Small business is shaping up to be a central election issue, with the government unveiling red tape cuts it said would collectively save SMEs more than $300 million over the next four years.
Federal Treasurer Josh Frydenberg and Small Business Minister Michaelia Cash jointly announced on Friday (16 November) that the government plans to double the threshold for proprietary businesses to be considered large enough to have to comply with financial reporting obligations.
Currently, proprietary businesses are considered ‘large’ if they meet at least two of three thresholds for any given financial year: a minimum of $25 million in consolidated revenue, a minimum of $12.5 million in consolidated gross assets, and at least 50 employees.
Under the new proposal, these thresholds will be lifted to a minimum of $50 million in consolidated revenue, a minimum of $25 million in consolidated gross assets, and at least 100 employees.
The changes will exempt one-third of business (2,200 out of approximately 6,600) from their financial reporting and audit requirements with the Australian Securities and Investments Commission (ASIC).
These businesses will save an estimated $81.3 million per year as a result, as it costs an average of $36,950 per business per year to prepare and audit financial reports, according to the government.
Small businesses will still be legally required to keep written financial records, and may need to prepare or audit financial reports if directed by either ASIC or 5 per cent or more of their shareholders.
Ralph Martin, national technical director at audit and tax firm RSM Australia, said the proposed changes would free up many SMEs from the burden of lodging annual financial reports.
“The proposed changes are a sensible step, given that there has been no change to these thresholds since 2007. [They] will be a welcome reduction in the regulatory burden for some medium-sized businesses,” he said.
“Many of the affected businesses may choose to continue preparing a financial report to meet the needs of investors or lenders, but they will now have the freedom to choose when and how this information is presented.”
It comes amid something of a flurry of measures designed to support SMEs: in the past month alone, the federal government has brought forward tax cuts for small business; outlined the launch of a new $2 billion securitisation fund to boost lending to SMEs; and joined court action in a bid to end the uncertainty over casual worker entitlements.
The federal opposition too has joined the mix, siding with the government over the tax cuts and announcing its own set of measures to tackle phoenix activity. In September, it also revealed a policy to shake up the appeals process of the ATO.
The Australian Electoral Commission states that a federal election must be held no later than 18 May 2019.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.