The 2024 Federal Budget: Key Takeaways For Small Businesses

Treasurer Chalmers has announced the 2024 Federal Budget and the response from the small and medium business community has been mixed. The Budget includes $641.4 million in targeted support for small businesses.

While some see the 2024 Budget as a missed opportunity for small businesses, others find valuable support measures.

While the emphasis on relieving pressures on household finances was expected, a more business-centric budget would benefit all Australians as small businesses are significant contributors to the economy and job creation. 

However, here’s a breakdown of the key takeaways for small business owners in Australia. Click on any of the below points, or keep scrolling to read the full breakdown:

Contents:

• The Government has extended the $20,000 instant asset write-off for small businesses with turnovers under $10 million for the 2025 financial year, allowing immediate tax benefits on new assets. 

• The Future Made in Australia program includes a $1.7 billion innovation fund to benefit SMEs and startups, focusing on priority industries like clean energy, though specific details remain vague.

• The 2024 Budget includes nearly $90 million for 20,000 fee-free TAFE and VET places and $500 million for skills development in priority industries like clean energy and manufacturing to support small businesses struggling to hire and retain staff.

• The Government is introducing tax incentives for green hydrogen and critical minerals, investing in battery and solar panel manufacturing, and offering up to $25,000 in grants for small businesses to improve energy efficiency.

• Starting July 1, 2024, the government is providing a $325 energy rebate to small businesses and a $300 rebate to households, as part of a $3.5 billion plan to curb inflation. But how much difference will it make for small businesses?

• The government is investing $25.3 million to implement reforms aimed at ensuring small businesses get paid faster, including enhancements to the Payment Time Reporting Regulator's resources and IT systems.

• The Budget allocates $16.5 billion for infrastructure projects and $2.2 billion for South East Queensland transport, helping SMEs by clearing local bottlenecks, funding affordable housing, and creating opportunities in construction and related sectors.

• Starting in the 2025-26 financial year, superannuation will be paid on top of Commonwealth paid parental leave, supporting new mothers and narrowing the gender gap in super balances.

• Starting July 1, 2024, the final version of the stage 3 tax cuts will flatten the tax system by abolishing the 37% tax zone, with the top tax rate of 47% applying to incomes over $190,000, while allowing business owners to distribute more income to family members at lower tax rates, though the ATO will monitor these distributions closely.

Small business Instant Asset Write Off extended again

The Government has once again extended the $20,000 instant asset write-off (IAWO) for small businesses with turnovers of less than $10 million for the 2025 financial year. This means that business owners can separately apply the IAWO to their assets, allowing them to benefit from immediate tax deductions on significant capital expenditures.

With the Temporary Full Expensing Levy ending after 2023, the Government has reintroduced the $20,000 instant asset write-off as a key incentive for small businesses.

If your small business has a turnover of less than $10 million and your key capital investments are under $20,000, you qualify for the IAWO and can depreciate all assets separately.

If your investments exceed $20,000, you will need to revert to the standard depreciation methods.

Future Made in Australia innovation fund

The federal government’s Future Made in Australia program has various components, many of which were known before the budget announcement.

However, the plan now includes a $1.7 billion innovation fund aimed at benefiting SMEs and startups, though specific details on the implementation remain unclear.

 The focus is on 'priority industries,' suggesting that the intention is to encourage private sector and corporate investment in opportunities that combine industry, clean energy, resources, and human capital.

While more details were expected in the budget, they were not provided. Stay tuned to see if this initiative could offer opportunities for your business.

Investment in Skills and Education

Given the challenges small businesses have faced in hiring and retaining staff over the past few years, it's no surprise that the 2024 Federal Budget includes significant investment in skills and education.

Specifically, the budget allocates nearly $90 million to provide 20,000 additional fee-free TAFE and VET places, focusing on industries such as construction, where small businesses are common.

Additionally, Treasurer Chalmers announced $500 million in funding for skills development in priority sectors like clean energy and manufacturing, aiming to support the creation of 'A future made in Australia' and include women in these industries.

The Building Women’s Careers program will be established to support women’s participation in key industries, with the government investing $55.6 million over the next four years.

Energy + net zero

The Government is rolling out new tax incentives aimed at promoting green hydrogen and critical mineral production as part of the pathway to net zero emissions. It is also investing in the integration of household batteries and solar panels into the grid. However, specific details on how these incentives will function and their accessibility remain unclear.

An Energy Efficiency Grant program for small businesses is also being introduced, offering grants of up to $25,000 to enhance the energy efficiency of their appliances and heating and cooling systems.

This initiative could provide substantial opportunities for businesses operating within the energy sector.

Energy rebate for everyone

It may be hard for businesses to get excited about this one. The government is allocating $3.5 billion to provide a $300 energy rebate to every Australian household and a $325 rebate to small businesses. Effective from 1 July 2024, this measure aims to help reduce inflation.

$325 will be automatically credited to eligible small business customer bills as a lump sum. The exact timing will depend on individual bill cycles. However, for small business owners, the rebate may seem minimal compared to the substantial investments they make in their businesses.

Payment times reforms

The government has expressed support for various recommendations from the recent review of the payment times reporting framework, aimed at ensuring faster payments to small businesses.

To implement these reforms, the 2024-25 budget allocates $25.3 million, which includes enhancing the resources and IT systems of the Payment Time Reporting Regulator.

Infrastructure and Housing Investments

The Budget also provides significant support for SMEs through infrastructure and housing investments.

These initiatives aim to alleviate local infrastructure bottlenecks and increase funding for social and affordable housing. This streamlining will help stimulate local economies and create opportunities for small businesses in construction and related sectors.

The 2024 Budget allocates an additional $16.5 billion over the next 10 years for new and existing infrastructure projects across Australia. Additionally, $2.2 billion will be invested in improving the connectivity and reliability of South East Queensland’s transport networks, benefiting many businesses in the region.

Superannuation on paid parental leave

In a long-anticipated move, superannuation will soon be included with Commonwealth paid parental leave, offering enhanced support for new mothers and addressing the gender gap in superannuation balances. This change will only take effect starting in the 2025-26 financial year.

Stage 3 tax cuts 2.0

The federal government announced changes to the previously legislated stage 3 tax cuts earlier this year.

 One of the key updates in this budget is the finalisation of these tax cuts, which will take effect from 1 July 2024. The new tax rates will be as follows:

While the original tax cuts significantly changed the income tax system by eliminating the 37% tax bracket, the revised cuts ensure that tax benefits are distributed more broadly. The top tax rate remains at 47% (comprising 45% plus a 2% Medicare levy), but it will now apply to incomes over $190,000 instead of $180,000.

This change allows business owners who distribute income among family members to share more income at a lower tax rate. However, the ATO will be closely monitoring these distributions to ensure compliance.

Other Initiatives

The 2024 Federal Budget includes several other important initiatives for SMEs.

Firstly, the Government has allocated $10 million to assist SME employers with the administration of the Paid Parental Leave scheme.

Additionally, there is increased funding to address unpaid superannuation entitlements owed by employers in liquidation or bankruptcy, starting from 1 July 2024. - $187 million the government plans to invest over four years from 1 July 2024 in relation to counter fraud strategies for the ATO.

 Regional areas will benefit from $777.4 million aimed at creating local jobs, services, and economic opportunities in remote regions across Australia.

Furthermore, $68 million is being invested to provide Wi-Fi in remote communities, helping SMEs in these areas to operate more efficiently online.

Farmers can take advantage of the $30 million allocated to the on-farm connectivity program, which allows them to invest in connected machinery and sensor technology.

Recognising the mental and emotional challenges faced by business owners, the Budget also includes $10.8 million to support their mental and financial well-being. This includes the Small Business Debt Helpline and the NewAccess for Small Business Owners program, which provides financial counselling and mental health support for small business owners.

$15.7 million to strengthen scrutiny of high‑risk foreign investment proposals, enhance monitoring and enforcement activities and support faster decisions. 

A Missed Opportunity For Small Businesses?

While the emphasis on relieving pressures on household finances was expected, a more business-centric budget would benefit all Australians as small businesses are significant contributors to the economy and job creation.

If any of these key takeaways are unclear to you, please feel free to reach out to us to discuss how they may affect you and your business.