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We’re staring down the barrel of tax year end, so now is a good opportunity to talk to your small and medium enterprise (SME) clients about how they could use funding to leverage the tax incentives available to them this financial year. Yes, there’s still time!
According to the findings in the 2023 Banjo SME Compass a rich source of intel on the state of SMEs in 2023 - over 50% of those surveyed intend to leverage funding this year to drive growth, especially metro-based businesses.
The research also found that more and more SMEs are turning to finance brokers for help with evaluating and securing finance for their business – a jump of 10% in the last year alone. All of this points to a plethora of conversation starters with your small business clients, on how they can use funding to strengthen their cash flow, lower their costs, and power their growth.
Chief among the EOFY tax incentive discussion points with your client is that getting a business loan doesn’t have to take weeks or months, endless form-filling, and putting up the house as collateral. There are smaller, nimbler, well-established lenders in the market, who can not only provide unsecured loans, but also refreshingly business-realistic approval times (ie days, not weeks).
Next, let’s take a look at the key measures for SMEs announced in the recent Budget that are applicable to FY23, and how they might be applied.
Instant Asset Write Off: The instant write-off was extended to FY24 for businesses purchasing eligible assets up to $20k. The $20k threshold was significantly reduced from the current $150k and the eligibility changed from firms with $500m turnover to businesses with less than $10m turnover. However, the threshold will operate on a per-asset basis, so small businesses can instantly write off multiple new or second-hand assets.
For clients at the smaller end of the scale, this could be used to purchase things like:
- new laptops or IT hardware
- office appliances or furniture
- shop fixtures and fittings
- a second-hand car or trailer
- tools
- machinery or equipment.
GDP Adjustment for PAYG & GST: This is a Budget measure that some people may not have noticed. For businesses who fall under the current PAYG and GST instalment eligibility thresholds ($50m and $100m respectively), the current 12% GDP adjustment factor will be halved in FY24 to 6%. The adjustment factor is calculated based on GDP rate changes over the preceding 2 years, and is seen as a rough indicator of how Aussie businesses are performing overall.
The aim of the measure is to reduce the tax instalments being paid (usually quarterly) by around 2.1m small businesses. However, be aware that the correct final amount of tax will have to be paid after the end of FY24 anyway, so this measure simply gives a short-term cash flow boost.
Small Business Energy Incentive: Businesses with an aggregated turnover of less than $50m, who purchase assets supporting electrification and energy efficiency up to a maximum of $100k, will receive an additional 20% tax deduction on the asset’s value.
Savvy SMEs who want to future-proof their business for a decarbonised world can use this incentive to invest in electrification, be it heating or cooling systems, upgrading to more efficient fridges and/or induction cooktops, and installing batteries and heat pumps. All of these can help them save on their energy bills, and save energy on the grid.
Tradies, manufacturers, restaurants, hairdressers, real estate agents and other small businesses are the backbone of communities across Australia. This incentive helps ensure these businesses share in the benefits and opportunities of the energy transition that’s now underway.
Regional SME Support: Extension of the Regional Small Business Support Program Pilot until 30 June 2023. This Pilot provides free financial counselling and related services for small regional businesses facing hardship.
This is supported by Banjo’s SME Compass finding that one in five SMEs across Australia have built up tax debt. As the Tax Office chases debts, many small businesses are seeking loans to help manage the challenges on their cash flow.
Banjo provides tailored business funding solutions to support the growing needs of hard-working Australian SME businesses and makes it achievable for those with a good forecast to fund their growth.
Super Processing Changes: From 1 July 2026 employers will have to pay their employee’s super on the same day they are processing and paying their employee’s wages. This should ensure employers have more visibility over their superannuation liabilities.
Working capital funding could be useful for those SMEs who need to smooth initial cash flow bumps when paying employee super more frequently.
Provided you act quickly, there are productive tax time chats to be had with your SME clients, for the benefit of you both.
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