Entrepreneurs calculate every year how the budget announcements will directly affect their business. This year’s budget announcements are especially important for startups as many of them are still recovering from the financial instability caused by the pandemic.
Below we examine three ways startups and small businesses can make more informed decisions based on the Singapore budget 2021.
1. Extended support for hiring new employees
Recruiting for many companies had stalled during the pandemic. This has led to rising unemployment rates as well as slow growth in small businesses.
The Job Support Scheme will support employee part-time wages for the next few months to encourage startups to resume their hiring activities. The expansion and innovation of newer companies will result in a more vibrant startup community.
Job Support Scheme
| animal | April – June 2021 | July – September 2021 |
|---|---|---|
| Tier 1 (aerospace, aviation, tourism) | 30 percent wage support | 10 percent wage support |
| Tier 2 (Retail, Arts & Culture, Food Services, Environment) | 10 percent wage support | Inapplicable |
This job growth incentive program aims to create more long-term employment opportunities for Singapore citizens and permanent residents.
For example, the tourism industry laid off experienced workers over the past year, and with financial support from the Employment Growth Incentive Program, companies can gradually begin increasing their workforce to meet the growing demand in local tourism.
In addition, entrepreneurs who hire new employees within the eligible period set out below will receive wage support for 12 to 18 months.
Specifically, the government will reimburse companies up to 50 percent of their first $ 6,000 salary through September 2021 to further motivate entrepreneurs to hire mature workers over 40, people with disabilities, or ex-offenders.
Incentive system for job growth
| Type of setting | Phase 1: September 2020 – February 2021 | Phase 2: March – September 2021 |
|---|---|---|
| Non-mature employees (under 40) | Up to 25 percent of the first $ 5,000 Wage support for 12 months |
Up to 25 percent of the first $ 5,000 Wage support for 12 months |
| Older employees (from 40 years of age, people with disabilities and former offenders) |
|
Up to 50 percent of the first $ 6,000 wage support for 18 months |
The requirements for eligibility as an employer between March 2021 and September 2021 include:
- Compulsory CPF contributions made in a timely manner
- Increase in the total workforce compared to February 2021
- Increase in local employees earning gross wages of ≥ S $ 1,400 compared to February 2021
Entrepreneurs can also receive cash benefits of up to 50 percent wage subsidy for the next 18 months. Depending on your business needs, the Employment Growth Incentive Program makes it affordable to employ college graduates or experienced professionals who are making a transition in their careers.
Supplementary program for SMEs and startups
| Supplementary regulations | details |
|---|---|
| Wage credit | 15 percent government co-funding for gross monthly salaries up to $ 5,000 monthly gross wage increases (≥ $ 50) previously granted by the same employer will continue to be co-funded if sustained through 2020 and 2021 |
| Loss carry-back relief | Withdrawal of unused CA capital relief / trading losses for a valuation of up to 3 years (up to $ 100,000) |
| SGUnited Jobs and Skills Package | Extension until March 2022 Up to 80 percent allowance for mid-career internship money Pathways Program Up to 80 percent subsidy for under 40s ($ 1,600-3,000 monthly) Up to 90 percent subsidy for 40 and over (1,800 – 3,800 USD monthly) |
ALSO READ: Guide to SMB Grants and Covid-19 Measures to Support Businesses in Singapore
2. More credit and new resources for business transformation
The 2021 budget in Singapore is intended to equip companies for the digital wave. As economic activity slows, traditional food and beverage companies and retail startups can use the new household initiatives to reshape existing workplaces and build digital skills.
For example, retailers considering adding e-commerce or hawker booths to their offerings can partner with grocery delivery services to increase sales.
In addition to small businesses in retail or in the food and beverage industry, startups offering services in the arts and sports sectors can improve their operational skills with the USD 45 million package for arts, culture and sports resilience.
Steps small businesses can take include offering their art services in smaller face-to-face groups or improving digital skills to offer alternatives online.
Another business area that is receiving increasing financial support from the government is the sustainability sector.
As Singapore increases its commitment to sustainability efforts, small businesses that offer innovative solutions that are environmentally friendly will receive additional support in the years to come.
Examples include companies making solar energy more accessible to the public, companies selling electric vehicles, and a mobile app that enables Singaporeans to track their carbon footprint.
Other initiatives for SMEs and startups
| initiative | details |
|---|---|
| Venture Debt Program | The loan volume increased from USD 5 million to USD 8 million |
| Scale-up SG program | Extended until March 2022, 80 percent co-financing of program participation costs |
| Grant productivity solutions | Co-financing for the redesign of workplaces rose from 70 to 80 percent by March 2022 |
| Open innovation platform | Co-funding prototyping and deployment support, linking businesses and government agencies with relevant technical solutions to solve business challenges |
| Transformation of mature companies | $ 1 billion earmarked for new technology adoption into business operations; The costs covered include:
|
| Financing platform for large local companies | $ 1 billion equity investments for LLEs (with annual sales up to $ 100 million) for growth |
3. Increase in operating costs
Starting in 2023, low-value imported goods will be subject to GST, and small businesses with vehicles can expect a GST increase of up to 9 percent. One way to plan ahead is to get the resources you need before implementation.
Gasoline prices will also rise by 10 to 15 percent, which means businesses should consider these costs when doing delivery business or any other business that relies heavily on moving goods across the island.
Increase in taxes / duties
| Tax increases | details |
|---|---|
| GST |
Stay at 7 percent (2021) |
| Gasoline tax | Premium gasoline (increased by $ 0.15 per liter) Intermediate gasoline (increased by $ 0.10 per liter) |
On the positive side, all commercial vehicles are entitled to a 100 percent vehicle tax refund for one year in order to cushion the increase in petrol tax. Companies that acquire new machines can spend acquisition costs out of taxable income for both YA 2021 and 2022.
ALSO READ: Budget 2021: $ 24 billion for businesses and workers to begin next phase of transformation
Reliefs for companies
| Reliefs | details |
|---|---|
| Road tax relief |
|
| Loss carry-back relief | Withdrawal of unused CA capital relief / trading losses for a valuation of up to 3 years (up to $ 100,000) |
| Tax treatment of business expenses | Option to claim renovation and refurbishment expenses extended to YA 2022 |
| Depreciation for acquired Plant & Machinery | Write off the Plant & Machinery acquisition cost extended to YA 2022 |
Conclusion
While change is inevitable, Singapore has a variety of resources including grants, loans and other initiatives to help businesses in different sectors change and thrive in the year ahead. Read more about how you can make smarter financial decisions on our small and medium business blog.
This article was first published in ValueChampion.
