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Budget 2021: What SME law firms need to know
Here are the key takeaways for boutique law firms from #Budget2021, delivered earlier this week by Josh Frydenberg.
Emma Ryan and Jerome Doraisamy
Coming off the back of the COVID-19 pandemic, the Treasurer cited a need to maintain an avid focus on the nation’s economic recovery, with a commitment to supporting jobs and essential services of utmost importance.
“Net debt will increase to $617.5 billion or 30.0 per cent of GDP this year and peak at $980.6 billion or 40.9 per cent of GDP in June 2025.
“This is low by international standards. As a share of the economy, net debt is around half of that in the UK and US and less than a third of that in Japan.
“We are better placed than nearly any other country to meet the economic challenges that lie ahead. Consumer sentiment is at its highest in 11 years. Business conditions reached record highs and more Australians are in work than ever before.
“Our plan is working. Australia’s economic engine is roaring back to life.”
Earlier this week, Lawyers Weekly reported on the $416.2 million being directed at the family law system, together with other measures impacting upon the legal sector, including but not limited to funding to combat workplace sexual harassment, investments in innovation and tech upskilling, and visas for skilled international workers. The profession has also been reacting to the budget announcements throughout the week, including family lawyers expressing both pleasure and disappointment at announced measures.
Below are the measures rolled out in tonight’s federal budget specific to the SME community:
Business incentive expansion
As part of its commitment to create jobs, Mr Frydenberg announced the government would be extending temporary full expensing and temporary loss carry back for an additional year until 30 June 2023. This will see an additional $20.7 billion in tax relief to businesses over the forward estimates period.
“Combined, the extension of these two measures is estimated to deliver an additional $20.7 billion in tax relief to businesses over the forward estimates period. An estimated $320 billion worth of investment is expected to be supported by these incentives,” the Treasurer said.
“The temporary full expensing and temporary loss carry-back measures are estimated to boost GDP by around $2.5 billion in 2020-21, $7.5 billion in 2021-22, and $8 billion in 2022-23, and create around 60,000 jobs by the end of 2022–23.”
Tax cuts
Further, Mr Frydenberg said the government will deliver more than $16 billion in tax cuts to small and medium businesses by 2023-24, with around $1.5 billion flowing in 2019-20. This, he said, “includes reducing the tax rate for small and medium companies, from 30 per cent in 2014-15 to 25 per cent from 1 July 2021”.
“Small and family businesses are the engine room of our economy, they are at the heart of every local community,” the Treasurer said.
“As they strive to recover, we need the tax system to work for them, not against them. So tonight we provide small business with peace of mind that an independent umpire will stand between them and the ATO when it comes to debt recovery actions.
“We will take these disputes out of the courts and let small business get on with what they do best. Under the Coalition, small business will always be stronger.”
Broadening AAT powers
Earlier in May, Mr Frydenberg declared the Administrative Appeals Tribunal (AAT) now has the ability to pause or modify ATO debt recovery actions while a small business is in a dispute, in a move the government hopes will make things “easier, faster and cheaper” for SMEs.
“This will provide an avenue for small businesses to ensure they are not required to start paying a disputed debt until the matter has been determined by the AAT,” Mr Frydenberg reiterated.
Technology booster
In line with its plans to make Australia a digital economy in the next decade, the government will invest $1.2 billion in its Digital Economy Strategy for three key reasons.
- To build digital skills and capabilities.
- To encourage business investment.
- To transform government services.
“[We will be] expanding our cyber-security innovation fund to train the next generation of cyber-security experts and undertaking a digital skills cadetship trial which combines workplace and vocational training.”
Further to the above, the government is encouraging “innovation and investment” in Australian medical and biotech technologies by introducing a patent box.
“...This measure will complement the government’s $2 billion investment in the Research and Development Tax Incentive (R&DTI) which was announced in the 2020-21 budget. The government has asked the Board of Taxation to review the administrative framework of the R&DTI before the end of 2021,” the budget papers noted.
Increasing AusBiz proposition
As the Treasurer announced, “Australia is an attractive place to do business”, with “our way of life, our safe, clean cities and our proximity to Asia” desirable to foreigners.
In a commitment to attract more business to Australia and create more Australian jobs, Mr Frydenberg flagged that the government has introduced a new Global Talent visa and Temporary Activity visa and “will modernise the framework for individual tax residency, to encourage highly skilled individuals to relocate to Australia”.
Further, Mr Frydenberg said “the government’s Deregulation Agenda continues to support Australia’s economic recovery, helping unlock business investment and create jobs”.
“A further $134.6 million in this budget will make it easier for businesses to employ people and reduce the regulatory burden for businesses interacting with government, saving on average $430 million in annual compliance costs,” the Treasurer said.
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