May 2023 - Federal Budget Analysis

In my opinion, the three features of the 2023 Federal Budget which impact freelancers and sole traders, are:

1. $4B to help Australia shift to cleaner energy use,

2. $14.6B to address our current cost-of-living pressures, and

3. $390M in investment and advice to startups and SMEs to commercialise their ideas and grow their operations.

Let’s take a quick look at the essential parts for small businesses including freelancers and sole traders.

Instant asset write-off returns with a $20,000 threshold

The instant asset write-off returns with a $20,000 threshold per asset from 1 July 2023 to 30 June 2024.

Small businesses can immediately deduct the total cost of eligible assets costing less than $20,000 that are first used or installed ready for use next financial year, 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.

Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year after that. 

In summary - a good but reduced benefit for you if you utilise capital assets, but it's not a ‘real cash’ benefit.

See what the ATO has to say here.

New tax incentive for small businesses to invest in energy-saving technology

The Small Business Energy Incentive will help small‑ and medium‑sized businesses, including freelancers and sole traders, to invest in their energy transformation. The bonus tax deduction will provide small businesses with an additional 20 per cent deduction on spending that supports electrification and more efficient energy use.

It will help small businesses make investments like electrifying their heating and cooling systems, upgrading to more efficient fridges and induction cooktops, and installing batteries and heat pumps. Tradies, manufacturers, restaurants, hairdressers, real estate agents and other small businesses are expected to benefit from the move. 

However, specific exclusions will apply, such as electric vehicles, renewable electricity, generation assets, capital works, and assets not connected to the electricity grid and using fossil fuels.

Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business. Eligible assets or upgrades must be first used or installed ready for use next financial year, 1 July 2023 and 30 June 2024.

In summary - a great initiative to move Australia towards reducing fossil fuel use, but again, it's not a ‘real cash’ benefit for small businesses.

See what the Treasurer has to say here.

Small Business Lodgement Penalty Amnesty

A lodgement penalty amnesty program will be provided for small businesses to encourage them to re-engage with the tax system.

The amnesty will remit failure-to-lodge penalties for outstanding tax statements lodged from 1 June 2023 to 31 December 2023 that were initially due from 1 December 2019 to 29 February 2022.

In summary - A nice gesture to help small businesses, freelancers, and sole traders struggling with cash flow and tax compliance, but again, it's not a ‘real cash’ benefit.

See what the ATO has to say about this here.

$390+ million to establish a new Industry Growth Program

According to the budget papers, the program will support Australian startups and SMEs to commercialise their ideas and grow their operations, distributed over four years 

“This will enable emerging businesses to become the big employers of the future – backing our innovators with investment and advice so they can jump from brilliant idea to business plan to a growing enterprise,” the Minister for Industry and Science, Ed Husic, said.

The Minister confirmed that the Industry Growth Program would include grants and mentorship, with support targeted at businesses within the priority areas of the National Reconstruction Fund.

This approach provides a pathway for entrepreneurs to turn their ideas into thriving businesses in Australia instead of overseas.

Minister Husic said this funding would work “in tandem” with the National Quantum Strategy announced last week. The budget papers expanded upon this, announcing a $101 million investment into the “responsible development” of AI and quantum industries within Australia.

In summary - This is a win for small businesses, freelancers, and sole traders. It is repurposing some previously allocated funds but includes much new funding.

There is much more to go into on this, and I’ll write a specific blog for you and how to ‘get your head’ more around this news in a part 2 blog in coming days.

Cover Photo by Towfiqu barbhuiya on Unsplash