Following one of the most difficult years most businesses will ever face, SME’s were looking for a figurative shot in the arm from Budget 2021 to boost their recovery following COVID-19. Instead, the shot in the arm was delivered to areas including Welfare, while SME’s were offered a comparative throat lozenge.
While there was hope with a self-titled “Securing our Recovery”, the 2021 New Zealand Budget didn’t come close to the level of assistance offered to SMEs by our Australian cousins, who received a lowering of tax rates for low and middle income earners and SMEs, and an extension of tax incentives for businesses to invest in productive assets.
In the end, the only direct benefit offered to SMEs was a digital skills training scheme and some additional advisory support to assist some businesses to “change their business” in the face of COIVD-19.
The highlights for SMEs in Budget 2021 were:
66,000 small businesses will benefit from training courses over the next two years. This is designed to improve productivity by improving the digital skills of SMEs, particularly those that struggled with the immediate shut down of their business as the country went into lockdown and found it difficult to adapt quickly to an online world.
For businesses that qualify for the training, this will offer a great opportunity with $44m of funding allocated for this programme.
To assist businesses that were negatively affected by COVID-19, some funding has been allocated to support 15,000 businesses to “change their business”.
Prior to the budget, the Government announced $200m to assist tourist communities recover and re-set tourism to be more sustainable and resilient. A focus of this is on the Kaikoura, Mackenzie District, Queenstown Lakes, Fiordland and South Westland regions, as well as Maori tourism operators.
Pre-budget, the Government talked about improving productivity in the economy. In today’s Budget, they announced developing Industry Transformation Plans across seven areas of the economy - advanced manufacturing, agritech, food and beverage, digital, construction, tourism, forestry and wood processing. They will engage with those sectors to develop plans to achieve this.
While not yet a budget item, the Government will investigate an ACC-style scheme that would provide 80 percent of the income for a fixed period of time if a person lost their job as a result of an event like COIVD-19. The Government did this with the COIVD-19 Income Relief Payment but wants to have a scheme in place for future events. It remains to be seen how much this will cost and how this will be levied on businesses.
While there was precious little offered to SMEs, there were some general benefits announced that will benefit SMEs to some degree, such as investment in roading infrastructure.
Further, some sectors will benefit from some of the targeted spending in other areas. For example, the construction sector will benefit from the increase in infrastructure spend and the assistance offered by the Government to boost housing supply in New Zealand. Some rail projects will certainly assist certain businesses in that sector, and there is some additional investment in low carbon technologies and low-emission vehicles. Further, training providers will get a boost with additional funding across different avenues throughout Budget 2021.
While there will be some positives out of this budget for some, the reality is that very little was provided to SMEs in Budget 2021. Instead, it appears the Government is counting on the better than expected economic recovery to date and the economic forecasts they received to sustain SMEs. In a similar position, the Australian government took a different view and delivered more for SMEs to boost their recovery. Time will tell who is right.
If you would like more information on any of the announcements from Budget 2021, please speak to your adviser or get in touch with the Crowe Tax Advisory team.