Focused on building forward in a “New Era”, this year’s Valentine’s Day Budget was once again delivered by Finance Minister Lawrence Wong on 14th February 2023.
Here are 6 key points that SME owners need to take note of:
The government plans to help small and medium-sized enterprises (SMEs) cope with difficult financial conditions and rising energy prices by extending the current improvements to the Enterprise Financing Scheme (EFS) and the Energy Efficiency Grant (EEG) for another year. The EFS enhancements, which include trade loans, working capital loans, and project loans for domestic construction projects, will continue until March 31, 2024.
Businesses will be able to access the EFS-Working Capital Loan with a maximum loan amount of S$500,000 which was extended from March 31, 2023. The EEG initiative provides up to 70% of the implementation of pre-approved, energy efficient machinery by SMEs.
The New enterprise innovation scheme will significantly enhance the tax deductions of up to 250% of qualifying expenditure on some of these activities. Additionally, the tax deductions are raised to 400% of qualifying expenditure on each of these five activities in the innovation value chain:
i. R&D conducted in Singapore;
ii. Registration of intellectual property, including patents, trademarks, and designs;
iii. Acquisition and licensing of intellectual property rights;
iv. Innovation carried out with Polytechnics and ITE;
v. And training via courses approved by SkillsFuture Singapore and aligned to the Skills Framework
Qualifying expenditure on these activities are capped at $400,000 each, except for innovation carried out with Polytechnics and ITE, for which the expenditure will be capped at $50,000. With these enhancements, businesses that make full use of the scheme could enjoy tax savings of nearly 70% of their investment
Moreover, to help smaller firms defray the costs of their innovation activities, firms that have yet to turn profitable, or pay little or no taxes have the option to convert 20% of their total qualifying expenditure per Year of Assessment into a cash payout of up to $20,000.
Promising SMEs can expect to benefit from the co-investment of $150 million via the SME Co-Investment Fund. The co-investment will act as a catalyst for an additional $300 million of private investments to support our SMEs. This has been mobilised through Heliconia Capital which deploys equity financing to SMEs.
Furthermore, to support SMEs as they chart into international territories, $1 Billion Dollar will be pumped into the Singapore Global Enterprises Initiative. With this, companies can expect the following:
To help employers and workers to facilitate better industry training and placements, the government will appoint and equip Jobs-Skills Integrators, who can be existing institutions with new responsibilities and outcomes to deliver. The Jobs-Skills Integrators will engage with enterprises to understand the skills gap in the industry, work with training providers to update or develop new training programs, work closely with employment facilitation agencies, and identify individuals with the right aptitude for training. The goal is to ensure that training leads to better employment and earnings prospects. The Jobs-Skills Integrators will be piloted in sectors with higher concentrations of mature workers and SMEs, namely Precision Engineering, Retail, and Wholesale Trade.
The Senior Employment Credit for Senior workers will be extended till 2025, to continue providing wage offsets to their employers as well as the Part-time Re-employment Grant till 2025. This is to encourage SMEs to offer part time re-employment, other flexible work arrangements, and structured career planning to them.
Businesses can also expect the transitional support of government Co-funding for the Progressive Wage Credit Scheme (PWCS) which was introduced in 2022 to be maintained in 2023.
To encourage businesses to hire persons with disabilities (PwDs) who may need more help to secure employment, the Enabling Employment Credit is enhanced. Thus, covering a larger proportion of wages and a longer duration for PwDs who have not been working for at least six months.
For ex offenders, a new Uplifting Employment Credit in the form of a time-limited wage offset was also introduced to encourage employment.
It was also announced that the CPF monthly salary ceiling will be raised in stages to $8,000 by 2026. The CPF monthly salary ceiling currently sits at $6,000, and the increase will take place progressively over four stages. The first increase to $6,300 will take effect on Sept 1, 2023, followed by further increases to $6,800 on Jan 1, 2024, $7,400 on Jan 1, 2025, and $8,000 on Jan 1, 2026. This change aims to keep pace with rising salaries and help middle-income Singaporeans save more for their retirement.
The Government will also continue with the next hike in CPF contribution rates for older workers in 2024, after the first two steps of increases on Jan 1, 2022, and Jan 1, 2023. The contribution rates for workers aged 55 to 60 will increase by 1.5 percentage points to 31%, rates for those aged 60 to 65 will climb 1.5 percentage points to 22%, and rates for those aged 65 to 70 will increase 1 percentage point to 16.5%.
To offset the rise in business costs, the Government will provide employers with a one-year CPF transition offset equivalent to half of the 2024 increase in employer CPF contribution rates for every Singaporean and permanent resident worker aged above 55 to 70. The offset will be provided automatically, and employers need not apply for it.
Need some help in figuring out how your business can leverage on these loans and initiatives? Contact the SME Centres for some helpful insight.
The SME Centres help more than 25,000 businesses yearly through the one-to-one business advisory, capability workshops and group-based upgrading projects provided by their Business Advisors.
There are various SME Centres located islandwide, so get started now!
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Pebbles is a fashion enthusiast with a passion for Brazilian Jiu-Jitsu. When she is not keeping up with the latest fashion trends or practicing her tosses, she loves talking to anyone about personal finance and helping shape the fintech industry
