Budget at a Glance
This year's budget estimates total receipts and payments to be $433.5 billion and $459.7 billion respectively, an underlying cash balance of -29.4 billion that is expected to close by 2020-21 when the budget returns to surplus.
This is welcome news, as public debt is always the elephant in the room come budget time. As debt increases so too does the pressure to deliver a surplus. This budget estimates a return to surplus by 2021. From a small business's perspective, at a glance, Budget 2017-18 is a responsible document that promises to deliver substantial government investment and support to small business, education and elsewhere.
Instant write-off extended 12 months: the Coalition is committed to extending the $20,000 instant asset write-off another 12 months (to 30 June 2018). Only businesses with annual turnover less than $10 million are eligible.
Red tape cut: the Coalition is committed to cutting burdensome red tape. Through the National Partnership on Regulatory Reform, the Government will provide up to $300 million over two years to States that reduce unnecessary regulatory restrictions on competition and small businesses.
Temporary Skill Shortage Visa & Skilling Australians Fund: the recently abolished subclass 457 visa is to be replaced by a new temporary skill shortage visa with tighter conditions and stricter safeguards.
Businesses employing workers on the new temporary skill shortage visa, and on certain permanent skilled visas, will be required to pay into the new Skilling Australians Fund via a levy. This levy will be paid on a per employee per year basis and will replace the existing regulations on the employment of foreign workers.
Through this initiative, an estimated $1.5 billion will be provided to State and Territory governments to support up to 300,000 apprentices, trainees, pre-apprentices and higher level skilled Australians, with priority given to occupations currently relying high on skilled migration and high growth sectors.
Although these changes could increase labour costs, they also come with increased government investment into home-grown talent and more policeable regulations. It also remains to be seen how much "tighter" and "stricter" the new visa's regulations are.
Supporting innovation: the Coalition is committed to building on the Government's progress on improving Australia's innovation potential. Between the $1.1 billion National Innovation and Science Agenda and changes including opening up crowd-sourced funding startups and innovative businesses and the introduction of a regulatory sandbox allowing eligible businesses to test new financial and credit services, Australia is moving in the right direction to keep up with new technologies and changing cultures.
Gonski 2.0: the Coalition plans to increase funding to schools by an extra $18.6 billion over 10 years, however, the Coalition also plans to reduce Government support to university students.
HECS-HELP: in Budget 2016-17, changes to HECS-HELP required people with HELP debt to pay it back sooner and quicker, with the lowest repayment threshold being lowered to $42,000 by 2021 and repayment rates rising across the board.
These changes have been multiplied by higher student fees and a new efficiency dividend. Overall, students will have to pay an extra 7.5% by 2022. In combination with the recent abolishing of the subclass 457 visa program and related changes, this could increase the pressure on Australian startups and small businesses by reducing the pool of local talent and increasing the cost of hiring foreign talent.
The Research and Development Tax Incentive still slashed: businesses with annual turnover less than $20 million undertaking innovative research and development projects can currently claim the costs of R&D. Under the new scheme, 43.5% of costs incurred in the first $100 million of investment can be claimed. 1.5% less than previous.
No new incentives to refocus investment towards innovation: although the Government will be increasing its own investment into innovative businesses and initiatives and cutting red tape, there is no plan to introduce legislation that incentivises investing in innovation.
Overall, Budget 2017-18 is welcome news to startups and small businesses. The extension of the instant write-off tax incentive and the Coalition's commitment to cutting burdensome red tape will help power innovation and competition. Coupled with the cuts to the Corporate Tax Rate passed March 2017 and the myriad of initiatives levelling the playing field between small business and large multinationals, including a Multinational Anti-Avoidance Law (MAAL) and Diverted Profits Tax, are welcome news.