As the world shifts towards all things digital, it has become increasingly important for small and medium enterprises (SMEs) to adopt digital technologies. Technology adoption can drive efficiencies to your business operations, which will allow you to provide better value to customers. Besides, the diffusion of new technological innovations and tools in the SME sector can significantly aid economic development and growth.

Many businesses in Australia have already transitioned to this digital space by adopting accounting automation, digital marketing, CRM, and other such tools. These technological tools have fundamentally changed the way these businesses operate.

Incentivising digital transformation further, the Australian Government released the Federal Budget 2022-23 on 29 March 2022. The budget consisted of special provisions for SMEs, including increased tax breaks for those businesses that invest in new technologies and skills. Let’s take a look at these provisions in greater detail.

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Federal Budget 2022-23: Tax Incentives for Small Businesses

In releasing the Federal Budget 2022-23, treasurer Josh Frydenberg announced that this year’s budget would contain special tax provisions for small and medium enterprises (SMEs). The Australian Government believes that small businesses are the driving force of the economy, and it wants to help the businesses in what they do best, which is:

• Running their business
• Growing their business
• Creating more jobs for Australians.

SMEs that invest in skills training and digital adoption will be able to benefit from tax relief. This tax relief would allow small businesses to invest in better tools or hire an extra skilled worker.

The Government hopes that the tax breaks will provide Australian businesses with the necessary incentive to adopt digital technologies like B2B digital payments and automation systems, among other advanced tools.

What is Technology Investment Boost?

The Australian Government has allocated $1 billion for Technology Investment Boost, providing small businesses with the necessary encouragement to go digital. SMEs will have the provision to claim 120% of their annual expenditure on technologies and digital systems like cyber-security software, digital payment systems, B2B automation tools, etc. However, there will be a $100,000 annual cap on this expenditure, and only businesses with an annual turnover of $50 million or less will be eligible for it.

Over 3.6 million businesses will be eligible for the Technology Investment Boost. The scheme has come into effect immediately and will continue until 30 June 2023. Any expenditure incurred by qualified businesses before 30 June 2022 can be claimed in the coming tax years.

What are the other incentives for SMEs?

Skills and Training Boost: As per this scheme, SMEs will be able to claim 120% of their annual expenditure incurred in providing external training to employees. The total tax relief for this scheme will be around $550 million, and businesses with an annual turnover of up to $50 million will be eligible for it. SMEs also need to ensure that the training takes place in Australia by organizations registered in the country to be able to claim the tax relief. The Skills and Training Boost has come into effect immediately and will continue until 30 June 2024.

PAYG uplift rate: The Government is also planning to change the GST instalments and Pay-As-You-Go (PAYG) rate by only 2%, instead of 10%. Through this move, the Government aims to provide cash-flow support of an estimated $1.85 billion to small traders, SMEs, and other businesses using instalment methods. However, the legislation still needs to be passed in Parliament for the changes to take effect.

Economic Support for COVID-19: The Government has also allocated an extra $53.9 million for Business Support Payments.

How will these tax incentives benefit your business?

It is a well-established fact that small businesses are the lifeline of the Australian economy. However, many have struggled to stay afloat with the changing technologies. With the tax incentives provided in this financial year’s budget, your small business will be able to get the support it needs to build a sustainable and resilient infrastructure. Leading economists believe that the initiatives to support SMEs in the new budget are more targeted to their growth. It will allow you to improve your digital capabilities by using new technological innovations like accounts receivable automation tools, cloud subscription services, and more.

It is amply evident that this is the time for the growth of small businesses, and digital transformation makes that possible and lucrative too.

For more information on the 2022-23 Budget, visit budget.gov.au

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