What’s in the Spring Budget for startups
March 22, 2023
We’ve got you covered with the key takeaways for startups, from Spring Budget 2023.
Budget 2020: A short summary for startups and SMEs
We get it, this year is exhausting. But you still need to know what’s in Budget 2020 for startups and SMEs, so here’s a quick snapshot (that won’t put you to sleep).
First up, tax cuts
We won’t dwell on the Budget 2020 tax cuts for individuals (because we’ll keep the focus on business) except to say it’s worth remembering they will take a while to come through to your bank account. They are being applied retrospectively but you won’t see the benefit of that until lodging your 2020-21 tax return (after 30 June 2021).
Here’s a quick table of the individual tax cuts:
| Income | 2019-20 tax rate | Income | 2020-21 tax rate |
| $0-$18,200 | 0% | $0-$18,200 | 0% |
| $18,201-$37,000 | 19% | $18,201-$45,000 | 19% |
| $37,001-$90,000 | 32.5% | $45,001-$120,000 | 32.5% |
| $90,001-$180,000 | 37% | $120,001-$180,000 | 37% |
| $180,001+ | 45% | $180,001+ | 45% |
R&D Tax Incentive (RDTI)
You might have already seen some commentary around the R&D Tax Incentive (RDTI) Budget 2020 announcements.
For our startup clients, it was a relief to see that the proposed rate changes – bringing the 43.5% claim rate down to 41% – will not be backdated to the 2019-20 financial year.
While we haven’t had confirmation on how JobKeeper-supported wages will be treated in RDTI claims, or any clarification on the eligibility of software development, it is good to at least have some certainty here. Likewise, it was good to see the government remove the proposed $4 million cap on RDTI refunds.
Going forward, for companies with turnover under $20 million:
- For 2020-21: The R&D rate will not be reduced and the reduction in company tax rate to 26% means that the net benefit is 17.5%. In total, you can still claim up to 43.5% of your R&D expenses
- For 2021-22: The R&D rate will increase 18.5% above the 2021-22 company tax rate of 25%, which will bring us to the same total R&D rate of 43.5%
If you have more than $20 million in annual turnover, there are other changes to check out in the official Budget 2020 announcement, too.
Carried-back losses
This Budget 2020 measure is a very interesting one, in that we haven’t really seen it before. It aims to support businesses that were profitable before COVID-19 but have suffered losses since.
Basically, the government will allow most companies to offset losses against previous profits you paid tax on. So if you made a profit and paid tax on it in any year from 2018-19 onwards, and then you lodge a taxable loss for any/all of 2019-20, 2020-21 and 2021-22, you should be able to get a refund for the tax paid previously.
How? Through your 2020-21 and 2021-22 tax returns.
You don’t have to do this though. You can stick with the previous system of carrying a loss forward to offset future profits, if you choose.
Other measures worth a look
1. JobMaker – support for young employees. It’s not as supportive as JobKeeper (which is finishing in March 2021), but the new JobMaker Hiring Credit will give businesses $100-$200/week to take on job seekers aged between 16 and 35.
2. Instant expensing of assets. This is basically a big extension of the instant asset write-off scheme. It means you can write off (or ‘instantly expense’) equipment up until June 2022. This is good in theory, and especially for capital-intensive businesses looking to refresh or expand, but it obviously only suits businesses with the cash to pay for equipment.
Before you go
Just a reminder that this isn’t personal financial or tax advice (you need to speak to us for that).
If you want more free and helpful financial info, scroll through our blog and our resources, including a cashflow template.
Photo at top by Marcus Aurelius from Pexels
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