Federal Budget review: Big things come in small business packages
On May 12, Treasurer Joe Hockey announced the 2015-16 Federal Budget outlining the Australian government’s fiscal intentions for the next 12 months. The plans have since been hailed as a boon for SMEs, thanks to a string of beneficial policies for the country’s small businesses.
But what impact has the Budget had on confidence? And what are the ramifications for the wider business community? This review will outline the main policies unveiled, what they mean for businesses and how industry commentators have reacted to the changes.
It is undeniable that SMEs were the primary focus of the Budget. These organisations currently generate $330 billion of economic output and provide employment for 4.5 million Australians.
The $5.5 billion Growing Jobs and Small Business package was the government’s flagship Budget offering. Here are some of the key measures the government intends to implement for the coming year:
Tax cuts: From July 1 2015, enterprises with annual revenues totalling less than $2 million will see their company tax rate drop from 30 per cent to 28.5 per cent. There will also be a 5 per cent tax discount to unincorporated businesses with yearly turnover of below $2 million, which is designed to help sole traders and contractors.
Accelerated depreciation: Small businesses will benefit from immediate tax write-offs on any individual asset purchases worth up to $20,000 until June 30 2017.
Small Business Ombudsman: Plans for an $8 million ombudsman that will act as a single point of contact and facilitator of dispute resolution for small businesses and family enterprises were revealed.
Employment initiatives: The government will spend $331 million over the next four years in an attempt to boost job prospects for Australians through skills and training packages. The investment will target young and mature-age workers in particular.
Industry analysis of the Budget
Many industry commentators have welcomed the changes set out in the Budget. In contrast to last year’s fiscal statement, which was overly optimistic for Australian businesses, the 2015 announcement from the treasurer is likely to provide chief executives and business owners with the resources to grow effectively in a competitive market.
Stephanie Christopher, CEO of The Executive Connection (TEC), said the incentives announced in the Budget are a nod to the growth opportunities that Australian businesses can provide for the country’s economy.
“The generous tax breaks, including the 1.5 per cent tax cut, and the accelerated depreciation measures, will provide the additional cash flow businesses need to adapt to changes in the economy and drive growth via investment and innovation,” she explained.
“With skills and talent also a key business challenge; organisations will also benefit from the government’s key skills and training packages, which includes seeing older workers over 50 bolster their skills and get back into the workforce.”
Chief Executive of the Business Council of Australia Jennifer Westacott said the 2015 Budget was sensible, as it took pragmatic steps to balance the country’s need to get fiscal strategy back on track while still building growth.
She specifically praised the $20,000 write-off mechanism for asset purchases. The extent of the allowed deductions surprised many analysts, with Ms Westacott claiming it will drive productivity and create jobs.
“The small business package provides some welcome relief by assisting start-ups and helping to keep small enterprises to be competitive,” she stated.
Impact on the wider business community
Despite the obvious benefits for SMEs, the Budget outlined few measures that directly supported larger organisations. A recent TEC member poll seems to reflect some of the uncertainty that this potential imbalance could create.
Respondents appeared undecided about whether or not the 2015 Budget is likely to have a notable impact on their business over the next 12 months. While approximately one-third indicated it would, the same percentage of firms were unsure and 30 per cent said ‘no’.
Confidence in the overall business environment also remains mixed. Thirty per cent of those polled feel optimistic about the coming year, but 46 and 23 per cent believe conditions will remain the same or worsen respectively.
Nevertheless, the majority of organisations (58 per cent) predicted their profitability would increase, while just 14 per cent forecast a drop. Approximately 28 per cent expect to maintain the status quo.
Stephanie suggested the government’s failure to push through initiatives from last year’s Budget could still be weighing on the minds of some business leaders. However, the government’s proposals for the next 12 months are still viewed as a positive by many.
“Members remain cautious about the 2015-16 Federal Budget, but they also recognise the tangible opportunities that can now complement existing business plans to nurture growth and increase cash flow,” she explained.
“While the opportunities will be different for each business, The Executive Connection is excited to see this year’s Budget translate into outcomes that have the potential to drive growth, hiring and innovation.”
Clearly, there are likely to be significant benefits for SMEs from the Budget over the next year. However, the rest of the business community will no doubt be waiting for more detailed information to emerge about how the government’s policies will directly affect their operations.