Scott Morrison delivered his second budget in May and there is barely a ripple in the water. No huge sweeping reforms, no budget emergencies, it was almost a non-event. This is what Australia needs though, a stable and predictable Government. Was this what we saw? I think even Labour was surprised by the number of policies and initiatives that have typically been offered by the left, that were announced during the Budget hand down.
Unfortunately, I don’t see it as a clear win for small business with this budget, however, there are still a number of measures that will bolster small business. The lack of huge sweeping reforms and emergencies is what business needs. Stability increases confidence, and in a weak retail market, we need to encourage spending.
Let’s take a look at how the current budget will impact business owners specifically:
Red tape reduction incentive – States and Territories have been promised a $300m payment over 2-years towards innovation. Let’s see how this filters through to small business.
Small businesses employing foreign workers on 457 Visas will now be slugged with a $1,200 per year per worker, along with a one-off $3,000 payment. This replaces the need to report training spend required of 1-2% as previously required. I can see this impacting the retail and hospitality segment especially, with a high number of foreign workers, and incredibly tight margins.
The $20k instant asset tax write-off – this has been maintained for the 2017-18 FY for businesses of up to $10m. No surprises here, and certainly will encourage businesses to invest in equipment to help them grow.
The Black Economy – a crack down on the ‘cash economy’ is on its way. Businesses still operating by under-reporting, falsifying records and illegally avoiding paying tax are under threat. This will include businesses that pay cash to employees and businesses that don’t declare cash payments. Joe Hockey was advocating this several years ago, and in a recent meeting with Scott Morrison, he advised me that business owners that illegally avoided paying tax, paid their employees cash-in-hand and “were ripping off fellow Australians” were within target of the Government. It is no longer ‘if’ you get caught, but ‘when’.
The government announced a reduction in the small business tax rate from 28.5% to 27.5% for the 2016-17 for business with a turnover of less than $10 million and progressively rise until the 27.5% rate applies to companies with less than $50 million annual turnover in 2018-19. This is certainly encouraging for companies with a large turnover. Many business owners I speak to, which fall into the $2m-$10m bracket, often tell me their operating margins are so tight, with high wage costs and often high volume/ low margin offerings, this will be a welcome relief. More profitable businesses and business owners reinvest back into their businesses and new businesses.
If the Government is serious about creating a strong, resilient and sustainable small business sector, we need to focus on two key elements.
Funding for small business – cash flow is the number one issue for small business. The bank’s pledge small business funding, yet it is not accessible to the majority of small business. There needs to be a State or Federal solution to this. As an advocate for small business, I have raised this with NSW and Federal Governments for a number of years. John Barilaro, the NSW Minister for Small Business and Deputy Premier, says this is the number one issue facing small business.
Education for small business owners – the more I work with small business owners, navigating the many challenges and opportunities that they encounter, the more obvious it is. Small business owners need training and education in the areas outside of their trade craft. Too often small business owners are expected to be the expert in all areas, accounting, taxation, legal matters, social media and marketing, structuring, systems, HR and so on. Yet, to get professional advice in all these areas is financially unachievable. Training and education are, therefore, essential and should be a high priority for both State and Federal Governments.
Scott Morrison stated in his Budget speech, “…business is responsible for a large part of driving revenue growth for Australia.” A continued focus on business profitability and funding will enable small business to drive the economy for all Australians.
Matt Alderton is the CEO of Alderton Enterprises, Bx, BxNetworking, The Movie Crew, and Orderfast, founder of IWS, and the owner of multiple retail and hospitality businesses. Matt was named Business Person of the Year in 2015, and NSW Business Leader in 2016. Matt’s company was awarded the Australian Business of the Year in 2016 and 2017. Bx is Australia’s premier provider of training & education for small business. Aligning business owners with industry experts & world class education. BxNetworking hosts networking events for SME’s from Sydney to Canberra. Relaxed, sociable and structured networking meetings, growing Business for Life.