What the budget means for small business

Following Scott Morrison’s budget last night Inside Small Business spoke to a number of small-business owners and other executives immersed in the sector to gauge their reaction to the measures that will have the biggest impact on SMEs.

Extension of immediate asset write-off

Ross Watson, Principal, SMB, of RSM Australia, welcomes this measure.

“Together with the change of the definition to businesses with an aggregated turnover of less than $10m (passed by Senate but not yet by the House of Representatives),” he says, “will provide an immediate deduction and hence a lower tax bill to a broader range of businesses.”

Clive Rabie, CEO of Reckon, also welcomes the move.

“Now that the Senate has also passed legislation that increases the small business entity turnover threshold to $10 million, this means more businesses will be able to immediately deduct purchases of eligible assets costing less than $20,000, helping them to expand, pursue new ideas and create more jobs,” Rabie says.

Rob Hango-Zada, co-founder and co-CEO of Shippit.com, says that the instant asset write-off is great for conventional SMEs that are at the stage of turning a profit. However, he goes on to say that Tech start-ups are inherently capital-heavy to establish, with most running at a loss for the first two years.

“Given that new age SMBs or “start-up” businesses would lack the P&L characteristics to benefit from the write off,” he says, “what more is being done around innovation grants / funds to help finance innovation in tech. Or alternatively is this being driven by tax breaks for investors as per the ESVCLP initiative?”

David Spurritt, Executive Director and Taxation Consultant at Bentleys SA, believes the extension is a positive.

“Provided legislation currently before Parliament receives Royal assent,” he says, “companies with a turnover of between $2m and $10m as well as those with turnovers below $2m will be able to claim an immediate write-off for all asset expenditure less than $20,000 from 1 July 2016.

“Furthermore, if the scheme is beneficial to businesses to promote growth then we also need to ask why this is not a permanent measure for SMEs,” Spurritt adds.

Small business CGT and GST

Ross Watson says that while the definition of small business for many measures has been lifted for those with an aggregated turnover of less than $10 million, the Government has left the turnover threshold for the Small Business CGT Concessions at less than $2 Million.

“This will lead to confusion by small business operators as to what concessions they have access to,” Watson says.

“In addition, the Government announced the Small Business CGT Concession will be tightened to deny eligibility for assets which are unrelated to the small business. The Budget papers cite as an example arrangements where ownership interests in larger businesses do not count towards the test for determining eligibility for the concession. The government provided little detail on the measures.”

Also of interest, Watson says, is that the statement is an integrity measure and not expected to raise additional tax revenue.

Jeff McAlister, CEO of TryBooking, thinks that the government needs to further crackdown on multinationals not properly adopting current GST obligations.

“We are competing against foreign ticketing companies with a clear base in Australia that are dodging fair GST obligations by passing the payment and reporting obligations onto their customers,” McAlister says. “We seek a fair playground in this regard as our quoted prices always includes GST while foreign competitors may not.”

Payment terms

Clive Rabie says that the majority of Australian small businesses have a general payment term of 30 days for good reason.

“Cash is required to pay employees, purchase raw materials, equipment or goods, amongst others,” Rabie says. “Without a healthy cashflow cycle, business growth can be severely restricted, and indeed otherwise successful enterprises can go under. Why should they act as ‘a bank’ for other businesses, especially big multinationals imposing onerous payment terms.

“It appears there are no policy measures announced within the budget to address the impact of late payments on small businesses which is disappointing, as the current system is evidently not working,” Rabie goes on to say. “The Business Council of Australia’s proposal to implement a voluntary industry code is a welcomed measure, but it is clear small-business owners want more. A recent Reckon survey to over 1200 small business owners showed that over two-thirds want the Federal Government to step in to address late payments and lengthy payment terms.”

Foreign worker levy

Mark Tanner, co-founder of Qwilr, believes asking Australian businesses to pay up to $5000 to employ skilled foreign workers will affect our ability to find the right talent and impact our tech industry as a whole.

“For a quick-growth tech company on the hunt for talent to help us expand, these restrictions will do nothing to ease the supply and demand challenges we face,” Tanner says.

“The top one per cent of candidates in technology can offer expertise and results that are 10 times better than anyone else – and the reality is that most of these candidates are from outside of our shores. Putting up barriers to attain overseas talent will be detrimental to the success of Australia in the global tech race long term.”

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