Pre-budget commentary from Sam Allert, Reckon Group CEO
Tue 2 April 2019 - 2:59 pmEconomy | Expert | News | Opinion | Tax
Sam Allert, Reckon Group CEO, shares his thoughts on the impacts of the expected federal budget announcement this evening.
“Our survey uncovered that 65 per cent of small business owners do not believe this year’s Federal Budget will deliver positive change for their business, suggesting that they have been disappointed by budget announcements in the past.
“As a result, many are expecting a change of federal government this year, indicating that many feel April’s budget announcements could be short lived.
“Small businesses will be eager to understand what concessions the Coalition can offer if it remains in power. This means they will need to go the extra mile and introduce more substantial benefits to small businesses in order to meet their expectations.”
Wages & Income Tax
“Income tax reductions are to be expected from the government, with a surplus from booming iron ore prices offering it more revenue to play with. These will be appreciated by small businesses, who are fearful that a sluggish economy is hurting consumer confidence. Just over half (56 per cent) of business owners say the seven-year personal income tax relief plan announced at last year’s budget benefitted them, suggesting more cuts would be welcomed.
“As we approach the election, many small businesses say Labor’s plan to enforce a living wage could harm their revenue. By making changes to income tax rather than adding legislation on wages, the Coalition will have the upper hand with small business owners on this subject.”
Instant Tax Asset Write-Off
“Research from Reckon shows that 91 per cent of small business owners want to see the $20,000 instant asset tax write-off extended. While an extension to June 2020 is expected, a permanent fix would provide more certainty to small businesses.”
“Labor has already pledged to introduce a permanent $20,000 instant asset write-off if it gets into power, offering a more stable prospect for businesses. While Scott Morrison is expected to raise the threshold to $25,000 in the budget, a longer extension will still be in demand. Ultimately, any further tax relief for small businesses is always welcomed, as it means more resources for business owners to re-invest back into their venture.
“Interestingly, only half (53 per cent) of respondents have utilised the tax offset since it was put in place, indicating a need to educate small businesses on what they can actually write off. Of those who have benefited, 68 per cent say they’ve seen an improvement in cash flow as a result.”
Corporate Tax Cuts
“78 per cent of small business owners say they have seen no benefits since the corporate tax rate was reduced from 30 to 27.5 per cent last year, indicating that larger reductions are desired. In fact, almost half (45 per cent) say a decrease in corporate tax rate is critical to their business success. Policies with a more personal immediate impact are therefore more likely to resonate.”
“Securing small business finance has been a challenge for some time, and this shows no sign of abating. In Reckon’s research, 44 per cent of small business owners say they have already been affected by falling house prices and tighter lending conditions imposed by banks. This comes as no surprise, given many small business owners secure loans on their homes.
“The Coalition’s plans to offer additional funding to financial regulators should be welcomed, but small businesses will need reassurance that credit sources do not dry up as more stringent checks are introduced. Labor has pledged to limit negative gearing on housing to help first time buyers, but this could also cause house prices to drop. The Treasury concludes that the impact of Labor’s policy would be limited, but the Coalition could use this to entice home owners at the election.”
Small Business Training & Upskilling
“Australia is experiencing a skills gap across many professions, with shortages spanning from carpenters to electricians. This is reflected in Reckon’s pre-budget survey of Australian small businesses, which found that 83 per cent of business owners want the government to provide more subsidies for skills and training.
“In last year’s budget, additional resources were assigned to the Skilling Australians Fund to help create more apprenticeships. However, this has not been successful for the most part, with Victoria and Queensland rejecting the proposal completely. Labor has already announced plans to increase funding in TAFE and vocational education, and small business owners will be looking for similar assurances from the Coalition.”
Rising Energy Prices
“In our survey of Australian small businesses, 69 per cent say they have been affected by increasing energy prices, showing a high demand for policies that encourage electricity cost reductions. The Coalition has confirmed it will underwrite several energy generation projects to bring down prices, which could include gas and coal. While this will please some small business owners, it will alienate those that are more environmentally conscious.
“The Coalition’s Energy Efficiency Grants that were announced at the beginning of the year — which offer small businesses up to $25,000 to install more efficient and environmentally friendly equipment — were clearly devised to show decisive climate action. However, our research shows that only 19 per cent of Australian small businesses will take up the government’s offer, while almost half (47 per cent) do not even know what it is.”
“The lukewarm response to the Energy Efficiency Grants shows this initiative is unlikely to offset voter concerns regarding emissions. Confirmation of more investment into fossil fuels in the budget could divide the small business vote.