The federal budget should protect small businesses. It should offer the provisions and the safeguards required to make businesses work for our society as a whole. But, above all, it must be delivered with SME owners in mind, recognising their importance to Australia's economy. So why are so many Australian startups and small business owners feeling left out in the cold by the latest budget?
What exactly has gone wrong here? We take a closer look and examine the three ways in which the federal budget has let Australia's SMEs down. It's not all bad news, but it's not all good news either.
The $30k write-off does just what it says on the tin -- i.e. it provides businesses with the ability to instantly write-off asset taxes on purchases up to $30,000. Of course, this sounds like a good idea, and it is, to an extent. Unfortunately, this provision for business in the latest federal budget may turn out to be something of a smokescreen, and organisations may end up being let down.
We'll start with the good news -- the latest federal budget has boosted the asset tax write-off by $10k, from $20k to $30k. This, of course, means that businesses can now achieve tax write-offs on major purchases up to $30k, and benefit from this in the same financial year, encouraging increases spending on assets and boosting the Australian economy in the process.
The turnover threshold has also been raised, this time by 500% from $10million to $50million.
The critical bit of bad news regarding this is that the move is just a temporary measure. The current extension of the initiative is only valid until June 30th, 2020. This means that businesses do not benefit from long term confidence in asset investment, and neither does the Australian economy. Sure, the $30k write-off might get renewed, but equally, it might not, and business owners cannot work with this kind of uncertainty.
Andrew Conway, chief executive officer of IPA, outlined his concerns;
“We believe this initiative needs to be a permanent fixture of the taxation system and further increased to encourage business reinvestment, growth and employment opportunities,” Conway said.
There is also the convincing argument that the budget provisions are insufficient, and should be higher. If the government is serious about helping the country's businesses, they should consider exploring options beyond the $30k limit. The benefit this would have for our economy would be huge.
The thriving modern economy is a dynamic one, and one which is structured in such a way that it supports technological innovation and vision. The latest federal budget has paid lip-service to this, allowing for an increase in the Export Market Development Grant - or EMDG - and ring-fencing funding for spending in key areas.
However, critics of the budget have pointed out that these provisions fall short of delivering what businesses really need, and risk putting the development of our economy in jeopardy. Political motivations, as opposed to business-related ones, and a lack of understanding of the market, have clipped the wings of a potentially beneficial budget announcement.
It goes without saying that the increased funding for the EMDG is a good idea and one that will provide many businesses with the additional development revenue they need. The $3.4 million dedicated to supporting women in STEM careers, to be invested over four years, also makes for pleasing reading.
While the budget announcement has offered some hope for business, it has also come up short in other areas. Critics have noted the lack of attention paid to the Research and Development Tax Incentive -- something that risks discouraging key innovators from pushing the homegrown business sector forwards.
StartupAUS CEO Alex McCauley highlighted the lack of vision displayed by the government within their new budget;
“The Treasurer chose to focus on the status quo rather than outline his government’s strategic plan for transitioning the Australian economy into an increasingly technology-led world,” McCauley said.
About the R&TDI scheme, McCauley went on to say;
“It is critical to ensure that high-growth startups are unequivocally welcomed under the scheme as soon as possible. This is an urgent issue and was left unaddressed tonight."
Access to Funding
Sufficient access to funding is a perennial concern for small business in Australia and across the world. As a result, it was important that the new federal budget really got to grips with this issue, and showed that the treasury was serious about giving SMEs the boost they need.
Alas, this was not to be.
Small business funding was always going to be a hot topic at budget time, thanks to the Royal Commission's recent report. The Royal Commission has recommended enhanced accountability for the big four commercial banks and lenders in Australia, which is undoubtedly good news for businesses seeking the capital they need.
Along with the budget came the news that the Small Business Minister's Office is also working on how to lower the hurdle for businesses securing funding, potentially reducing the need for business owners to pledge their personal property against the loan value.
One serious bit of bad news is that the need for business owners to put up their homes as collateral is still there. This has been a significant complaint among small business owners for some time now.
Other complaints include loan inflexibility (73% of business owners cited this as a frustration), and loan conditions (80%). Neither of these concerns has been adequately addressed by the recent budget.
So, the news is not great following the release of the budget, but at least alternative lenders such as Banjo Loans provide some hope for small businesses. If anything, the latest budget news suggests that a greater need for these kinds of alternative lenders than ever before.