The government has increased tax breaks for small and medium businesses investing in new technology and skills, but will not extend temporary full expensing of investments.
The temporary full expensing measure was introduced during the pandemic to encourage businesses to invest in new equipment, being able to write off the full cost of purchases against their tax in that year, rather than having to claim depreciation over many years.
It was extended in last year's budget, at a short-term cost of nearly $18 billion, although the long-term cost would fall to $3.4 billion because it would reduce the amount of asset depreciation businesses could claim in future years.
However, that instant tax deduction has not been extended, meaning businesses will have to have installed or be using the new equipment by June 30, 2023, to claim full expensing.
Instead, the government is offering a new, temporary tax break for businesses that invest in either new technology or employee training and skills development.
"Starting tonight, for every hundred dollars a small business spends on training their employees, they will get a $120 tax deduction, helping them become more productive and competitive," Treasurer Josh Frydenberg said in his speech.
"From tonight, every hundred dollars these small businesses spend on digital technologies — like cloud computing, e-invoicing, cyber security and web design — will see them get a $120 tax deduction.
"Investments of up to $100,000 per year will be supported by this new measure."
The additional tax deduction will be available for eligible spending incurred between the start of the Treasurer's budget speech at 7:30pm AEDT on March 29 and June 30, 2023, for technology investments and June 30, 2024, for staff training.
However, the additional training deduction only applies to courses delivered by external providers registered in Australia.
The additional technology deduction applies to business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud-based services.
The two new measures are expected to cost the government around $550 million and $1 billion, respectively, over the four years of forward estimates.
Apprenticeship funding
The Treasurer made industry skills and training a key focus of his budget speech.
"During this pandemic, we have already invested $13 billion in skills and training, with a record 220,000 Australians now in a trade apprenticeship, the highest level since records began in 1963," Mr Frydenberg said.
"Tonight, we go further, with a new, $2.8 billion investment to increase take-up and completion rates, providing $5,000 payments to new apprentices and up to $15,000 in wage subsidies for employers who take them on.
"Mr Speaker, in this budget, we also lay the foundations for national skills reform with a $3.7 billion investment, supporting an additional 800,000 training places, ensuring businesses get the skilled workers they need."
As part of this package, the government plans to provide $1.3 billion over five years from 2021-22 to support employers to engage and retain new apprentices.
The government is also committing to more than $9 million a year to provide more support for women commencing higher-paying trade occupations.
Manufacturing, critical minerals and space get cash
The budget is also directing funding towards a few target industries, with $328.3 million being directed to further support priority manufacturing businesses, with a focus on addressing supply chain vulnerabilities.
More than $250 million is being directed towards the "critical minerals" sector, to reduce reliance on overseas suppliers, notably China, for rare earth minerals that are vital for tech hardware.
About 80 per cent of this funding will go to companies to help them advance their projects, while the remainder will fund a virtual Critical Minerals Research and Development Centre.
The space sector will receive $1.3 billion from 2021-22, with most of that money ($1.2 billion) going towards a National Space Mission for Earth Observation.
