Last week, Federal Treasure Wayne Swan handed down his 6th budget. You surely heard. In fact, you’re probably already completely sick to death of hearing about it.
But, before you get back to the important work of actually building the economy (of actually contributing to Australia’s taxable revenue and creating new industries), take a moment to learn what’s in Swann’s budget for startups and sole traders.
1. Venture Australia
The budget includes $378 million to be allocated to Venture Australia, to support innovation and venture capital investments. Most of this funding will be invested over 15 years with $350 million of these funds being added to the Innovation Investment Fund (IFF).
Funding in Venture Australia requires matching investment from the private sector. So, in theory, if external investors rock up to this party, the pool of funds available for investment into growing businesses will rise to $700 million.
However, how this funding will be distributed is yet to be determined. COSBOA and other industry bodies will be lobbying the government to ensure that innovation application funding processes are not complicated and do not inhibit small business people.
Furthermore, $378 over 15 years is a pittance in comparison to its predecessor, Commercial Ready, which invested $200 million per year. At best, the innovation investment fund will only ever be able to invest $23.3 million per year on average, at best.
In this budget item, there is, curiously, $3.2 million allocated over the 15 years of the funding to Venture Australia to promote the success stories that emerge from the program.
2. Video Game Development
If you’re in the gaming industry, $20 million has been allocated to Screen Australia to support the development of our video gaming industry.
Mind you, that seems like pocket change when you consider that the Australian gaming industry generates more revenue than our film and television industries combined. (And how much government support do these industries attract each year?)
3. Industry Innovation Precincts
The planned Industry Innovation Precincts have been funded. The precincts are to assist in “driving innovation and develop world class growth businesses”. Manufacturing and the food industry are to be the focus of the first two precincts.
4. R&D Tax Changes
The research and development tax incentive will be offset on a quarterly basis, rather than annually. This refundable tax offset will help companies with cash flow management and encourage R&D activities.
Companies with a turnover of less than $20 million receive a 45 per cent tax offset, those over $20 million receive a 40 per cent offset.
1. Administrative costs opportunity lost
Administration costs for small businesses paying superannuation to their staff have not been addressed. COSBOA believes the government missed an opportunity to remove employers from the superannuation collection process. Changing how superannuation is collected by having it go through the PAYB system could have saved businesses a significant amount in administration costs
2. Complexity of tax system
The complexity of our tax system was not addressed in the Budget. In fact, taxation has just become a more onerous task for trusts, self managed super funds and sole traders. These entities will be required to make PAYG payments. Yet, there is no mention of how monthly PAYG payments will be calculated. Plus, there is no mention of GST payments becoming monthly.
Taxation for business is already an extremely complicated process. Small businesses have to collect tax on behalf of employees in the form of PAYG tax. Plus, they must collect tax from customers in the form of GST.
Now, without further clarification, sole traders and trusts may have the burden of monthly PAYG payments and quarterly GST payments.
Let me repeat that. Monthly PAYG payments and quarterly GST payments. (That’s insane!)
For the approximate 750,000 sole traders working in Australia, adding an increasingly complex layer of paperwork and more frequent intervals is just an additional burden. Monthly tax payments will increase cash flow for the government but, as yet, there is no detail about how monthly tax will be calculated. Will it account for the ebb and flow of cash that is commonplace for sole traders and independent contractors?
So much for the ‘simpler tax system’!
1. GST for overseas purchases
There has been a lot of opinions in the media, often expressed by the larger retailers, that GST should apply to overseas purchases. In this Budget, the Government has chosen to ignore this. Overseas purchases remain GST free.
Depending on your industry, this may be good or it may be ugly. But, so far, the Government seems to be sitting on the fence on this topic.
2. Changes to the 457 Visa
The budget also targeted the controversial 457 visa. Again, depending on which side of the fence you sit on regarding these visas, will affect how you interpret these changes.
Essentially, the application fees for a 457 visa have almost doubled, from $455 to $900. This increase in fees is expected to add $198 million to government coffers over the next four years. The Fair Work Ombudsman is also to receive additional funding to oversee the 457 visa program to identify any rorting of the system. Just why this visa class is being singled out is a topic for another day.