SMEs divided over Federal Budget expectations

Federal budget

With the list of uncertainties around the Federal Budget growing every day, many are unsure what to expect. Unsurprisingly, the SME community is no different, with overall sentiment around the impending Budget divided.

According to our Voice of Australian Business Survey, a bi-annual national survey of SMEs across all industries and regions, 39% of Australian SMEs believe the upcoming Federal Budget will not include measures beneficial to their businesses, compared to only 23% that believe it will.

With the lack of clarity currently around the Budget, it’s understandable that people feel uncertain of what will transpire. The fact that the majority of SMEs don’t believe the Budget will contain beneficial measures for their business however is worrying as it raises questions about the SME community’s confidence in the support they will get from government.

In general, larger and metropolitan SMEs were more likely to expect the Budget will benefit their organisation, with 44% of medium-sized businesses believing it would contain beneficial measures compared to only 13% of micro businesses.

Overall, the possible measures nominated as being of greatest benefit were:

  • simplification of compliance and reporting processes – 64% stating it would be extremely beneficial, very beneficial or moderately beneficial)
  • cuts to the corporate tax rate – 58% stating it would be extremely beneficial, very beneficial or moderately beneficial)
  • extension of the immediate asset write-off – 58% stating it would be extremely beneficial, very beneficial or moderately beneficial

With regard to the measures SMEs would warrant as beneficial, it’s not unexpected that simplification of compliance and reporting processes rank highly for SMEs, as most don’t have the time nor the money to be dealing with excessive and complex processes. Reducing this burden would make a substantial difference for SME owners, freeing them up to do what they do best – run their business.

At the same time there’s so much speculation on tax reform it’s hard to see the forest for the trees in this area. Cuts to the corporate tax rate may very well be included in the Budget if the current political debate is anything to go by. However, we’ll have to wait and see what happens on that front.

When asked about a hypothetical GST increase, just over a quarter of businesses overall – 27% – supported lifting the rate of the GST to 15%, contingent on a corresponding reduction in personal income tax. Medium-sized businesses were more in favour of this hypothetical scenario than small or micro businesses.

The SME sector is main driver in Australia’s economic growth and prosperity. However, for this sector to thrive we need government to take a proactive step in reducing tax burdens, red tape and related costs. The 2016/17 Federal Budget will set the tone for the next fiscal year, we hope it inspires optimism among SME owners and positions them well for the next 12 months.

Dean Steer, Partner, Tax, Bentleys