Small businesses get cost relief amid renewables push

Small businesses will receive a $325 energy rebate and continue to be able to write off assets valued up to $20,000 as the federal government looks to reduce cost pressures across the economy while muscling up the critical minerals industry.

Treasurer Jim Chalmers on Tuesday confirmed that the instant asset write-off scheme for small businesses would be extended for 12 months until June 30, 2025.

It is a continuation of a scheme that allows businesses with turnover up to $10 million to immediately deduct $20,000 from all eligible assets, and is expected to provide a total of $290 million in cashflow support to small businesses.

But the change stopped short of the opposition’s calls to increase the write-off amount to $30,000 and make it available to businesses with annual turnover of up to $50 million.

It comes as consumers’ reluctance to spend amid cost-of-living pressures has led to the highest rate of insolvencies on record. In March, 1136 businesses failed, up from 555 in January and 968 in February, according to data from the Australian Securities and Investments Commission.

While the government expects inflation to moderate over the year, it said economic growth would probably remain subdued and that real wages were growing again.

The federal budget has set aside $3.5 billion over three years from 2023–24 to extend the Energy Bill Relief Fund. That will include a $325 rebate to eligible small businesses for a year from July 1. Prime Minister Anthony Albanese said in April that last year’s budget delivered $650 in savings for about 1 million small businesses and 5 million families.

Chalmers has also set aside $7.1 billion over 11 years from 2023–24 to support the refining and processing of critical minerals as the sector reels from a collapse in global prices. Critical minerals prices, including lithium and nickel, have slumped over the past year amid weaker-than-expected demand and strong supply from China.

In March, Albanese announced an $840 million package of loans and grants to help the Gina Rinehart-backed Arafura Rare Earths develop its Northern Territory mine and refinery, in an effort to supercharge its push to break China’s stranglehold on global critical minerals supply.

On Tuesday, the federal budget measures included a “critical minerals production tax incentive” aimed at supporting downstream refining and processing of Australia’s 31 critical minerals, to come into play from 2027-28 and end by 2040-41. The government said the measure, with a price tag of $7 billion for the budget over 11 years from 2023-24, would improve supply chain resilience.

Chalmers also announced a “hydrogen production tax incentive” to come into place over the same period for producers of renewable hydrogen, aimed at supporting the growth of a competitive hydrogen industry and Australia’s decarbonisation, at an estimated cost of $6.7 billion over 10 years from 2024-25.

The treasurer previously flagged he was prepared to use the tax system to guide the economy towards national objectives including “the kind of investment that we want to see in the future of our economy and in Future Made in Australia”.

Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up to our weekly Inside Politics newsletter.