2022 – 2023 Budget – Key Takeaways for Small Businesses

On 29 March 2022, Treasurer Josh Frydenberg delivered the 2022-2023 Budget, described as ‘the next stage in leading Australia’s strong economy into the future’ following ‘the biggest economic shock since the Great Depression.’ The Budget labelled as its key focus areas: Safer Australia, Cost of living, Regions, Workforce, Women, and Essentials. Included amongst these are some interesting changes for small businesses, innovation industries and insolvency practitioners

Small Business

The bulk of the budget’s small business support comes in the form of ‘skills and training boost.’ Budget Paper No. 2 provides that:

Small businesses (with aggregated annual turnover of less than $50 million) will be able to deduct an additional 20 per cent of expenditure incurred on external training courses provided to their employees. The external training courses will need to be provided to employees in Australia or online, and delivered by entities registered in Australia (p 26, Budget Paper No.2).

Similarly, the Government is seeking to enable small businesses to modernize operations by provide a ‘technology investment boost:

Small businesses (with aggregated annual turnover of less than $50 million) will be able to deduct an additional 20 per cent of the cost incurred on business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud-based services (p 27, Budget Paper No. 2).

Patents and intellectual property

The Government appears committed to supporting Australian innovation by expanding the ‘patent box’ announced in the budget ‘to support practical, technology-focused innovations in the Australian agricultural sector.’

The budget papers provide that:

The Government will provide concessional tax treatment for corporate tax payers who commercialize their eligible patents linked to agricultural and veterinary (agvet) chemical products listed on the Australian Pesticides and Veterinary Medicines Authority (APVMA), y (APVMA), PubCRIS (Public Chemicals Registration Information System) register, or eligible Plant Breeder’s Rights (PBRs) (p 22, Budget Paper No.2).

Moreover, the budget provides that:

 Eligible corporate income will be subject to an effective income tax rate of 17 per cent for PBRs and patents granted or issued after 29 March 2022 and for income years starting on or after 1 July 2023. Eligible income will be taxed at the concessional tax rate to the extent that the research and development of the innovation took place in Australia’ (p 22, Budget Paper No.2)

Beyond agricultural innovation and in line with the Governments net zero emissions by 2050 target, the patent box:Will provide concessional tax treatment for corporate taxpayers who commercialise their patented technologies which have the potential to lower emissions. Eligible corporate income will be subject to an effective income tax rate of 17 per cent, for patents granted after 29 March 2022 and for income years starting on or after 1 July 2023. Eligible income will be taxed at the concessional tax rate to the extent that the research and development of the innovation took place in Australia’ (p 23, Budget Paper No.2).

Insolvency Reform

The practice and application of insolvency law continues to raise reform questions. For example, the court recently in Morton as Liquidator of MJ Woodman Electrical Contractors Pty Ltd v Metal Manufacturers Pty Limited [2021] FCAFC 228 held that section 553C of the Corporations Act 2001 (Cth) may not be used as a defence to unfair preference claims.

Unfair preferences remain within the Government’s sight, as it proposes to provide $29.8 million over 4 years from 2022-23, including:

1. $22.0 million to implement reforms to unfair preference rules, including enhancing the Assetless Administration Fund, from 1 July 2023
2. $7.0 million to clarify the treatment of trusts with corporate trustees under Australia’s insolvency laws
3. $0.8 million in 2022-23 to implement the Government’s response to the recommendations of the Independent Safe Harbour Review.
   
   

FAL Lawyers has significant experience in assisting small businesses, innovation industries, and insolvency law; if you have any queries about any of these sectors, please do not hesitate to contact our team.