News on what small businesses and sole traders can expect from this federal budget, to be held on Tuesday 29 March 2022, is starting to drip through.

On Wednesday (23 March 2022), Treasurer Josh Frydenberg promised them cash flow support through changes to PAYG tax and reducing red tape.

Under the proposed changes, the 10 per cent GDP uplift rate that applies to PAYG and GST instalments will be reduced to 2 per cent for the 2022/23 financial year, if the legislation is passed.

While this will ease the tax burden on small businesses, Australian Small Business and Family Enterprise Ombudsman Bruce Billson advises them to keep abreast of their tax obligations as they will need to pay any extra tax owed at the end of the financial year, if their business earnings exceed what is calculated quarterly.

Another government proposal is to allow PAYG to be calculated in real-time, based on financial performance. Companies with PAYG instalment obligations that report losses or lower than anticipated profits will get an automatic refund of tax paid, by systems expected to be in place from 2024.

The government also plans to use technology to help reduce compliance costs and improve processing times for small businesses.

Links between single touch payroll data from the ATO and state governments means tax returns and other forms can be pre-filled – a change that’s expected to benefit about 170,000 businesses and improve lodgement accuracy, reduce compliance costs and save time.

Similar technology, implemented by January 2024, will be used to pre-fill annual tax returns using BAS for the around 190,000 contractors who use the taxable payments reporting system. 

In addition, businesses with annual turnovers of less than $50 million will be allowed to lodge and pay excise and excise-equivalent customs duty on a quarterly basis, from 1 July 2023. Currently, most of these businesses report monthly, with some reporting weekly. 

Some small businesses are also hoping for a further extension of the SME Recover Loan Scheme which is now set to run until 30 June 2022. Building on earlier loan schemes introduced during COVID-19, the government will guarantee 50 per cent of a loan amount for small businesses. Repayment can begin up to 24 months after the loan is issued. 

Another scheme small business groups would like to see extended for another year is the temporary full expensing scheme. Introduced in the last federal budget, it currently allows businesses with a turnover or income of less than $5 billion to immediately write off the cost of assets they first use or install by June 30, 2023. 

With skills shortages, a major issue for many businesses, the Business Council of Australia (BCA), in its pre-budget submission, has urged the government to invest more in vocational education and training (VET) through an ambitious new National Skills Agreement and to extend the Boosting Apprentice Commencement wage subsidy for a further 12 months at a stepped down rate.

It also suggests catching up on lost skilled migration by raising the annual permanent migration cap to 220,000 places in 2022/23 and 2023/24 and extending visa application charge refunds for working holidaymakers and international students.

Elsewhere, Frydenberg has already said the government would introduce “further measures to support families to meet the cost-of-living pressures, in a targeted and proportionate way”.

With fuel prices skyrocketing in the wake of Russia’s attacks on Ukraine, there have been calls for the government to cut the fuel excise tax. The government, however, has remained tight-lipped in this area.

Some experts believe the low and middle-income tax offset (LMITO), which delivered households a tax break of up to $1080 over the past two financial years, could be maintained. If not extended, they say millions of Australians will pay higher taxes.

There are also reports that a one-off payment of between $200 and $400 to ease the pain of rising costs of living is being considered.

But despite the government’s elevated spending during COVID-19, it seems small businesses need not worry about massive budget cuts in March.

Speaking at a conference in March, Morrison noted that it was time to get the budget to more normal settings. “That doesn’t mean you need to go through periods of massive cuts and things of that nature. That’s not, that’s not on our agenda,” he said.

“You normalise this over time. You don’t do it in one fell swoop. You don’t need to go down that austerity path that others sometimes talk about. That is not our government’s fiscal plan. We do not think that would be the best way to manage the budget. We still have very strong priorities in areas like aged care, mental health and, of course, supporting the National Disability Insurance Scheme. But you can’t do that without a strong economy. That’s what pays for it.”