However, the announcement that businesses with an annual turnover of less than $10 million can claim up to $20,000 worth of depreciating assets each financial year, is a sweet, largely unpredicted kick-back that will certainly not go unappreciated (the $10 million threshold has been raised from the previous $2 million).
Not all SMBs stand to benefit, however. Where are the lower taxes and extension of the instant write-off to mid-large sized businesses? These companies sought greater simplification of the business environment, including lower taxes, and little has been done in this area to build on last year’s cuts.
Many of these mid-large sized businesses are now global. E-commerce makes it much easier to have international cost and income streams than was previously the case. Gone are the days when Australian global businesses were multinationals, or at the very least, large enterprises.
No substantive tax reforms were delivered for these mid-large sized businesses as part of yesterday’s Budget. And unless tax reform is delivered to e-commerce enabled global companies, we are more likely to see brain drain, with companies seeking labour, services and technology from other countries – whether that be outsourcing their accountancy services to the Philippines or manufacturing to Vietnam.
When Australia is competing against the likes of Iceland (which has a 12.5 per cent corporate tax rate) and with President Trump muting the idea of cutting the corporate tax rate to 15 per cent, ongoing tax reform is crucial in fostering entrepreneurialism, investment and innovation at home.
On a side note, whilst yesterday’s Budget has been described as a blow to the banks, there has been disappointment in some quarters with the government’s failure to deal with slow paying big businesses. For years, small business operators have complained about big businesses starving them of cash by stringing out payments to them. The Federal Small Business Ombudsman, Kate Carnell had urged the Federal Government to legislate to force big businesses to pay small business suppliers within 30 days. The failure to act on late payments represents a lost opportunity for small businesses.
As we know, speed of payments is of utmost importance to our customers buying and selling in foreign currencies – and a key determinant of the future success of Australian businesses selling their wares overseas. Speed of transfer by alternative financial services providers is a unique selling points of new entrants coming from the traditional banking sector. In some instances, it can make the difference between profit and loss on a monthly balance sheet for some of our SMB customers.
See also: Federal Budget: small business $20k instant asset write-off scheme extended by one year, Federal Budget: foreign worker tax introduced, Federal budget: start-ups and innovation and Small businesses being used as ‘cheap form of finance’ by larger ones: late payment inquiry.
About the author
Michael Judge is Head of Corporate Dealing at International currency transfer provider, OFX (ASX, formerly OzForex).