Federal Budget 2012: The good, the bad and the ugly

The 2012 Federal Budget has lived up to its promise of delivering a “modest” surplus, with most of the measures announced also fairly modest.

While it’s easy to feel disheartened by the lack of support for start-ups, there were a few small victories, although there were also a few measures that will prove a lot less popular.

StartupSmart wraps up the good, the bad and the ugly of the 2012 Federal Budget.

Loss carry-back

This measure was, undoubtedly, the major victory for small businesses in the budget.

In 2012-13, companies will be able to carry back tax losses of up to $1 million so they get a refund against tax previously paid.

From 2013-14, companies will be able to carry back losses for two years, providing a tax benefit of up to $300,000 per year.

“This will support businesses when they need it – providing an injection of funds to invest in new ideas, equipment and markets,” Swan said.

Small Business Commissioner and support services

The government will spend more than $8 million to establish an Australian Small Business Commissioner, who will represent and advocate small business interests.

Meanwhile, the Small Business Advisory Service will be made ongoing, with additional funding of $28 million over the next four years.

The Small Business Support Line will also be extended to 2015-16.

Business skills training for tradespeople

In what appears to be the only start-up incentive, the government will spend $19.4 million over four years to help newly-qualified tradespeople start their own business.

Recently-qualified tradespeople – who want to set up their own business – will be eligible for up to $5,000 in business skills training.

Manufacturing innovation centre

To enable manufacturers to compete globally, the government is introducing a $30 million Manufacturing Technology Innovation Centre.

The initiative is designed to encourage businesses and researchers to work together to improve business performance and realise new market opportunities.

University places

Almost 800,000 students are expected to enrol at Australian universities by 2015 as a result of higher education reforms, which could give young entrepreneurs the leg-up they need.

A total of $38.8 billion will be invested over the next four years to support the government’s decision to lift the cap on student places.

No company tax cut

Despite speculation about a company tax cut, for small businesses in particular, the budget contained nothing in this regard, which is sure to be a major sore point among start-ups.

Swan didn’t go into too much detail about the absence of a small business tax cut, but also didn’t waste an opportunity to shift the blame.

“Our company tax cut has been rejected in full by the Liberals and Nationals, and in part by the Greens,” Swan said in his budget speech.

“We wanted to do more for business with a company tax cut but the Opposition’s negative tactics have prevented that tax cut flowing.”

Crackdown on living-away-from-home perks

The government is cracking down on the tax concession for living-away-from-home allowances and benefits, which could affect start-ups who spend much of their time overseas.

One of the issues raised at last year’s tax forum was the increasing exploitation and misuse of this tax concession, particularly among highly-paid executives and foreign workers.

The government will now ensure it can only be used for the expenses of people who are legitimately maintaining a second home in addition to their actual home, for up to 12 months.

Changes to super concessions

From July 1, individuals with income greater than $300,000 will have the tax concession on their contributions cut from 30% to 15%.

This reform is designed to reduce the tax concession that very high income earners receive on their concessional contributions, so it is more in line with the concession received by average income earners.

It is expected to affect around 128,000 people or 1.2% of people contributing to superannuation.

No standard deduction for work-related expenses

The government has decided not to proceed with the standard deduction for work-related expenses – a measure that was scheduled to commence on July 1, 2013.

“This decision will deliver a substantial saving of $2.1 billion over the forward estimates period,” Swan said in a joint statement with Assistant Treasurer David Bradbury.

GST crackdown

The government will provide the Australian Taxation Office with $195.3 million in 2014-15 and 2015-16 to fund additional GST compliance activities, so start-ups need to be on their best behaviour in this area.

The measure will ensure that issues relating to fraudulent GST refunds, systematic under-reporting of GST liabilities, failure to lodge GST returns and outstanding GST debts continue to be closely examined by the ATO.

This measure is estimated to increase tax revenue by $986.2 million over the forward estimates period.