The Coalition’s federal election win prompts us to reflect on their FY20 Federal Budget promises that piqued our interest. With Australian households spending over $73 billion each year on tradespeople and 250,000 trade businesses operating around the country, the sector represents an important economic contributor that deserves nurturing for continued prosperity and growth.
So if you own a business in the trades sector, or are a sole trader looking to grow, what are the incoming policies you should be capitalising on and planning for, next financial year?
Tax benefits for small business owners
The Coalition’s Federal Budget promises the lowest tax rate in 50 years for small and medium-sized businesses with a turnover of less than $50 million, moving the needle from 30 per cent to 27.5 per cent. This will be further reduced to 25 per cent by 2021-22 – meaning more cash in the pockets of our hardworking tradies and other small business owners spanning any sector. While, unincorporated businesses with a turnover of less than $5 million will have a tax discount of 8 per cent (capped at $1000), that’s set to increase twofold to 16 per cent.
Adding to these tax benefits, the instant asset write-off threshold will inflate from $25,000 to $30,000 and expand to include medium-sized businesses with annual turnover of less than $50 million. This is aimed at helping small businesses such as tradespeople, invest in the tools, equipment and machinery they need to grow.
For those seeking more seamless and faster lending access, small businesses are due to be offered more competitive finance through the $2 billion Australian Business Securitisation Fund, which will help smaller banks and non-bank lenders increase their lending to those in this sector.
Further, the Coalition pledged to establish the Australian Business Growth Fund ($100 million), which will partner with financial institutions to provide equity funding to small business. The initiative is designed to assist small and family businesses in funding access to help them reach their full potential.
New tools for apprenticeships and training
The Coalition has also made commitments to boost apprenticeship levels and inject capital into vocational training. A key plank in the Coalition’s Delivering Skills for Today and Tomorrow policy is a $525 million investment in the vocational education and training sector.
It will support 80,000 new apprenticeships in areas deemed to be suffering skills shortages over the next five years and offer incentive payments to employers will be doubled from $4,000 to $8,000 per placement.
New apprentices will also receive incentive payments of $2,000 and industry training hubs are set to be established to address the challenge of high youth unemployment in regional areas.
Impact on homeowners and trade job climate
In contrast to the ALP’s proposed Federal Budget, the Coalition’s budget policies relevant to homeowners pledged to retain the status quo, with no change to negative gearing or capital gains tax.
Despite house prices falling and credits being frozen, there are low concerns about a reduction of the number of home renovations within the industry. In fact, according to the HIA National Outlook Report (Autumn 2019), more homeowners have opted to undertake renovations in order to improve the amenity of their existing property, instead of transacting in the market. Tougher credit application criteria have only impacted a small segment of the renovations market, with those larger jobs requiring financial support.
Overall, the HIA Report showed the market has experienced an increase of 4.2 per cent in the total investments in home renovations in FY19 and stable, comparable levels are expected for FY20, with further growth forecast for FY21.
Working smarter in the on-demand tradie economy
Despite some variability in the real estate and property sector, the home improvement and maintenance market in Australia remains stable. In addition to benefiting from the new FY20 government policies relevant to their success and growth, tradies should also seek out cost-effective solutions that help them work smarter.
Our recent research with EY Sweeney and LEK showed that tradie work is increasingly being channelled through online platforms, revealing the deep value in digitising tradie-consumer engagements as the on-demand tradie economy grows. In fact, 70 per cent of tradies agree that technological assistance can free up their work time, including assisting with schedule management and reducing travel time between jobs (60 per cent). Our research also revealed that tradies spend an average 14 hours per week on quoting and general admin, having to pass up approximately six figures per year in potential work.
Drawing on easy to use digital and automated solutions for job coordination, communication through to administration, will help tradies operate in smarter ways so they can focus on what they do best – their trade and craft. Coupled with embracing the new policies promised in the FY20 Federal Budget, Australian tradespeople should be well equipped to succeed in the year ahead.
Roby Sharon-Zipser is the CEO & Co-Founder of hipages.