Top 6 Changes Small Businesses Should Know About the 2023 Federal Budget

February 20, 2024
minutes to read
Justin Bohlmann
Table of Contents

Labour has just presented its second federal budget following its victory in the federal election, and needless to say, there's a lot of information to sift through. We understand that as a small business owner, your time is valuable, and delving into the intricacies of the budget can be daunting. That's why we've taken it upon ourselves to wade through hundreds of pages of budget papers so that you don't have to! In this blog, we'll discuss the six major changes that startups and small businesses need to know about the 2023 Federal Budget. By understanding these changes, you can make informed decisions and position your business for success in the ever-changing economic landscape. So, without further ado, let's dive into the key takeaways from the 2023 Federal Budget.

1. Investment in AI Adoption: Embracing the Future of Small Businesses

In today's rapidly evolving technological landscape, the mention of artificial intelligence (AI) is ubiquitous, and it seems the federal government is ready to fully embrace its potential. According to the 2023 budget papers, an impressive $101.2 million has been allocated to support small businesses in incorporating AI and quantum technologies into their operations.

This exciting development signifies the government's commitment to empowering small and medium enterprises (SMEs) with the transformative power of AI. By leveraging AI, SMEs can revolutionise their business processes, enhance efficiency, and gain a competitive edge in the marketplace. The allocated funds aim to facilitate the adoption of AI among SMEs, ensuring they have the resources necessary to embrace this cutting-edge technology.

Furthermore, a portion of the budget will be allocated to expanding the National AI Centre. This investment serves as a testament to the government's recognition of AI's pivotal role in driving innovation and economic growth. The expanded National AI Centre will serve as a valuable hub for SMEs, providing them with access to expertise, guidance, and resources to accelerate their AI adoption journey.

The inclusion of AI in small business operations has the potential to unlock many benefits, from automating repetitive tasks and improving customer experiences to optimising supply chains and facilitating data-driven decision-making. 

But don't worry if integrating AI into your business seems overwhelming. That's where Thriday comes in. Thriday is a powerful tool designed to help small businesses navigate the complexities of financial management, including budgeting, expense tracking, and tax deductions. Moreover, Thriday offers AI-powered insights and recommendations, enabling you to harness the full potential of AI in automating your banking, accounting and tax.

So, take advantage of the financial support offered by the 2023 Federal Budget, explore the expanded National AI Centre's resources, and equip yourself with Thriday to unlock the benefits of AI for your small business. 

2. Boosting Small Businesses with Extended Instant Asset Write-Offs

In more good news for small businesses, the government has extended the instant asset write-off scheme for another year, providing a valuable opportunity to enhance your operations. Under this scheme, small businesses with an annual turnover of less than $10 million can benefit from immediate deductions on eligible assets, fueling growth and productivity.

The 2023 Federal Budget outlines that the new instant asset write-off threshold will be set at $20,000, allowing you to fully deduct the cost of eligible assets. Any qualified assets purchased or installed between 1 July 2023 and 30 June 2024 can be immediately written off, providing an immediate tax benefit.

What makes this even more appealing is that the instant asset write-off applies on a per-asset basis, enabling you to claim deductions for multiple assets. Whether it's office equipment, machinery, technology, or vehicles, you can accelerate your business's growth by taking advantage of this opportunity to invest in the assets you need to thrive.

By utilising the extended instant asset write-off scheme, you can enhance your cash flow, reduce your taxable income, and reinvest those savings into furthering your business objectives. This flexibility allows you to make strategic decisions aligned with your growth plans, seize new opportunities, and improve operational efficiency.

To ensure that you make the most of this initiative and accurately claim your eligible deductions, Thriday is here to assist you. Thriday offers robust financial management tools that simplify tracking expenses, managing budgets, and maximising tax deductions. By leveraging Thriday's intuitive platform, you can streamline your record-keeping processes, easily track eligible assets, and optimise your tax returns.

Remember, the extended instant asset write-off scheme is a valuable lifeline for small businesses, empowering you to invest in essential assets and strengthen your competitive advantage. 

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3. Empowering SMEs with the $392 Million Industry Growth Program

The 2023 Federal Budget has allocated $392 million to support startups and SMEs in commercialising their ideas and expanding their operations. This substantial funding aims to fuel innovation, drive economic growth, and empower small businesses to realise their full potential.

Minister for Industry and Science, Ed Husic, has confirmed that the Industry Growth Program will encompass grants and mentorship opportunities. This comprehensive approach recognises that more than financial support is needed. By combining financial resources with mentorship and guidance, the program ensures that startups and SMEs can access the necessary expertise and support networks to thrive in today's competitive landscape.

Moreover, an additional $39.6 million has been allocated over four years to sustain the Single Business Service. This invaluable resource facilitates SME engagement with the government, offering a streamlined platform for businesses to navigate regulatory requirements, access relevant information, and benefit from government initiatives. The continuation of this service is a testament to the government's commitment to creating a business-friendly environment and fostering strong partnerships between SMEs and regulatory authorities.

The Industry Growth Program and the Single Business Service provide a synergistic platform for startups and SMEs to flourish. Whether you're seeking financial support, guidance from experienced mentors, or a streamlined pathway to engage with the government, these initiatives are designed to cater to your unique needs.

4. Visa Application Charges (VACs) on the Rise: Implications for Investment

In a slightly disappointing move, the government has announced an upcoming increase in Visa Application Charges (VACs) set to take effect from 1 July 2023. This change holds particular significance for those applying for business innovation and investment visas, as they will face an additional 40 percentage point fee hike.

The implications of this price hike are clear: overseas investors and venture capitalists looking to bring their resources and investments to Australia will now face increased costs. While this move aims to balance the economic considerations surrounding visa applications, it is important to recognise its potential impact on investment decisions and foreign business engagement.

It's crucial for prospective investors and venture capitalists to carefully assess the financial implications of the revised VACs and consider them as part of their overall investment strategy. Evaluating the benefits and opportunities the Australian market presents, coupled with a thorough understanding of the revised fee structure, will help ensure informed decision-making.

However, it's worth noting that while the increased VACs may present a higher entry cost for foreign investors, Australia's robust economy, stable political environment, and numerous business opportunities continue to make it an attractive investment destination. The potential returns on investments, access to a talented workforce, and the ability to tap into emerging industries make Australia an appealing option for those seeking to expand their ventures.

As a small business owner, staying informed about these changes is essential, as they may indirectly impact your business. Increased investments from overseas investors and venture capitalists can positively impact the local economy, opening up new partnerships, collaborations, and markets for small businesses.

5. Small Business Energy Incentive: Boosting Efficiency and Electrification

In an effort to promote energy efficiency and the adoption of electrification technologies, the government has introduced the Small Business Energy incentive. This exciting initiative allows small businesses to claim an additional 20% of the cost of depreciating assets that support efficient energy practices. However, it's important to note that this incentive does not include electric vehicles (EVs).

Under this incentive, businesses with an annual turnover of less than $50 million can benefit from claiming up to $100,000 of the total expenditure on eligible assets. This means you can deduct a maximum bonus of $20,000, providing a significant financial advantage for businesses striving to enhance their energy efficiency.

By incentivising the adoption of assets that support electrification and efficient energy practices, the government aims to foster a sustainable and environmentally conscious business environment. Whether investing in energy-efficient appliances, lighting systems, or renewable energy infrastructure, the Small Business Energy incentive empowers small businesses to make impactful changes and reduce their carbon footprint.

This incentive allows small businesses to optimise their operations, reduce energy costs, and contribute to a greener future. By embracing energy-efficient practices, you can benefit from potential cost savings, enhance your brand reputation, and attract environmentally conscious customers.

While EVs may not be included in the Small Business Energy incentive, exploring other government programs and incentives specifically designed to promote electric vehicle adoption is essential. By researching and capitalising on available opportunities, you can still progress towards a more sustainable fleet if it aligns with your business goals.

6. Easing Cash Flow Pressure: Temporary Reduction in Tax Instalments

Startups and small businesses often face the challenge of managing their cash flow effectively. Recognising this, Labor has taken a step to rapidly assist businesses that find themselves burning through their funds. To alleviate financial pressure, the tax law will be amended to temporarily set the GDP adjustment factor for Pay-As-You-Go (PAYG) and Goods and Services Tax (GST) instalments at a reduced rate of 6%, down from the previous 12%.

According to the budget papers, this reduced rate will apply to small businesses and eligible individuals utilising the relevant instalment methods. For GST instalments, businesses with an aggregate annual turnover of up to $10 million will benefit from this adjustment, while for PAYG instalments, the threshold extends to those with an annual aggregate turnover of up to $50 million.

It's important to note that this temporary reduction in tax instalments applies specifically to the 2023-24 income year. By implementing this measure, the government aims to provide breathing space for startups and small businesses, enabling them to manage their cash flow more effectively and navigate challenging economic conditions.

This adjustment's significance lies in its immediate impact on your financial management. By reducing the amount set aside for tax instalments, you can retain a more significant portion of your cash flow, providing the flexibility to invest in critical areas such as business growth, innovation, and talent acquisition.

Thriday understands the importance of optimising your tax obligations while balancing the financial health of your business. Our platform offers intuitive budgeting and expense tracking tools, enabling you to effectively manage your financial resources and align your tax planning strategies accordingly. By leveraging Thriday's comprehensive financial management features, you can ensure that you take full advantage of the temporary reduction in tax instalments while maintaining compliance with your tax obligations.

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Key Takeaways

The 2023 Federal Budget announcement resulted in several vital provisions directly impacting small businesses and startups. From encouraging the adoption of AI and quantum technologies to extending the instant asset write-off scheme, the government aims to foster innovation, growth, and financial stability within the small business sector. 

Small business owners must stay informed about these budget changes and leverage the available resources to their advantage. Thriday offers a comprehensive platform that equips businesses with the tools to manage their finances effectively, navigate tax obligations, and make informed decisions. Thriday allows small businesses to streamline their financial management processes, maximise tax deductions, and drive sustainable growth.

While some adjustments, such as the price hike in Visa Application Charges, may pose challenges for overseas investors and venture capitalists, Australia's business landscape remains vibrant and full of opportunities.

As a small business owner, you have the power to navigate the evolving economic landscape and make strategic decisions that drive your growth. Take advantage of the provisions outlined in the 2023 Federal Budget, tap into the support networks available, and leverage technology-driven solutions like Thriday to streamline your operations and optimise your financial health.

DISCLAIMER: Team Thrive Pty Ltd ABN 15 637 676 496 (Thriday) is an authorised representative (No.1297601) of Regional Australia Bank ABN 21 087 650 360  AFSL 241167 (Regional Australia Bank).  Regional Australia Bank is the issuer of the transaction account and debit card available through Thriday. Any information provided by Thriday is general in nature and does not take into account your personal situation. You should consider whether Thriday is appropriate for you.

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