Last night the Federal Government released its Budget for the year, the second since the announcement of the pandemic. Here is a basic break down of what the 2021 Budget will mean for retailers moving ahead.
The theme throughout the Budget was recovery, signalling the restoration of life for businesses across Australia. There are several ‘winners’ and ‘losers’ in the 21/22 Budget this year, but small and medium-sized businesses, who have had it extremely tough in the last 12 months, have received encouraging support.
“Australia’s economy is in an enviable position – unemployment is down, and business confidence is at record highs – but we can’t become complacent. We need to consolidate our head start in the global recovery,” shared Paul Zahra, the Australian Retailer’s Association CEO.
Extended Asset Write-Off
Last year’s write-off perks have now been extended for a further 12 months. Businesses with a turnover of up to $5 billion will be allowed to deduct the entire cost of eligible capital assets until the end of June 2023, including COVID-related losses.
“The NRA has been advocating for the continuation and expansion of the instant asset write-off since before COVID-19 came along,” explained Dominique Lamb, the CEO of the National Retail Association. “Local cafes, family-owned restaurants and small clothing shops, to name just a few, will now be able to make investments in their business that would otherwise be unaffordable.”
Extended Tax Cuts
Extended $7.8 billion in tax cuts for low and middle-income earners have also been welcomed by the National Retail Association and Australian Retailer’s Association.
“Extending tax cuts for low and middle-income earners will mean that everyday Australians will now have more disposable income to spend at the shops, providing an adrenaline boost to retailers’ bottom lines,” explained Lamb.
Paul Zahra highlighted the ripple effect that the tax cuts would have on the Australian economy. “The tax cuts for low and middle-income earners will help ensure there’s more money in people’s pockets to support retail spending and create more jobs,” he said. “We welcome the further extension of measures for business to write off the full value of any eligible asset they purchase. This will allow businesses to make the investments they need in equipment so they can continue to grow and thrive in the post-COVID world.”
As Power Retail reported, the ABS figures of 38 percent YoY growth show encouraging signs for the sector itself. “The extended tax break for low and middle-income earners worth up to $1080 and $1.7 billion towards childcare subsidies announced in the latest federal budget will no doubt help further boost retail spend and accelerate industry growth following disruption in 2020 driven by the pandemic,” shared Adam Ioakim, the Managing Director APAC of Emarsys.
“With family households, and particularly women, expected to hold more disposable income this financial year, this should trickle down into increased consumer spending. It’s encouraging to see ABS data reveal strong sales growth already at the start of the calendar year across clothing, footwear and personal accessory retailing, and department stores.”
Australian Treasurer Josh Frydenberg (AAP Image/Lukas Coch)
Investments in Digital Economy
The pandemic has highlighted the power and necessity of digital retail as Australians spent more time at home in 2020. As part of this boom, the federal government is allocating $1.2 billion into fuelling the digital future for Australian businesses through its Digital Economy Strategy.
“The pandemic has created a powerful shift in the way people live and work and how people purchase the goods and services they need,” said Zahra. “When lockdowns and restrictions were introduced just over a year ago, some retail businesses had to scramble to boost their online and digital offerings, so they could continue to operate while people were confined to their homes.
“The migration to online is a permanent one, with more and more consumers purchasing the things they need with a few taps of their fingers and embracing new methods of contactless shopping. It’s part of an acceleration of trends we’ve seen over the past 12 months, and that will continue to evolve in the years and decades to come. It’s important that businesses, particularly small business, have the skills and knowledge they need to keep up with the rapid rate of innovation and new and emerging consumer trends.”
The budget allocates funds towards enhancing AI capabilities, establishing drone management and network, implementing Australian data strategy, and expanding Cyber Security partnerships, among other things.
“Particularly coupled with incentives for entrepreneurs, investment in digital skills is a great move for retail. Many entrepreneurs, a significant percentage of these being women, start their businesses with their laptop. Investing in digital skills and infrastructure will give more retailers the opportunity to start and boost their business,” added Lamb.
A major focal point at the forefront of the federal budget has surrounded women’s rights, especially at home and in the workplace. While last year’s budget was criticised for its lack of attention paid to women’s services and funding, this year has seen a different story.
Women currently represent 68 percent of sales assistants and 75 percent of checkout operators, the ARA highlighted. “Women are the backbone of the retail workforce,” said Zahra.
“There is a clear focus on women as part of this year’s Budget – and that’s long overdue – with additional funding for women’s health and domestic violence programs. The $1.7 billion child care package is also significant. This will provide more choice for working mothers and also puts more cash into the family budget each week, which are good outcomes for Australian families, the retail sector and the broader economy.”
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