Has the federal budget provided real help for small businesses or is it just short term tokenism?
The measures are only available to businesses with a turnover of under $2mill.
It leaves out the small businesses with turnover over this amount who are the ones who are the bigger employers.
The measures are only short term and make no real contribution to the major needs of small to medium business. It will do little to increase employment.
The two main measures in the budget for the smaller businesses is to reduce the tax rate for companies from 30% to 28.5%.
For those that do not operate through a company there will be a drop in the amount of tax by 5%.
These come into effect from next financial year. For a good profitable business turning over $1mill this would save them about $1,500 in tax.
While this is nice to receive it is not enough to cause any changes to business decisions.
The other measure is to allow an immediate deduction for assets that cost under $20,000.
This deduction is allowable for assets purchased from 12 May 2015 until 30 June 2017. This could save an additional $5,000 in tax on the full $20,000. However by starting this just before the end of the year it makes the measure more short-term tax focused, than longer-term capital expenditure focused.
It is the latter that will provide more jobs.
Neither of these measures are law yet and have to be approved by the Senate.
The bigger problem with the budget is that the small businesses that are doing the bulk of the employing do not receive any assistance.
While small business employs 47% of the workforce, only approx 17% of that employment comes from businesses turning over less than $2mill.
The major employers are turning over more than $2mill.
The Henry Review into the taxation system, which reported five years ago, acknowledged that the $2million threshold was too low and recommended that the threshold be lifted to $5million.
The Reserve Bank in their May report on Monetary Policy, in which they lowered official interest rates to 2%, said part of the reason they did this was because they could see unemployment continuing to rise.
The Federal Budget acknowledged this too, but have not targeted their measures where a substantial difference could be made.
The budget needed to take a long term view to provide sustainable benefits to the economy. The income tax reduction of 1.5% on the first $5mill of profit as was originally canvassed last month by the Treasurer, has the potential to make an impact on employment.
The economic landscape has changed dramatically in recent years. We need long term measures that will increase the competitiveness of Australian businesses. Measures that are addressed to all small to medium businesses.
Peter Ambrosiussen is the managing partner of Ambrosiussen Accountants & Advisors www.ambrosiussen.com.au
View LinkedIn profile – http://www.linkedin.com/pub/peter-ambrosiussen/29/171/a24
Published by Toowoomba Chronicle www.thechronicle.com.au on Saturday 22 May 2015