Last night we saw our fourth Budget handed down from the current Government and there were no major surprises for small business owners. Yet, was it enough? As a small business owner, is there enough being done to drive your profitability, resilience and long-term success by the Government?
Why Small Business?
I am often asked by people why the Government should spend resources and funds on small business. ‘Shouldn’t it be the responsibility of the business owner to achieve their own success?’. This is not a simple answer, and the same could be asked of all Australians. Before we dive into the 2017-18 Budget, let’s take a look at WHY small business is important to the Australian Economy.
- Small business employs more than 60% of working Australians – According to figures compiled by Saul Eslake, and discussed in an article by Adam Creighton in The Australian:
- Businesses that employ less than 20 employs approximately 45% of private sector employees
- Businesses with 20-199 employees employ approximately 25%, and
- Businesses with 200+ employees, approximately 20%.
- Small business is paying the way for Australia
- The ABS reports in 2015-16 taxes on income accounted for 57% of revenue (across all levels of Government).
- Taxes on the provision of goods and services accounted for over 23%
Not only is small business paying company and other taxes, they are paying the wages of 60% of the Australian workforce, contributing to the PAYG tax collected by the ATO.
It’s clear that small business is a key player in the revenue generated by the Government, yet are the measures to support and strengthen this critical sector our economy – the ‘engine room’ as it is so often referred to – enough to ensure this sector becomes stronger and more resilient.
Last night the ABC reported that 3 out of the last 4 quarters had seen negative growth in the retail sector – a significant segment of small business. Even the cafe and restaurant sector, has seen negative growth.
With greater than 50% of small businesses failing, small business needs more than a tax break on profits to create long-term growth and sustainability. Dun and Bradstreet’s Failed Businesses Report, shows that in 2016 the ACT recorded its highest number of business failures in three years.
Interestingly, small business may make up a significant portion of the Australian economy, but how much of that is actually collected? The Australian reported in an article by Robert Gottliebsen, the ATO is owed $19 billion in overdue tax, of which $13 billion is owed by small businesses with turnover up to $2 million.
The engine room is clearly struggling.
The Budget Wrap-Up
Okay, so it’s not all doom and gloom for the small business sector. Although I don’t see it as a clear win for small business, there are still a number of measures that will bolster small business.
- $20k instant asset tax write-off – this has been maintained for the 2017-18 FY for businesses of up to $10m. No surprises here.
- Red tape reduction incentive – States and Territories have been promised a $300m payment over 2-years towards innovation. Let’s see how this filters through to small business.
- Small businesses employing foreign workers on 457 Visas will now be slugged with a $1,200 per year per worker, along with a one-off $3,000 payment. This replaces the need to report training spend required of 1-2% as previously required. I can see this impacting the hospitality segment especially, with a high number of foreign workers, and incredibly tight margins.
- The Black Economy – a crack down on the ‘cash economy’ is on its way. Businesses still operating by under-reporting, falsifying records and illegally avoiding paying tax are under threat. Let’s face it – it’s about time. If you are operating this way, you deserve to be caught – you are lining your pockets at the expense of all Australians. This will include businesses that pay cash to employees and businesses that don’t declare cash payments. Next time you walk into a local cafe that doesn’t have EFTPOS…ask for a receipt.
What is missing?
If the Government is serious about creating a strong, resilient and sustainable small business sector, we need to focus on two key elements.
- Funding for small business – cashflow is the number one issue for small business. The bank’s pledge small business funding, yet it is not accessible to the majority of small business. There needs to be a State or Federal solution to this.
- Education for small business owners – the more I work with small business owners, navigating the many challenges and opportunities that they encounter, the more obvious it is. Small business owners need training and education in the areas outside of their trade craft. Too often small business owners are expected to be the expert in all areas, accounting, taxation, legal matters, social media and marketing, structuring, systems, HR and so on.Yet, to get professional advice in all these areas is financially unachievable. Training and education is, therefore, essential and should be a high priority for both State and Federal Governments.
There is it, the Budget 2017-18. Hon. Scott Morrison stated in his Budget speech, “…business is responsible for a large part of driving revenue growth for Australia.”
If 4/5 of the budget repair is driven by growth, then business success is fundamental.