Singapore Budget 2023: What do Small Businesses need to know?
This year’s Singapore Budget 2023 delivered by Finance and Deputy Prime Minister Lawrence Wong sought to provide support for opportunities in innovation and internationalisation in a post COVID-19 world.
It also aims to cushion those hardest hit by inflation, protect workers, encourage families, and also introduced some taxes to cool luxury car and property prices.
What about the average SME? Here are some announcements to take note of:
1. Higher Monthly CPF Contribution Income Ceiling
As salaries continue to rise, the CPF income ceiling will be increased from S$6,000 to S$8,000. This ceiling was last raised in 2016, and will be phased over four years starting this year until 2026.
This will directly result in increased costs for employers, for the employees that will receive more CPF contributions.
2. Increased Parenthood Support
The current Government-Paid Paternity Leave (GPPL) will be increased from the current two weeks to four weeks for eligible working fathers of Singaporean children born on or after 1 January 2024.
Additionally, the Unpaid Infant Care Leave for each parent in the child’s first two years will also be increased from the current six days a year to 12 days a year with effect from 1 January 2024.
3. Wage Support for Senior and Lower Income Workers
Employers of senior workers will continue to receive wage support under the Senior Employment Credit until 2025. Employers will receive wage offsets for hiring Singaporean senior workers aged 55 and above, and earning up to $4,000 a month.
Similarly, the Part-time Re-employment grant will also be extended to 2025 to encourage employers to offer part-time re-employment and other flexible work arrangements and structured career planning to senior workers.
The government will also co-fund up to 75% of pay increases for workers under Progressive Wage Credit Scheme earning a gross wage of up to $2,500 a month this year, while slowly tapering off by 2026.
4. Enhanced Business Tax Deduction Of Up To 400% For Key Innovation Activities
Businesses are currently allowed tax deductions of up to 250% on qualifying expenditure on some designated innovation activities. The tax deduction will be raised to 400% under the new Enterprise Innovation Scheme.
These tax deductions will cover five key activities:
- Research and development conducted in Singapore
- Registration of intellectual property (IP), including patents, trademarks and designs
- Acquisition and licensing of IP rights
- Innovation carried out with polytechnics and Institutes of Technical Education (ITEs)
- Training via courses approved by SkillsFuture Singapore and aligned to the Skills Framework
5. Support for Promising Local Businesses
$1 billion will be set aside under the Singapore Global Enterprise initiative to help large, promising local businesses scale up towards internationalisation efforts and further innovation capabilities.
Additionally, another $150 million will be set aside under the SME Co-Investment Fund to support growth-oriented promising SMEs.
These schemes are designed to grow and develop local companies, large and small, to develop new capabilities and scale beyond Singapore, however it will likely not affect SMEs broadly and only positively impact a select few companies identified as promising.
What does it mean for SMEs?
The budget aims to help individuals and households cope with rising cost of living, and also introduced increased stamp duties to try to cool the property market along with higher taxes on luxury cars and tobacco. It seeks to support young families and new parents, with increased parenthood support.
The budget is also favourable to employees. At the lower and vulnerable end, funding initiatives were extended for Senior and Low Income workers, while at the higher end, the CPF contribution income ceiling was increased - a cost that will be borne directly by employers.
It also seeks to promote innovation with enhanced tax deductions, and give a boost via investment to a select few companies identified as being ready for growth and internationalisation.
In all of the above, coupled with the recent GST increase, there doesn’t seem much new to celebrate for everyday small businesses that are not likely to be doing R&D or going developing IP, or going international.
Perhaps after all the assistance and initiatives to get through COVID-19 such as JSS and SGUnited Traineeships, this signals the government turning off the tap, and letting the market sort out the strong businesses and survivors. Against a backdrop of high inflation, GST increases, and additional CPF contribution requirements, everyday small businesses now have to figure out whether to sink or soar.
If you are worried about how these changes may affect your business, we at Harvest can assist by running forecast scenarios, to assess the impact to your business. Reach out to us if you would like to have better information for better decision making.