What are the top four things in the Budget for small and family business?

The extension of a number of COVID support measures will certainly help with business cash flow, however we note that this may be offset by changes to superannuation which have been designed to create more equality and support for workers.

1. Increase in Superannuation Guarantee Charge (SGC) to 10%

There had been some speculation that the Government would postpone the increase to the Superannuation Guarantee rate, which increases to 10% from 1 July 2021. The Government has chosen to make other changes to superannuation, and the rate increase to 10% will go ahead. The Superannuation Guarantee is legislated to increase 0.5% annually until it reaches 12% from 1 July 2025.

2. Proposed removal of Superannuation Guarantee Charge (SGC) minimum of $450 minimum monthly wage

In a move to improve equity in the superannuation system, focused on helping those on lower incomes and women in particular (who have been more adversely affected by the threshold), the Government will remove the current $450 per month minimum income threshold, under which employees currently do not have to be paid the superannuation guarantee by their employer.

While the intention behind this announcement is to boost women’s superannuation balances, it will have broader reach and impact businesses that have a large number of casual employees on their payroll.

At this stage, this is a proposal and we will need to await Royal Assent to know which year this change will commence. The employer exemption from Superannuation Guarantee payments for individuals earning less than $450 in salary or wages in a calendar month will be removed.  This announcement will take effect from the 1 July following legislation receiving Royal Assent.

3. Temporary loss carry-back extended to 2022-23

An important and welcome announcement was the extension of temporary loss carry-back for another 12 months. This will allow eligible entities with less than $5b turnover to carry-back tax losses from 2019-20, 2020-21, 2021- 22 and now the 2022-23 income year to offset previously taxed profits as far as the 2018-2019 income year.

The amount of the tax offset is limited by the tax liabilities in the earlier gain years and the franking account balance at the end of the year in which the loss carry-back tax offset is claimed. Companies that do not elect to carry back losses under this measure can still carry losses forward as normal.

4. Full Expensing extended to 30 June 2023

The government also announced a 12-month extension of the temporary full expensing measure. For businesses that have experienced a year of growth, this is a great opportunity to invest in the future growth of the business in a tax-effective manner.

Businesses with aggregated annual turnover or the total income of up to $5b can deduct the full cost of eligible capital assets acquired from 7:30pm AEDT on 6 October 2020 and first used or installed ready for use by 30 June 2023. All other elements of temporary full expensing will remain unchanged.

Should you have questions on how these changes will impact your business, please do not hesitate to contact your relationship partner.

Federal Budget 2021-22

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