Just a week out from this year’s federal budget, take a look at what SMEs could expect to gain – and lose – from the government next financial year.
SMEs, in effect, want the same thing the government is trying to achieve – growth. Growth in jobs, growth in output, growth in profitability.
According to a recent straw poll on the My Business website, working capital and cash flow remains the biggest problem SMEs face in trying to scale their business. Almost a third (31.8 per cent) cited capital constraints as their biggest impediment to growth.
How do SMEs rate the government’s policies to date?
Recent research does not paint a rosy picture overall for the government, with many business owners feeling unconvinced about the government’s ability to boost the capital positions and growth prospects of SMEs.
“While perceptions of the economy remain strong, less than one in seven businesses have faith in the government’s policies, with the biggest concerns being excessive bureaucracy and red tape, as well as there being too much of a focus on the interests of big business,” said Sensis CEO John Allan while releasing the latest Sensis Business Index survey.
That reflects research by Momentum Intelligence in late 2016 that found nearly two-thirds (65 per cent) of small business owners and their employees did not think the government’s management of the economy would stimulate growth for SMEs, and a further 21.3 per cent were unsure.
Address the problem of late payments
One factor for this, suggests Sam Allert, managing director for Australia and New Zealand at cloud accounting provider Reckon, is the government not taking direct action to address the problem of payment terms.
“[The] majority of Australian small businesses have a general payment term of 30 days for good reason: cash is required to pay employees, purchase raw materials, equipment or goods, among others. Without a healthy cash flow cycle, business growth can be severely restricted, potentially even leading to long-term damages that could destroy the engine room of our economy,” he points out.
“The current system is evidently not working. The Business Council of Australia's proposal to implement a voluntary industry code, that would ensure small business suppliers are paid within 30 days of issuing a correct invoice, is a welcomed measure but it is clear small business owners want more in the form of government legislation to directly address problems with late payments and lengthy payment terms.”
Support for business tax cuts
However, the government is finding solid support among business owners for tax cuts.
In another poll conducted over the Christmas/New Year period on the My Business site, 32.1 per cent of respondents rated tax cuts as the most important way the government could support their business – higher than any other type of support.
Reducing the red tape burden came in close, second, at 29 per cent.
The good news for SMEs is that the government remains committed to its phased reduction of the corporate tax rate.
Federal Treasurer Scott Morrison recently said the government is planning to reintroduce the remaining elements of its Enterprise Tax Plan when Parliament sits to ensure the full tranche of proposed business tax cuts are delivered.
Additionally, he pointed to corporate tax rates in countries, such as the UK and Singapore, are already well below those of Australia, and admitted this is building pressure for further reductions so that Australian businesses can remain competitive on the global stage.
Maintain the instant asset write-off
One of the most popular measures by the current government to support SMEs has been the $20,000 instant asset write-off. However, with the measure due to expire on 30 June this year, calls are mounting for this year’s budget to make the deduction permanent.
According to Reckon, 86 per cent of SME owners agree that the measure should be extended.
“The increase in the accelerated depreciation write-off threshold to $20,000 has been a great assistance to small business cash flow,” says Andrew Conway, CEO of the Institute of Public Accountants (IPA).
“This initiative is bringing forward the tax deduction that would have been deductible over a number of years.
“If this initiative reverts back to $1,000, there will be negative impact on the broader economy as the incentive for small businesses to reinvest in their future will be taken away, restricting potential growth, employment and prosperity.
The 457 visa debacle
The rather sudden abolition of 457 visas sparked much confusion and debate in the SME community last month.
As My Business pointed out at the time, the change to foreign working visas may prove to be part of a broader policy shift.
At face value, dramatically overhauling immigration restrictions on foreign workers may be patriotic in trying to secure jobs for Australians first and foremost. It may have the potential to create huge employee shortfalls in industries and regions where skilled workers are in short supply.
The federal budget could seek to rectify this imbalance, if the treasurer were to unveil increased funding for education and training targeting key skills shortages. This could be in the form of more funding for established vocational education and training providers, and/or additional financial incentives for businesses – especially SMEs – to hire more apprentices and take on greater training programs themselves.
However, there is more speculation on our part than the government giving signals about such a move.
What is on the cards, according to the Treasurer, is pursuing with its previously announced plans to progressively cut business tax rates and continued investment in infrastructure.
Will we finally see policy action on housing affordability?
However, the most interesting prospect – which will resonate with business owners struggling personally under the weight of housing costs – is action on the issue of housing affordability.
At an economists’ luncheon in Sydney last week, Mr Morrison boldly declared that the government is planning to “have a crack” at housing affordability.
“If you don’t have a roof over your head, one that you can rely on every night, then every other challenge you have in life gets harder; every single other challenge gets harder – keeping a job, getting an education, getting the proper nutrition, looking after your kids, dealing with a mental illness, coping with your disability … all of this gets harder,” he said.
“So I make no apologies, and our government makes no apologies, for deciding this is something we have to do something about.
“I think my constituents expect me to have a crack at it, and I think Australians who are struggling expect us to have a crack at it, and we will do our best to do the things that we believe we can do to improve that situation.”