A raft of industry and business leaders have provided their reaction to the budget, outlining what it will mean for their sectors and what additional measures would benefit SMEs in future.
Overall consensus was positive, though muted, with many saying the budget could have gone a lot further to support SMEs as the ‘engine room of the economy’.
“This is the second year in a row where small and medium businesses have been recognised and put front and centre in the budget. I have no doubt they will respond in the way the government hopes – by investing more in innovation and creating high-quality jobs,” said MYOB CEO Tim Reed.
“The plan to cut the company tax rate to 25% is an excellent one, however the timeline could and should be shortened.
“It’s like SMEs have been given a terrific present but told it is coming in pieces and they can’t open it up for a decade.”
The Retail Council agreed, with chairman Peter Birtles pointing out that the benefits of the tax cuts won’t be seen for years to come, though the economy is in need of immediate stimulus.
“We are disappointed that these measures will take a decade to implement – particularly as those companies that must wait the longest are the very companies that employ a high proportion of the workforce and make a significant contribution to economic output,” he said.
“Furthermore, it delays the flow-on benefits delivered to Australian households who would also benefit from a reduction in the company tax rate, primarily through higher real wages and increased employment.”
Accountants were quick to point out that staggered cuts and divergent thresholds could actually increase the compliance burden on SMEs.
“The increase in the small business entity turnover threshold is a welcome change for many businesses as it will allow greater access to concessions which had limited application to businesses with turnover of less than $2 million. However, the change in threshold also introduces more complexity and questions as to which concessions will apply [under] the new threshold,” said BDO tax partner Mark Molesworth.
“For example, the government has indicated that the $2 million threshold will be retained for the purposes of the small business capital gains tax concessions, and the new $5 million threshold for the small business tax discount will add further complexity. Multiple thresholds increase complexity and confusion, no matter how well-intentioned they are.”
Mr Molesworth said cutting small business taxes and winding back superannuation concessions are positive changes, but don’t go far enough in reforming the tax system.
“It’s now more than a decade and a half since our tax system has seen any meaningful reform and it’s hard to feel too positive about the chances of anything significant occurring in the near future,” he said.
However, Angus Sedgwick, CEO of alternative finance provider The Invoice Market, said the impact of the tax changes for SMEs should not be underestimated.
“In the two years since [The Invoice Market] started offering flexible cash flow funding, we’ve seen a growing number of Australian businesses turn to alternative financing because they find traditional funding sources penalise them if they are carrying a tax debt,” he said.
“The majority of [our] clients, small-to-medium businesses, are quite positive about their future growth prospects and abilities to expand their businesses, despite some doomsayers and negative sentiment prevalent in the market. The boost they will receive from either measure [the business tax cut or boosted tax discount for unincorporated businesses], and ultimately an easing tax burden, is obviously welcome.”
While reactions were generally positive about the measures outlined to reduce tax avoidance by multinational companies, Con Paoliello, RSM Australia’s managing partner of Perth and national head of tax, said this will likely result in rising costs for the company’s consumer and SME customers.
“Australia now joins the United Kingdom as being one of the only countries that have taken action outside of the BEPS action plan, by proposing domestic legislation to counter the tax leakage created by ‘new world’ business models. The commercial reality of the proposed diverted profits tax is that these entities will inevitably pass on any additional costs to their Australian customers. Read that as your monthly Netflix subscription going up in the near future!” he said.
One of the more overlooked aspects of the budget in the consumer press was tourism funding.
“Maintaining funding for Tourism Australia is a key commitment, which will pay dividends for the whole economy. Tourism Australia has been allocated core funding of $140.3 million in 2016-17; this, combined with industry contributions and the Asia Marketing Fund, will see their budget remain relatively stable,” said Steve Whan, manager of the National Tourism Council.
“About one in 20 Australian jobs is in tourism, following strong employment growth over the past year, and the sector boosted our balance of payments by $1.5 billion in February alone. Given this, it is vital that government policies support tourism growth rather than strangle it.”
More certainty was also delivered for SMEs and start-ups in the clean energy sector, with the government committing to retaining the Clean Energy Finance Corporation (CEFC) and the Australian Renewable Energy Agency (ARENA).
“The $1 billion Clean Energy Innovation Fund to assist emerging clean energy technologies provides a much-needed investment injection and greater certainty for the industry,” said Romilly Madew, CEO of the Green Building Council of Australia.