“Small businesses are the engine-room of our economy. They are integral to every local community,” said Treasurer Josh Frydenberg in his budget speech to parliament. “People running a small business put their livelihoods on the line. They start early and finish late. They manage the front desk and the back office. They pay their workers first and take their own wages last. We want small businesses to prosper, and we are backing them to do so.”
The government has been selling its budget as one that delivers for small business owners; it offers tax cuts, a raft of measures to improve access to finance, a number of initiatives aimed at streamlining processes and significant investment in skills training.
In all likelihood the federal election will be called in May and there won’t be any parliamentary sitting days before going to the polls; thus, much of the budget is contingent on the Coalition being elected. While the Opposition has suggested it will support some of the government’s initiatives, it has also promised to deliver its own mini-budget by September if it’s elected.
Nonetheless, the budget provides a clear picture of the Coalition’s policy direction with respect to small business. It’s a kind of roadmap for growth: it identifies the key challenges and proposes a series of measures to assist small business owners overcome them.
Here’s a closer look at what the 2019 budget might mean for small businesses:
Although the policy was announced late last year, the government’s commitment to reduce the small business tax rate has been budgeted for the first time. Under the plan, the small business tax rate will drop from 27.5 per cent to 25 per cent by 2021-22. So effectively, a business with a profit of $300,000 can expect to save $7,500 in tax from 2021-22 under the plan.
The government was able to pass a bill through the Senate last year that reduced the tax rate for businesses with less than a $50 million turnover from 30 per cent to 27.5 per cent. The fact that this bill passed through a parliament that has, at times, struggled to get legislation through both Houses suggests there is support for these measures from across the political spectrum.
Instant asset write-off
The most significant budget announcement for small and medium sized businesses is an extension of the instant asset write-off. The proposal has been well received by industry groups.
The instant asset write off is set to increase to a $30,000 threshold, up from the current $20,000, and more businesses, with turnover up to $50 million, will be eligible to use this incentive.
“Expanding the size and the accessibility of the write-off encourages businesses to invest, expand their markets and create more productive jobs by using improved equipment and technology,”said James Pearson, CEO of the Australian Chamber of Commerce and Industry (ACCI).”
What this means in practice is that if you buy an asset that costs less than $30,000, you can write off the business portion in your tax return for the relevant income year.
Assets that cost $30,000 or more can’t be immediately deducted. They will continue to be deducted over time using the general small business pool. You write off the balance of this pool if the balance (before applying any other depreciation deduction) is less than $30,000 at the end of an income year.
The government recently announced a joint initiative with New Zealand to establish the Australia New Zealand Electronic Invoicing Board (ANZEIB), an electronic invoicing board to oversee the rollout of e-invoicing technology in both countries. According to the government’s estimates, it is slated to save businesses about $30 billion in transaction costs by 2029.
While the board is responsible for setting the direction for e-invoicing, both countries have agreed to adopt a framework that establishes a common language for various e-invoicing software to ensure they’re all compatible.
When implemented effectively, e-invoicing can potentially help small businesses improve payment times and, as a result, cash flow. Square’s Invoices app enables you to send invoices directly from your mobile phone, computer or even via the point-of-sale app. You can then monitor the payment status so you can always see what’s outstanding.
“E-Invoicing will help business save time and money by allowing the direct exchange of invoices between suppliers’ and buyers’ financial systems,” said Stuart Robert, Assistant Treasurer. “Interoperable e-invoicing will significantly improve productivity for businesses large and small, and reduce the costs of doing business for both government and industry.”
The government announced a $525 million proposal to overhaul the Vocational Education and Training (VET) system. Around $132.4 million has been proposed over four years for the establishment of a new National Skills Commission, which will be tasked with delivering the reforms.
Additionally, a National Career Institute will be established to improve advice and guidance to job seekers.
As part of this government’s plan, small businesses will receive an $8,000 incentive payment – double the current amount – to employ apprentices.
As part of the Delivering Skills for Today and Tomorrow program, the Treasurer said 80,000 new apprenticeships would be created by 2024. The government will spend $347.9 million over the next five years, he said, in an effort to boost apprenticeship investments in areas of identified skills shortage.
Small business owners struggling with the rising cost of electricity may be disappointed with the lack of commitment by the government to offer immediate relief and, in the long term, propose any viable solutions for bringing costs down.
The government has offered a one-off Energy Assistance Payment – $75 for singles and $125 for couples – to age pensioners, people on the Disability Support Pension, veterans, carers and single parents, but there is no equivalent scheme for small businesses.
A plan to shortlist 12 projects that will add a combined 3,818-megawatt hours, or approximately 7% extra capacity to the National Electricity Market has been spoken of, but it remains vague and light on detail.
All the figures cited have been taken from the 2019 budget documents.