What to watch in Australia's budget if you're a small business

We've picked out the issues that matter most to a small business around the federal budget.

Demian McClean, Xero

The news is full of speculation about what will be in the May 9 federal budget. At Xero, we’ve combed through the past two months of coverage so you don’t have to. More importantly we’ve picked out the issues that matter most to a small business!

Tax break for small business

An instant $20,000 write-off for depreciating assets is due to expire at the end of June. The government must now decide whether to extend the tax break, which applies to businesses with turnover of up to $2 million. It covers most business goods, though software is an exception. Among those calling for an extension are Minister for Small Business Michael McCormack and the Australian Small Business and Family Enterprise Ombudsman. Doing so seems like a no-brainer. Separately, the House is expected this month to decide whether to boost the turnover limit to $10 million.

Employees may see their deductions for work-related expenses capped

The Treasury says millions of Australians are exaggerating their work-related expenses. Consequently the budget may propose a standard $1,000 tax deduction, wrote the Sydney Morning Herald on April 8. That’s about half of what employees usually claim for purchases such as uniforms or home internet, according to CPA Australia. Such a change would effectively cut take-home pay, and workers might ask employers to cover more of their job-related expenses.

Black economy

Expect to see budget measures that address the “black economy” of all-cash businesses, the Sydney Morning Herald reported April 5, without citing a source. These include cafes and restaurants, hair and beauty industries, building and construction, and especially labour-hire companies, the Board of Tax chairman told Fairfax Media. The “hidden economy” generates some $15 billion in untaxed income and enables bogus welfare claims, he said.

Ombudsman’s wish list

In addition to the above tax break, the Australian Small Business and Family Enterprise Ombudsman has asked that the budget include:

  • A banking code that bars lenders from applying a “non-monetary default” to small business loans even when the borrower is making payments.
  • Establishment of a payment “transparency register”. This records how quickly large ASX 100 companies pay small businesses and discourages extended payment times.
  • Adoption of a 15 business-day payment time by the government, as well as requiring head contractors to adopt the payment times through their supply chain.

The big four banks addressed the first issue this week, and it may be enough to placate the government. Whether the ombudsman gets the rest of its wish list remains to be seen.

ACN and TFN may be replaced by ABN

At Xero, we’re hearing talk that the government will assign just one number to new businesses — the ABN — and discourage the use of ACNs and TFNs. Such a proposal has been floating around for more than a year and would simplify compliance and filing taxes. It would also help the government track small-business revenue more easily.

With 457 visas axed, job training is in focus

After Malcolm Turnbull announced the end of 457 work visas in mid-April, the ABC reported the government will likely create a $300 million fund to help train Australians to fill skills gaps. It’s possible small businesses could tap these funds to train staff in high-demand occupations. Watch for details.

Infrastructure spending

If you’re a small business that serves the construction industry, there may be a gusher of work coming down the pipe. The government will likely help fund an inland inland rail link between Melbourne and Brisbane (a $10 billion project). Furthermore it’s likely they’ll fund a second Sydney airport ($6 billion). This was reported by the AFR on April 27, citing comments from the prime minister and treasurer.

Medicare levy for all high earners

All high-income Australians may have to pay the 1%-1.5% Medicare levy, even if they have private health insurance, according to The Sydney Morning Herald on February. 27. That means all families earning more than $180,000 a year and all childless individuals making more than $90,000. Such a tax would raise an estimated $4 billion per year. Note that Treasurer Morrison has said he’s unwilling to rule out any tax increases in recent weeks.