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How the Australian budget will impact SMBs - Reckon

09 May 2018

In light of Australia’s 2018 Budget being released yesterday, Reckon A/NZ MD Sam Allert comments on the ramifications for Australian small businesses.

Instant asset write-off

Any further tax relief for small businesses is always welcomed, as it means they would have more resources to create jobs, expand, and purchase technology and equipment to boost productivity.

The $20,000 instant asset write-off is evidently a worthwhile incentive, so it’s promising to see the government extended the initiative.

As a next step, it should ideally be enshrined in permanency. 

According to our survey of 1,000 small business owners, 91% say they’d like the government to extend the instant tax write-off beyond June 30, 2018.

However, over one in three (39%) respondents have yet to utilise the incentive, indicating the potential need to better educate Australian small businesses on what they can and cannot write off.” 

R&D tax incentive  

It’s disappointing to see that the government has decided to restructure the R&D Tax Incentive.

This will have huge implications on many Australian small businesses that rely heavily on the tax concession to drive research, development and innovation, as well as startups who do not have the capacity to work on projects with a substantial R&D spend above industry peers. 

Along with these changes, the ATO will now be able to publicly disclose those who requested R&D relief and what the relief was for, as well as impose a limit on time extensions to complete R&D registrations and amendments to technical provisions.

These changes could jeopardise Australia’s goal of becoming the region’s innovation hub, as more businesses are forced to set up their R&D bases in countries with more supportive government initiatives and funding.

Personal income tax cuts 

Personal income tax cuts was of massive focus in this year’s Budget.

We are pleased with the government’s decision to reduce tax rates over a seven-year plan.

With a degree of income tax cut, low and middle wage earners, in particular, will have a higher purchasing power, which will go a long way in stimulating local economic activity especially amongst small business retailers.

Rising energy costs

Any further support that can be afforded to small businesses will go a long way in ensuring they remain profitable and thrive.

For one, the massive electricity price hike over the past several years has been crippling many small businesses across the country.

In fact, according to our survey of 1,000 small business owners, over half (53%) want the government to better support them by lowering the cost of doing business, specifically via a reduction in electricity price (53%).

If the government doesn’t step in to address the issue, it will have huge implications on small business growth as capital that could have gone into hiring new talent, investing in new technology and expanding their venture, would now have to go into solely ensuring they have an operational work space.

Taxable payments annual report

With the latest changes to the TPAR (Taxable Payments Annual Report), this will present additional red tape for small businesses to comply with.

In order to ensure minimal implications for their operations, small business owners must make sure that they have the right technology and software in place to deal with the additional reporting requirements and ensure compliance.

Corporate tax cuts  

The reduction of the corporate tax rate is a positive step forward, but there is clearly more work to be done to actually allow small businesses to reap any positive financial benefits and ultimately create more jobs.

According to our survey of 1,000 small business owners, only 14% have seen an improvement in cash flow with the lowered tax rate, while a mere one in 10 (10%) have managed to bring in more staff.
It is no secret that Australia’s high company tax rate is a massive inhibitor to business growth.

We are already seeing instances where local entrepreneurs are driven to set up shop overseas, and it is only a matter of time before the rising costs of running a business force more of our own away.

With nations like the UK having a rate of 19% and the US at 21%, further reforms are critical to promote small business growth and ensure Australia remains competitive on the global stage.

Small business training and upskilling 

While tax cuts will go a long way in helping small businesses improve their cash flow, today’s pace of technological change has also meant that there’s a seemingly ceaseless demand for new skills.

I think it’s very important that as a country, we start fostering a strong culture of lifelong learning, so small business owners are able to continuously develop the skills they need to succeed.

To help small businesses stay ahead of these digital disruptions and prepare for the unknown, more assistance and frameworks must be afforded to them in the form of ongoing education, training, upskilling and reskilling.

In our survey of 1,000 small business owners, one in three (35%) say they’d like the government to better support them by offering more subsidies for training and upskilling programs.

Minimum wage increase 

Small businesses are and will continue to be the engine room of the Australian economy, so it is vital that they are provided with ample support to remain profitable whilst spurring growth.

According to our survey of 1,000 small business owners, over half (56%) indicated that the increase will affect their operations if it went ahead, while 66% want the government to step in to address the minimum wage debate.

More alternative initiatives combatting the wage rise need to be set in place – with the Sunday penalty rates cut, governments and businesses need to work closely together to ensure everyday Australians are paid a wage in line with the cost of living.

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