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Thumbs up or thumbs down? Industry reaction to budget

Adam Zuchetti
Adam Zuchetti
03 April 2019 8 minute readShare
City street, Sydney

Business leaders and commentators have shared their thoughts on the government’s pre-election budget, and what it will mean for SMEs on the ground.

As can be expected, there are some ranging views on the budget and the outcomes it will have for SMEs across the country if it is implemented in full. From taxes to jobs, migration to technology, here is the reaction of various business leaders, representatives and economists on the 2019 federal budget.

‘Stop using asset write-off as a dangling carrot’

Andrew Conway, CEO, Institute of Public Accountants (IPA)

According to Mr Conway, it is a case of “close but no cigar” in terms of the expanded instant asset write-off.

“The instant asset write-off was one of the IPA’s signature policy recommendations, and the boost from $20,000 to $30,000 is welcomed, as is the increase in the turnover threshold from $10 million to $50 million,” he said.

“However, the fact remains it is still a year-by-year proposition with the extension of the initiative to 30 June 2020 only.

“We believe this initiative needs to be a permanent fixture of the taxation system and further increased to encourage business reinvestment, growth and employment opportunities.

“Government needs to get serious about this measure and not use it as a dangling carrot leading into every federal budget.”

Mr Conway also said that the Division 7A changes, aimed at private company loans, payments and debt forgiveness to shareholders and their associated, were “not well received” when they were unveiled in October 2018. As such, he welcomed their deferral by one year to 1 July 2020 unveiled in the budget.

“Some of the changes proposed were not business-friendly and would have resulted in adverse cash flow consequences and the possibility of double taxation with the removal of the distributable surplus test,” Mr Conway said.

“We are pleased that the changes proposed in the consultation paper will be subject to further consultation with stakeholders.”

‘A flat white budget, not an Irish coffee’

Jo Masters, chief economist, EY

Using a colourful analogy, Ms Masters suggested that the budget was “economically sound” but lacked any real punch.

“It’s a flat white budget, not an Irish coffee,” she said.

“This is not an extraordinary budget, but that was never a realistic expectation. There is no far-reaching reform. That much-needed boost to productivity and innovation isn’t going to flow from this budget.”

Ms Masters said that the government had “overcome the temptation to only buy votes”, and balanced economic stimulus measures on the back of higher than expected commodity prices (and hence tax receipts).

However, she criticised the government over certain forecasts, particularly wage growth.

“The government’s wage growth projections are excessive,” Ms Masters said.

“The budget assumes an acceleration in wage growth with the Wage Price Index forecast to rise to 3.25 per cent in 2020–21, from 2.5 per cent in 2018–19, despite an unemployment rate steady at 5 per cent. This is considerably more optimistic than the RBA, which in the latest Statement on Monetary Policy forecast wage growth of just 2.5 per cent in June 2020.”

‘A good one for small businesses’

Ben Kearney, CEO, Australian Lottery and Newsagents Association (ANLA)

“The 2019 federal budget is [a] good one for small businesses like our newsagents, distributors and lottery agents and their staff,” Mr Kearney said.

He spoke of the current need to build demand and boost confidence within the nation’s economy to boost retail sales, which he said the budget will help to deliver through a project surplus next financial year and a $100 billion spend on infrastructure building.

Mr Kearney also said that the immediate tax cuts for low and middle-income earners would “put money back in people’s pockets to spend, and our small businesses will be beneficiaries”.

He also applauded the fast-tracking of small business tax cuts and the expansion of the instant asset write-off, but repeated previous calls to make this a “permanent fixture rather than extending it each year”.

New apprenticeships a ‘great step’

Gary Workman, CEO, Apprenticeship Employment Network

Mr Workman welcomed the government’s $525 million skills package, which he said would help meet the needs of jobseekers and employers.

“Creating 80,000 new apprenticeships in industries with skills shortages is a great step by the Australian government to ensure people are able to get a job, and businesses are able to find staff when and where they need them,” he said.

He noted, though, that “close consultation with business” is needed to ensure this spending is targeting where need is greatest for maximum benefit.

“International best practice shows that the best outcomes occur in thin markets where apprentices are contracted to a group training organisation, and then placed with different businesses where there is need. This would be a particularly strong model in rural and regional areas, where businesses may not be able to support full-time apprentice training,” Mr Workman said.

“It would be fantastic to see some of the $9 billion investment in science, research and technology directed to apprenticeships in this area. While apprenticeships in Australia are usually considered to be in blue-collar sectors, there is significant evidence that vocational training in more white-collar professions is efficient and effective in ensuring opportunities for young people.”

‘Concerned by cost of implementing banking RC changes’

Dante De Gori, CEO, Financial Planning Association of Australia (FPA)

Mr De Gori said that tax breaks and greater flexibility for superannuation are welcome measures that “have a positive impact on the financial health of many, many Australians and ease short-term cost of living pressures”.

“It has become harder and harder for Australians to understand and add money to their superannuation,” he said.

“We welcome the flexibility which will be provided from July 2020 for people aged 65 and 66 to contribute to super without meeting the work test of 40 hours over a 30-day period. This will greatly assist Australians in preparing for the upcoming rise in age pension eligibility to 67 from 2020–21.”

The government’s plan to implement recommendation of the banking royal commission was broadly positive, Mr De Gori said, but the funding of this could adversely impact people receiving financial advice.

“The $606.7 million required will primarily be recovered from ASIC’s industry funding model and will add to the significant increases in advice costs to the mums and dads of Australia,” he said.

“We believe implementing the royal commission recommendations is necessary for the protection of consumers, but are concerned by how much it will cost.”

Jobs focus is good, but not great

Yohan Ramasundara, president, technology association ACS

Mr Ramasundara said that some of the budget measures aimed at addressing skills shortages are “sorely needed”, such as “the establishment of a National Skills Commission to focus on retraining in the VET sector, the $62.4 million for the expansion of second-chance learning programs and the $20.1 million over four years to better identify emerging skills needed”.

But he said that these do not go far enough to meeting the country’s upskilling needs.

“Technology jobs are the jobs of the future,” he said.

“Many of the high-paying jobs of the next decade are going to be technology jobs, and a large proportion of the funds allotted to skills have been targeted not at technology jobs, but at trade skills. Much more investment should be made to improve the technology skills of the Australian workforce.

“The question from this budget is whether [the] government’s approach to education and investment in digital skills creation will support the rise of dozens of Australian global companies in the 2020s and beyond.”

‘Government not focusing on tech, innovation’

Dhruv Singh, CTO, influencer marketing service provider Hypetap

“The fact that ‘innovation’ was not referenced in yesterday’s budget [speech] and digital, only twice, signals the government’s focus is elsewhere,” Mr Singh said.

“If we want Australia to be an innovation nation, businesses need more support.”

He argued that Australia is “lagging behind” on support for innovation as well as R&D, particularly for small businesses and start-ups, and criticised the process for trying to claim the existing incentive as being “no easy feat”.

“Whilst there is progress underway, we are not even close to being competitive on a global level — incentives in the UK, for example, allow SMEs to claim up to a 230 per cent deduction,” Mr Singh said.

“Recent changes and guidance to R&D incentives mention that companies must ensure their work meets the definition of R&D that exists in the Income Tax Assessment Act of 1997. But the internet and software built to leverage it was still in its infancy when this was drafted, so referring to this definition is outdated.

“The current R&D scheme is skewed for a different time and needs to be adapted to meet the needs of new businesses that should be able to better leverage the R&D incentive scheme.”

Mr Singh added: “Current documentation requirements are onerous, pose a large administrative cost, and cannot be easily adapted to the internal development methodologies used by most modern software teams. Processes must be simplified for smaller and new start-ups.”

‘Welcome news for Australia’s cyber security’

Michael Warnock, Australia country manager, Aura Information Security

According to Mr Warnock, the budget is “welcome news for Australia’s cyber security awareness and capability”.

He said that it is crucial for ongoing investment and research into digital technology and security to protect information and build trust and confidence across the economy.

“A perennial problem in Australia — and indeed globally — is a shortage of cyber security skills,” Mr Warnock said.

“It is therefore encouraging to see more focus on cyber security education and skills development. What we need is investments in both specialist cyber skills and broader awareness programs.”

He added: “Let’s hope the $570 million cyber spending boost for ASIO and the Australian Federal Police will flow onto other areas of the economy. For example, requirements for anti-drone technology for the AFP and AI technology for ASIO could be met with local suppliers.”

‘Missed opportunity’ on tech

Alex McCauley, CEO, StartupAUS

“The Treasurer launched his budget with a message of strong economic management, but gave no indication of his government’s approach to the transformational role of technology in Australia’s economic future,” Mr McCauley said.

“The Treasurer chose to focus on the status quo rather than outline his government’s strategic plan for transitioning the Australian economy into an increasingly technology-led world.”

However, he said that the boost to the Export Market Development Grant is a “valuable addition” to the landscape for Australian start-ups.

“We’re glad to see a significant level of additional support allocated towards helping businesses export Australian-developed goods and digital products overseas. Given that Labor has also talked about boosting the EMDG, it’s great to see bipartisan support of a valuable program,” Mr McCauley said.

“Also, we’re pleased to see $3.4 million over four years dedicated to encouraging more women in STEM careers as a long-term measure of support.”

‘Disappointing cuts to skilled migration’

James Pearson, CEO, Australian Chamber of Commerce and Industry

While broadly supportive of the budget and its support for small business and skills training, Mr Pearson said that it was disappointing to see the government had locked in its proposed cuts to skilled migration.

“Businesses who are desperate to fill vacancies so that they can keep meeting their customers’ needs, let alone grow and create more jobs, will be disappointed that the government has locked in cuts in permanent migration for the next four years,” he said.

“It ignores the evidence of the economic benefit of skilled migration and assumes Australia’s needs will be unchanged. This is despite the increasing cost to support our ageing population with healthcare and pensions in retirement, and the contribution young skilled migrants make to meeting those costs.”

“Also, the budget has not made clear whether the government is going to make up the shortfall in funding from the migration levy linked to the Skilling Australians Fund, which is the agreement with the states and territory government to deliver more apprentices. If that shortfall is not made up, then it will take some of the gloss off the skills announcements.”

Thumbs up or thumbs down? Industry reaction to budget
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Adam Zuchetti
Adam Zuchetti

Adam Zuchetti is the former editor of MyBusiness and a senior freelance media professional, specialising in the fields of business, personal finance and property. In 2020, he also embarked on his own business journey – inspired in part by the entrepreneurs and founders he had met through his journalistic work – with the launch of customised pet gifting and subscription service Paws N’ All.

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