabilities.

The scheme will offer subsidies of up to $10,000 for employers.

“Workers with a disability as seniors are very valuable members of our workforce and businesses are incentivised to take them on,” the Treasurer reportedly said.

Infrastructure upgrades

The government is set to pledge $17.9 billion into some 22 new and existing road and rail projects across the country, including a $1 billion project to fund a fast train service connecting Sydney and Newcastle.

This announcement has not been without its critics, with many saying allocation of the funds clearly favour marginal seats. According to Crikey, only a handful of the projects, worth about $3.3 billion, are on Infrastructure Australia’s priority list.

Elsewhere, $480 million has been earmarked for improving telecommunications, including NBN connectivity, in regional Australia, something that will likely be welcomed by businesses in the regions.

What business owners want:

Tacking the skills shortage

Both small business owners and startup founders have expressed concern about the skills shortage in Australia, highlighting hiring and training as some of their key challenges.

Startups are looking out for any changes to the country’s skilled visa program, which will be essential to luring back international workers, as well as training solutions tailored to the tech industry.

At the same time, the right balance needs to be struck between training the local workforce and returning overseas talent. As Sandy Chong, chief of the Australian Hairdressing Council told SmartCompany: “We can only employ apprentices if we have skilled people to help transfer skills and also teach.”

Tax reform

Elsewhere, an Employment Hero survey of 528 Aussie SMEs found just over 67% see tax reform as “very” important for their business. In fact, taxation ranked second, behind inflation, as the top area of concern for SMEs when it comes to the budget.

According to the survey, the top change SMEs want to see is a broadening of the rules around business expenses, so they can claim back more GST credit. 

Instant asset write-off

The federal government dramatically expanded eligibility criteria for the instant asset write-off scheme in 2020, in a bid to encourage business investment during the pandemic, and last year’s budget extended the scheme into 2023.

While there’s no ironclad guarantee of another extension, both Frydenberg and Morrison have spoken favourably of instant asset write-offs in recent weeks. Small business groups want the policy to become permanent.

R&D Tax Incentive developments

It’s been a hot topic of conversation for the past few years, and while it didn’t get much attention in the 2021 budget, there is potential for more movement on the Research & Development Tax Incentive. 

In particular, the tech community will be looking out for updates to the way claims are handled for software R&D, and more clarity for software-based businesses. In the past, companies have found themselves having to repay millions in R&D claims for software, after audit processes have found they were incorrectly claimed.

“A lot of small businesses would say they feel like R&D payments for software are a lottery, and there are enough things in life that feel like a lottery,” Tech Council of Australia chief executive Kate Pounder tells SmartCompany.

“We have a system that was drafted in the ’80s and hasn’t quite kept pace.”

Emissions cuts not tax cuts

A pre-budget survey run by The Conversation showed that more than half of Australia’s leading economists would rather budget measures go towards cutting carbon emissions, rather than income or company tax.

The economists surveyed are hoping for a budget deficit smaller than the $99.2 billion that some expect for 2021-22, and want the deficit to boost spending in other areas like an accelerated transition to net-zero carbon emissions — which the Morrison government previously pledged to achieve by 2050.

SMEs demand action

For some business owners, while any and all financial support measures would be very welcome, what they’re really looking for is some certainty as to when that support might materialise. Many, like Birch Restaurant owner Renée Wallace, are desperate for some respite so they can start committing to growth plans.

Beyond pledges and promises, Wallace wants to see action, she told SmartCompany last week — although in a pre-election budget she’s not overly confident of that.

“Stop talking about it and just start doing something,” she said.

“At the moment, we’re still planning with that ‘if’, ‘but’, ‘maybe’ scenario which is exhausting.”

Other things to look out for:

How much is the deficit?

We know the budget will be in deficit, thanks to the titanic fiscal support measures implemented through the pandemic. What we don’t know is precisely how deep that deficit is.

December’s Mid-year Economic and Fiscal Outlook forecast a deficit of $99.2 billion for 2021-2022, but Australia’s economic performance over the March quarter is likely to have tweaked that equation.

This month, ANZ estimated the final figure will be around the $85 billion mark; Westpac went lower, estimating a deficit of $77.7 billion. The Treasury seems to have echoed those sentiments. On Sunday, Frydenberg said the budget will show a “material improvement” from earlier estimates.

What’s in it for women?

In an interview with ABC, Minister for Women’s Economic Security Jane Hume told women in Australia to expect “more” from this year’s budget. What that means exactly is yet to be seen.

So far, the government has pledged its support to women’s economic security by opening up new employment opportunities, getting more women into the workforce and closing the gender pay gap – although a financial investment into such matters has not been confirmed.

The government has however confirmed a $189 million investment into strengthening prevention and early-intervention efforts in family, domestic and sexual violence, alongside its already-pledged $104 million to prevent technology and devices being used to perpetrate or facilitate said forms of violence. There is also a $58 million national action plan put towards tackling endometriosis, a fertility condition affecting one in nine Australian women.

‘Re-announcements’

There’s no denying this is a pre-election budget, and it’s already showing. Many of the announcements made have be reiterations of spending that has already been pledged or spent, or touting of new legislation that has already passed.

Other measures rely on new legislation being passed, meaning it will only come into effect if the coalition gets into power.

When Frydenberg takes to the mic this evening, look out for announcements that sound good, but aren’t necessarily new.

Supporting business doesn’t take billions

In our pre-budget coverage, as we’ve chatted to small business owners and startup folk alike, a common theme has emerged — business leaders are cognisant of the amount the government has spent on support over the past two years, and of the massive deficit.

But whether it’s changing the scope of apprenticeships, streamlining regulation or working more closely with industry associations, many of the asks coming from the community don’t require massive investments.

It’s not necessarily about big spending measures, it’s about assurance of support and removal of barriers to business.