Our National Budget, what’s in it for you, the small business owner?
Amidst the buzz and uncertainty that surrounded its release, the budget for our nation’s growth was unveiled. A fabric of emotions….from curiosity and panic to disdain and complacency, all woven through the air. Yet for some, it barely registered on their radar.
As I put pen to paper today, the debates still rage on and as a small business owner, it’s only natural that you’re curious about how this financial roadmap affects you and your enterprise.
While your specific position may vary, here are seven key elements that I believe demand your attention and understanding.
Inflation – Paving the Way for Cost Savings
In the wake of the pandemic’s onset, supply chain difficulties sent inflation soaring, reaching a concerning 8% by the end of December 2022. However, as of August 2023, there is a glimmer of hope, with inflation having receded to a more manageable 4%. The downward trajectory is encouraging, and small business owners have every reason to be optimistic.
For entrepreneurs like you and me, a decline in inflation holds the promise of cost savings. As inflation decreases, the prices of raw materials and other essential supplies are likely to follow suit. This means that your business expenses, a constant concern I’m sure, may start to ease up. Lower costs can translate into healthier profit margins, giving you a competitive edge in the marketplace.
Property Tax – Preparing for Implementation
For some time now, Property Tax has been on our radar, with preparations underway for its eventual implementation. The 2024 budget has confirmed that the collection process will commence, beginning with residential property owners. If your business operates from a residence, it’s a prudent move to consider allocating a reasonable portion of this tax cost to your business. (Please seek advice from your accountant or tax professional first).
However, if your business operates from a dedicated commercial space, it’s unlikely that commercial property tax collections will begin in 2024. Regardless of the actual start date for tax collection, it’s wise to include a property tax line item in your business budget. This forward-thinking approach will aid in cash planning and ensure that your business remains financially prepared when the tax comes into effect.
Digitalisation in the Financial Sector
Let’s be honest—do you still rely on cash, or have you shifted to e-payments, like many others? According to the budget, 72% of businesses lack a business bank account, 82% don’t accept digital payments, and 55% of individuals struggle with online banking. Where does your business fit into this evolving landscape?
In Trinidad and Tobago, cash has traditionally dominated payments for bills, purchases, fees, rents, etc. But imagine conducting business from your premises, settling transactions, and receiving payments that instantly credit your bank account. It’s a prospect that can streamline your cash flow and simplify record-keeping. It can also save you time to do revenue-generating activities instead of standing in line.
Our economy is going digital, with the introduction of e-money by the Central Bank. As of September 1, 2023, three entities received approval to operate as e-money issuers, with another entity joining in October.
For small businesses, this shift holds significant implications. E-money facilitates payments, regardless of having a traditional bank account, offering enhanced security, quick transactions, improved efficiency, instant receipt collection without Linx machines, and privacy without sharing account numbers.
Moreover, e-money opens doors to effortless e-commerce participation, expanding your client base. It’s a digital revolution offering practical benefits, positioning businesses regardless of the industry for a more convenient and adaptable financial future.
Increase in Minimum Wage
Effective January 1, 2024, the minimum wage is slated to rise from $17.50 per hour to $20.50 per hour, a change set to benefit approximately 190,000 individuals. While this increase holds promise in the world of economic theory, where higher wages often translate into increased spending power, it also bears implications for your small business.
On the positive side, a higher minimum wage can stimulate economic spending, potentially leading to increased profitability and, in some cases, improved productivity for your business. However, it’s crucial to recognize that a wage hike can also bring about higher labor costs, and regrettably, it may lead to an uptick in the overall cost of goods, potentially squeezing your profit margins.
Exemption from Business Levy
This measure is primarily directed at small businesses operating within the thriving manufacturing sector. This sector, which represented a substantial 17.2% of our GDP in 2022, played a significant role in boosting our country’s total exports to an estimated figure of US$16.7 billion, with non-energy exports accounting for US$2.4 billion in the same year.
Export sales play a significant role in advancing international trade and stimulating domestic economic activity. In response, a proposal has been put forward to consider exemptions from business levy charges for manufacturing companies within the 30% tax bracket, particularly in relation to their export sales.
The general rule for an incorporated business in a chargeable profit position is to pay either corporation tax or business levy, with the higher amount prevailing. Effective January 1, 2024, this exemption will create a saving for small businesses whose business levy charge is higher.
It’s important to note that this exemption does not benefit a small business that is registered as a sole trader business, regardless of their involvement in manufacturing or exporting activities.
Cybersecurity
Due to our digitalized landscape, cybersecurity risks are on the rise. To address these challenges, there’s a proposal for a Cybersecurity Investment Tax Allowance, offering up to $500,000 to support businesses, including small enterprises, in bolstering their cybersecurity. To qualify, the cybersecurity software and network security equipment expenses that your business incurs must be certified by iGovTT. This initiative is meant to encourage proactive cybersecurity investment including antiviruses, firewalls, and monitoring hardware. Note that this measure is time sensitive. It is set to take effect from January 1, 2024, and ends on December 31, 2025.
Disallowance of Expenditure Incurred to Earn Exempt Income
A legislative amendment is on the horizon, addressing ambiguity surrounding the treatment of expenses related to tax-exempt income. It’s advisable to consult with your accountant or tax professional for guidance on which expenses are not taxable, avoiding the risk of penalties and interest due to incorrect filing. Stay informed and seek expert advice to ensure compliance.
Other Noteworthy Measures
There are several other key measures in the budget that hold significance for small businesses. One notable proposal is the increase in the retirement age from 60 to 65. While this change is currently under discussion and has not yet taken effect, it’s important to understand that it doesn’t prevent you from retaining talent over the age of 65 whenever it comes into effect. It’s a flexibility that you may wish to take advantage of in the future.
Additionally, the availability of foreign currency has been an ongoing challenge for many small businesses. To address this issue and stabilize the foreign exchange market, an agenda will be established. This agenda aims to assess the causes and effects of increased demand for foreign exchange, design strategies to tackle current challenges and determine the most suitable policies for foreign currency allocation, management, and distribution. Moreover, new arrangements with financial institutions will be made to provide preferential access to foreign exchange for qualified small and medium enterprises.
Lastly, if your small business has ever aspired to contribute to causes such as supporting education or youth development, there’s an appealing opportunity. Starting from January 1, 2024, if you sponsor any public or private school registered with the Ministry of Education, you’ll be eligible for a tax allowance of 150% of your investment, up to $500,000 per year. This means you can claim the full amount of your sponsorship as an allowance on your tax return for that year, plus an additional 50%.
While tax and budget matters may not always top your priority list as an entrepreneur, they are certainly worth paying attention to. These fiscal measures and proposals have the potential to impact your business in significant ways. Staying informed and proactive can help you navigate the evolving economic landscape and make informed decisions to support the growth and resilience of your small business.
Reflect upon this….. “In the realm of business, knowledge is not merely an asset; it is the radiant key that unlocks the doors to success.”
The views reflected in this newsletter are the views of the author and do not necessarily reflect the views of Aegis Business Solutions, its partners, or any affiliated companies.
If you found value in this article, I encourage you to share it with fellow women entrepreneurs who can also benefit from these insights. Please don’t hesitate to message me with your suggestions for future topics you’d like us to explore.
Stay tuned for my next article, where I will be touching on due diligence and the need for you to be professionally skeptical. Here’s to your ongoing success! I look forward to our next chat. 😊
