Every year, entrepreneurs anticipate how the budget announcements will directly impact their business. The budget announcements this year are especially important to startups, as many of them are still recovering from the financial instability caused by the pandemic.
Below, we explore three ways that startups and small businesses can make better-informed decisions based on Singapore Budget 2021.
- S$5.2 billion (US$3.8 billion) allocated to create up to 20,000 jobs and 35,000 traineeships
- GST extended to low value imported goods & services from 2023
- S$60 million (US$44 million) announced for Agri-Food Cluster Transformation Fund
Extended support for hiring new employees
Recruitment was at a standstill for many companies during the pandemic. This resulted in a rising unemployment rate as well as delayed growth within small businesses.
The Job Support Scheme will support partial employee wage for the next few months, in an attempt to encourage startups to resume hiring activities. The expansion and innovation among newer businesses will translate into a more vibrant startup community.
Job support scheme
|Tier||April – June 2021||July – September 2021|
|Tier 1 (Aerospace, Aviation, Tourism)||30 per cent Wage Support||10 per cent Wage Support|
|Tier 2 (Retail, Arts & Culture, Food Services, Environment)||10 per cent Wage Support||Not Applicable|
This Jobs Growth Incentive Scheme seeks to create more opportunities for long-term employment for Singapore Citizens and Permanent Residents.
For example, the tourism industry laid off experienced staff members during the past year and with financial assistance from the Jobs Growth Incentive Scheme, businesses can gradually begin expanding their staff count in anticipation of the increasing demand for local tourism.
In addition, business owners who hire new employees within the eligible time period below will receive wage support for 12-18 months.
More specifically, the Government will compensate businesses up to 50 per cent of the first S$6,000 (US$4,400) salary until September 2021, to further incentivise entrepreneurs to hire mature employees above the age of 40 years, persons with disabilities, or ex-offenders.
Jobs growth incentive scheme
|Type of Hire||Phase 1: September 2020 – February 2021||Phase 2: March – September 2021|
|Non-Mature Hires (Under 40)||Up to 25 per cent of first S$5,000 (US$3,600) Wage Support for 12 months||Up to 25 per cent of first S$5,000 (US$3,600) Wage Support for 12 months|
|Mature Hires(40 & Above), Person with Disabilities & Ex-Offenders)||
||Up to 50 per cent of first S$6,000 (US$4,400) Wage Support for 18 months|
Employer eligibility requirements between March 2021 and September 2021 include:
- Made timely mandatory CPF contributions
- Increased overall workforce, compared to February 2021
- Increase in local employees earning gross wages ≥ S$1,400 (US$1,305), compared to February 2021
Business owners can also receive monetary benefits of up to 50 per cent wage subsidy for the next 18 months. Depending on your business needs, the Jobs Growth Incentive Scheme makes it affordable to employ college graduates or experienced professionals who are making a transition in their career.
Supplementary scheme for SMEs and startups
|Wage Credit Scheme||15 per cent co-funding from the Government for monthly gross salary up to S$5,000 (US$3,600) Gross monthly wage increases (≥ S$50/US$36) previously given by the same employer continue to be co-funded if sustained in 2020 and 2021|
|Loss Carry-Back Relief||Carry-back Underutilised Capital Allowances (CA) / Trade Losses for up to 3 Years of Assessment (Up to S$100,000/US$73,000)|
|SGUnited Jobs and Skills Package||Extended till March 2022 Up to 80 per cent subsidy for traineeship allowance Mid-career Pathways Program Up to 80 per cent subsidy for under 40 (S$1,600 – S$3,000 / US$1,100 – US$2,200 monthly) Up to 90 per cent subsidy for 40 & above (S$1,800 – S$3,800 / US$1,300 – US$2,800 monthly)|
More loans and new funds for business transformation
Singapore Budget 2021 aims to equip businesses to ride the digital wave. With the slowdown in economic activity, traditional businesses in food and beverage as well as retail startups can redesign existing jobs and build digital capabilities with the new initiatives in the Budget.
For example, retailers that are considering expanding their offering through e-commerce or hawker stalls can partner with food delivery services to increase revenue. Besides small businesses in the retail or food and beverage industries, startups offering services in the arts and sports sectors can also enhance their operational competencies with the S$45 million (US$33 million) Arts and Culture and Sports Resilience Package.
Steps that small businesses can take include offering their arts services in smaller in-person groups or enhancing digital capabilities to offer online alternatives.
Another business area that will receive an increasing amount of financial support from the Government includes the sustainability sector. As Singapore increases its commitment to sustainability efforts, small businesses that provide innovative solutions that are environmentally friendly will receive additional assistance in the coming years.
Examples include businesses which are making solar power more accessible to the public, companies selling electric vehicles, and a mobile app that helps Singaporeans capture their carbon footprint.
|Venture Debt Program||Loan quantum increased from S$5 million (US$3.6 million) to S$8 million (US$5.9 million)|
|Scale-Up SG Program||Extended till March 2022, 80 per cent co-funding for programme participation costs|
|Productivity Solutions Grant||Co-funding for Job Redesign increased from 70 per cent to 80 per cent until March 2022|
|Open Innovation Platform||Co-Funding support for prototyping and deployment, Link up companies and government agencies with relevant tech solutions to resolve business challenges|
|Transformation of Mature Enterprises||S$1 billion (US$730 million) budgeted for adopting new technologies into business operations; costs covered include:
|Large Local Enterprises Funding Platform||S$1 billion (US$730 million) Equity Investments budgeted for LLEs (with annual revenue up to S$100 million/US$73 million) for growth|
Increase in operating expenses
From 2023 onwards, low-value imported goods will be subjected to GST and small businesses with vehicles can anticipate a GST hike up to 9 per cent.
One way to plan ahead would be to consider stocking up on necessary operating equipment before the implementation. There will also be a 10-15 per cent increase in petrol prices, which means that businesses should account for this cost if they are in the delivery business or other business that relies heavily on transporting goods islandwide.
Increase in Tax/Duties
|GST||Remain at seven per cent (2021) Expected increase to nine per cent (2022 – 2025) All imported low-value goods subject to GST from January 1, 2023|
|Petrol Duty||Premium Petrol (Increased by S$0.15 per litre) Intermediate Petrol (Increased by S$0.10 per litre)|
On a more positive note, all commercial vehicles are entitled to a 100 per cent Road Tax Rebate for one year to cushion the increase in petrol duty. Businesses that acquire new machinery will be able to expense acquisition costs from taxable income for both YA 2021 and 2022.
Reliefs Available for Businesses
|Road Tax Relief||
|Loss Carry-Back Relief||Carry-back Underutilised Capital Allowances (CA) / Trade Losses for up to three Year of Assessment (Up to S$100,000)|
|Tax treatment of Business Expenses||Option to claim for Renovation & Refurbishment expenditure extended to YA 2022|
|Write off for Plant & Machinery acquired||Write off the acquisition cost for Plant & Machinery extended to YA 2022|
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