Ten things startups need to know about the 2023 federal budget

Labor just handed down its second federal budget since winning the federal election – and there’s a lot to comb through. But we’ve waded through hundreds of pages of budget papers so you don’t have to! Here are the things that startups need to know.

1. $392 million Industry Growth Program

After startups had quite ordinary representation in the October budget, SmartCompany has something more exciting to share.

$392 million will be set aside to support startups and SMEs, “commercialise their ideas and grow their operations.”

Minister for Industry and Science, Ed Husic, confirmed that this will include funds for grants as well as mentorship.

An additional $39.6 million over four years will go towards the continuation of the Single Business Service, which supports SME engagement with the government.

Read the full story here.

2. Goodbye to some patent box measures

Nestled randomly within Budget Paper 2, Labor has quietly announced it will not proceed with three patent box measures from the 2021-22 and 2022-23 budgets. It’s currently unclear exactly which ones will be removed.

The previous Morrison government’s March 2022 budget said the patent box system would provide extremely generous tax concessions to agtech innovators, biotech leaders and low-emissions startups that patented and commercialised their technology within Australia.

According to Labor, axing a number of patent box measures will increase receipts by $722.6 million.

3. Price hike for Visa Application Charges (VACs)

Here’s a deeply specific one. The government is increasing VACs from July 1 2023, with an extra uptick for business innovation and investment visas. These will need an additional 40 percentage points.

So if overseas investors and venture capitalists want to come to Australia to splash some cash, it’s certainly going to cost them.

4. Cash for AI Adoption

Everyone is talking about AI, including the federal government.

The 2023 budget papers reveal that $101.2 million will go towards supporting small businesses to include both AI and quantum technologies within their operations.

This will include support for the adoption of artificial intelligence by SMEs to improve their business processes and trade competitiveness. Some of the funds will also go towards the expansion of the National AI Centre.

Read the full story here.

5. Instant asset write-offs

The government is extending the instant asset write-off scheme for another year. The new write-off will be set at $20,000. This will allow small businesses with an annual turnover of less than $10 million to immediately deduct the full cost of eligible assets first used or installed between 1 July 2023 and 39 June 2024.

This will be applied on a per-asset basis, meaning multiple assets can be instantly written off.

Read the full story here.

6. Small Business Energy Incentive

Speaking of assets, the government’s Small Business Energy incentive will allow for an additional 20% of the cost of depreciating assets that support electrification and efficient energy. Sadly this does not include EVs.

Up to $100,000 of the total expenditure will be eligible, with the maximum bonus deduction sitting at $20,000.

This will be applicable to businesses with an annual turnover of less than $50 million.

7. Managing tax instalments

In a measure that will assist startups burning through their cash fast, Labor is amending the tax law to temporarily set the GDP adjustment factor for PAYG and GST instalments to 6% – a significant reduction from 12%.

According to the budget papers, this rate will apply to small businesses, as well as individuals, who are eligible to use the relevant instalment methods. This is up to $10 million aggregate annual turnover for GST instalments and $50 million annual aggregate turnover for PAYG. 

This will relate only to instalments that are related to the 2023-24 income year.

Read the full story here.

8. Some small targets for women

The government is providing $8.6 million over four years for the previously-established Australian Skills Guarantee that will ensure that one in 10 workers on major government-funded projects will be an apprentice, trainee or paid cadet.

In addition to this, there will be sub-targets for women for projects costing $10 million or more. The targets will be higher for projects with contracts over $100 million.

The budget is also extending the Women in STEM Cadetships and Advanced Apprenticeships Program until June 30, 2027. This will be offset by savings from within the education portfolio.

$5 million over three years – starting in 2024 – will be provided to organisations “with appropriate expertise in supporting women in the workplace” with a view to supporting women in historically male-dominated trade apprenticeships.

According to the papers, “this will include providing education, advice or support to increase culturally safe and inclusive workplaces, reduce the cultural barriers to women’s participation, address workplace challenges and support businesses to attract and retain women.”

There was no mention of the Boosting Female Founders scheme. This isn’t surprising considering the significant feet dragging on this one. 

9. Removing plug-in hybrids from fringe benefit tax exemptions

If you were hoping to buy a plug-in hybrid as a company car over the next few years and looking for a tax deduction, make sure you buy before 2025.

Labor is sunsetting the eligibility of plug-in hybrids to receive the fringe benefits tax exemption for electric cars.

Read the full story here.

10. Crypto and blockchain

For all of you crypto and blockchain enthusiasts we have… absolutely nothing for you.

There was not a single mention of either in any of the budget papers. 

We were at least expecting some costing around the crypto compliance team announced back in February — but no.

To see SmartCompany‘s full budget coverage, click here.