As the curtains rise on another chapter of economic policy, the Australian Federal Budget has once again taken center stage. Amidst the backdrop of unprecedented challenges in the Defence sector, the recent release of the Defence Strategic Review (DSR), and the AUKUS announcement, companies hoped to hear of investments designed to ignite growth, resilience, and innovation. Instead, the budget fell flat, with a lack of focus on productivity improvement, which could lead to a lack of growth in the Australian economy.
The 2023-24 Budget was targeted at cost-of-living relief to help reduce the price pressures impacting many Australians due to the rising inflation rate, which has climbed to 7.8%, the highest it has reached since 1990.
Despite SMEs not being in the budget spotlight, a few major wins came out of the budget, especially for those companies working in the Defence sector. The sector has been promised $19B over the next four years to implement the findings of the DSR, while this funding will be coming from funding redirection or offsets (it is not new money), the implementation of the DSR recommendations will provide companies working in the Defence sector with more transparency on Defence projects as the government looks to streamline and accelerate the capability acquisition process. This will also remove some of the financial risks companies must take to be considered for a Defence Project.
From this funding:
- $4.5B invested into the AUKUS Program
- $4B invested in long-range missiles
- $4B invested into upgrading the Defence facilities in Northern Australia
- $5M invested into developing skills in the nuclear program.
Other benefits to come out of this year’s budget for SMEs include a $20,000 instant asset write-off, available from July 2023 to 2024, benefiting small businesses with an annual turnover below $10M. Additionally, the Small Business Energy Incentive offers a 20% tax deduction for eligible depreciating assets, up to $100,000, encouraging energy-saving upgrades for businesses with turnover under $50M.
Recognising the rising threat of cyber threats, the budget allocates $23.4M to support small businesses in building resilience, including the CyberWardens Program, an awareness and education initiative.
The Industry Growth Program aims to revitalise SMEs, promoting commercialisation and expansion of ideas. Cashflow assistance is provided by reducing the GDP uplift on PAYGI and GST installments.
These initiatives should collectively enhance the prospects and resilience of SMEs, driving their success in a rapidly evolving business landscape.
DTC’s Silver Corporate Partner, WilliamBuck, has a few extra key takeaways for SMEs, highlighted in the table below.
The biggest hit to SMEs was the cancellation of the Entrepreneurs Programme, which assisted SMEs in developing their growth strategy. It is meant to be replaced by a new scheme in October / November 2023, but little is known about the new program and its benefits to SMEs.
The $61M cut to the Export Market Development Grants scheme is a blow for SMEs, especially those working in the Defence sector who have been utilising this funding to assist them in getting their product on the Australian market.
“Disappointingly funding to the Export Market Development Grants scheme has been cut. Many of our members utilised this scheme to get their product in the overseas Defence market, which then transitioned them to get their product in the Australian market,” Tim Dore, Acting CEO of the DTC said.
“While I am pleased to see the budget reflecting the promises the government made to industry less than a month ago, it is disappointing that the industry must wait on the release of several reviews the government is undertaking from 2023 to 2025 to find out the full details of what projects will be going ahead and what they will look like.
“The next few years will be difficult for companies if their business model includes more than 50% of Defence work as there is not enough work available in Australia, and the reduction in the export scheme means companies cannot afford to get their product in the global Defence market. Members will need to turn to other sectors that are profitable for their business, and our sector could lose vital capability and skill sets that we need to protect our warfighters as we wait on the outcome of more reviews.”
More information on the 2023-24 budget can be found at https://budget.gov.au/