When the federal budget rolls around each year, few time-poor small business owners have the capacity to add `political analyst’ to their list of responsibilities. It’s well known that the average small business owner is also the company CEO, CFO, COO, and head of IT, human resources and sales. Unfortunately, sitting at the kitchen table to work out what this year’s federal budget means for your small business is a much more difficult task than usual.
An election will be called any day and with opinion polls suggesting a change of government, any small business budget sweeteners this week from the Coalition government or Labor come with a heavy caveat that the real budget picture for small business won’t be known until after the election.
Fortunately, there is at least some certainty around the small business centrepiece of the Morrison government’s 2019 budget. There will be an increase in the instant asset write-off threshold to $30,000 until 30 June 2020.
Our data shows thousands of small businesses have claimed motor vehicles, plant and equipment, business technology and other tangible assets under the instant asset write-off scheme. It’s measures like this that can help small businesses compete with the big guys.
The government is also expanding access to the instant asset write-off to include medium sized businesses by increasing the annual turnover threshold from $10 million to $50 million. This means around 22,000 additional businesses will now be eligible to claim the write-off.
It’s good news for small business that Labor has indicated it backs the scheme’s extension. But some people misunderstand what’s on offer with the instant asset write-off. It’s not free money for a new car or a top-of-the-line coffee machine. A business owner needs cash flow to buy it, and to be making a profit to benefit from the instant tax deduction.
The instant asset write-off is simply bringing forward the tax deduction associated with the depreciating value of the asset into a single financial year, rather than being spread over a number of years. Many small business owners will need to rely on their advisers like accountants or bookkeepers to help them work through this.
The proposed personal income tax breaks for low to middle-income earners and a long-term flattening of the personal income tax rates announced on Tuesday night is particularly important for sole proprietors who make up the majority of all Australian businesses.
Starting out as a small business owner is hard and 60 per cent of sole proprietors fail within four years, according to the Australian Bureau of Statistics. Personal tax cuts mean there is more money available to potentially reinvest in the business or manage cash flow.
Labor has a similar low to middle-income tax offset on offer, and many sole traders will be watching Bill Shorten on Thursday night to find out whether the Opposition will match or outbid the Coalition. So far, Labor has already matched the Coalition’s timetable to reduce the company tax rate on small and medium-sized businesses with a turnover of up to $50 million a year to 25 per cent by 2021-22.
It’s hard to crystal-ball gaze other big-ticket measures of interest to small businesses. Small businesses need better access to finance but, with just two sitting days left in the 45th parliament, it’s hard to see how the $2 billion securitisation fund for small business finance will become law before the election.
Australia’s small businesses told us in a survey they would borrow as much as $80 billion over the next 12 months if they could get the funding and would use the money to hire an average of six extra staff.
Instead, many are struggling to access capital, in large part due to the complexity of the loan process. Digitisation and technology are making inroads into making this process easier but government, banks, non-banks and the accounting sector need to work closer together to close the funding gap.
Our data shows small businesses with good cash flow are quicker to hire new workers. We have more than two million small businesses in Australia, and if every small business was able to employ an extra person – that’s two million new jobs.
Business owners like our customer Michael Bloom, who owns Happy Chiropractor in Melbourne, want to hire more staff and are keen to see more funding for small businesses to train staff. Half a billion dollars towards new vocational training may be able to help some businesses – particularly those who use apprentices – access $8000 in incentive payments.
Other smaller measures, such as assisting small businesses transition to e-invoicing and single touch payroll, is another step towards the digitisation of the small business sector – which can save small business owners hundreds of hours each year. And time is small business owners’ most valuable commodity.
Once parliament is dissolved in the next few days, our politicians will return to their electorates to start campaigning. Government departments will go into caretaker mode; postponing any new decisions until the 46th Parliament is sworn-in post-election.
If a new government is elected, there’ll be weeks of reorganising departments, new budgets, new KPIs, and inevitable delays as new ministers wait for the keys and phone numbers to their new offices. The best thing small business owners can do is to keep informed – through their accountants, business advisors and industry associations – so they can seize any opportunities coming their way.
After all, Australia’s 2.2 million small businesses – the engine room of the economy – have no time to waste.