New Zealand’s 2023 Budget has been approved by Parliament and announced by Finance Minister Grant Robertson. If you own a small or medium-sized enterprise in New Zealand, here is a breakdown of what the funding means for your business.
New Zealand’s “no frills” Budget
The New Zealand Government has already managed the nation’s expectations and clarified this year’s government spending will be “no frills”. The latest budget is focused on:
Cyclone recovery
Improving public infrastructure
Helping Kiwis cope with the rising cost-of-living
With advanced warning of a more frugal financial plan, small and medium-sized business owners have been waiting tentatively to discover just how much help they will receive via government funding in the following year.
The New Zealand 2023 Budget and SMEs
New Zealand’s small and medium-sized businesses make a vital contribution to the national economy. A report by KPMG found that SMEs represent 97% of New Zealand businesses, accounting for 28% of employment and generating over 25% of the nation’s GDP.
Despite their obvious importance, SMEs are among the biggest losers with this year’s budget. While smaller companies are the backbone of the national economy, few initiatives directly supporting them have been announced.
Executive Director at Buy NZ Made Dane Ambler claims “we have seen great support for small businesses over the past few years, but now is not the time to turn off the tap. They need support during this difficult time.”
However, a handful of financial initiatives target New Zealand SMEs specifically, and are worth looking at in closer detail.
Supporting the gaming sector
New Zealand’s gaming sector is quickly expanding, contributing more than $400 million in revenue throughout 2022.
The government is keen to stimulate the growth of a low-emission industry that creates high skill, high pay jobs. $160 million has been allocated to a 20% tax rebate for video game developers over the next four years.
The minimum expenditure a rebate can be claimed on is $250,000, meaning some medium-sized studios will benefit. This move is planned to level the playing field with Australia, which also has a profitable gaming sector.
Investing in digital skills
The Government is investing $27 million in a digital skills package to help grow the tech sector workforce, helping to cover the cost of training new employees with cutting-edge digital skills.
The Digital Boost fund has now been running for three consecutive budgets and targets small businesses specifically. Over 48,000 employees from 30,000 small businesses have used the fund since 2021.
New Zealand’s Minister for Small Business Stuart Nash claims “the use of digital tools has enabled Kiwi small businesses to stay connected, grow their channels to market, and drive efficiency and productivity, thereby supporting our economic recovery.”
Additionally, technology in horticulture will receive an investment of $30 million, and innovation for tourism and hospitality $18 million.
In total, $75 million has been set aside for New Zealand’s digital capabilities. The consensus among tech news outlets is this will not be enough to achieve the Government’s vision of a “low emission, high skill future.”
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Extension of Apprenticeship Boost
This initiative will receive a big thumbs up from many of New Zealand’s SMEs. A $77 million extension to the Apprenticeship Boost program will see the Government continue to pay $500 per month toward an apprentice’s wages for the first two months of employment.
This not only helps SMEs attract the next generation of employees, but also covers a portion of the wage bill while they develop the skilled staff needed to grow their enterprise.
Funding scientific research
The Government has dedicated $450 million to creating three multi-institution science research hubs in Wellington. This is one of the costliest plans and is aimed at transforming the nation’s capital into a “science city.”
While this investment should eventually offer benefits for small businesses involved in tech and R&D, those benefits are indirect and will only be delivered a long way down the track.
The Business Growth Fund
A significant omission from this year’s budget is the extension of the Business Growth Fund. Last year saw $100 million dedicated to the launch of the BGF, which has functioned like a private equity fund and invested Government money in New Zealand small businesses.
Similar systems have already proven effective in Australia, the UK, Ireland, and Canada. The BGF has helped to grow small businesses, offering an injection of capital and wrap-around financial care while they scale.
With no extension announced, it seems the BGF will end when the final round of investment applications closes at the end of May.
What else is missing for SMEs?
Beyond further investment in the BGF, what else is missing from New Zealand’s 2023 Budget for SMEs?
Initiatives that could have made a tangible difference for small businesses and sole traders include:
Increasing the GST threshold for businesses
Accelerated depreciation for manufacturing
Direct investment in more sectors
While some targeted plans within the $4.8 billion allowance will help New Zealand’s SMEs, most of the initiatives offer little instant reprieve for Kiwi businesses already weary from battling a challenging economic climate.
Economic conditions should settle in the year ahead, meaning small businesses in New Zealand will have no choice but to wait patiently for more help in the 2024 Budget.
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This article is intended to offer general information and should not be taken as financial advice. Before making changes to your business, be sure to seek professional financial advice.