BUDGET ROUNDUP: PRE ANNOUNCEMENT EDITION
Working capital and cashflow are the biggest challenge faced by small businesses trying to manage and scale their business. In a recent poll on the My Business website almost one third cited capital as the biggest impediment to growth. Yet we need small businesses to grow in order to grow job opportunities and output for the benefit of the economy.
Many small businesses have identified tax cuts as the most important way that government could support them. The good news is that it is tipped that the Government will deliver on the corporate tax rate cuts. The total tax reform package that was pledged in the 2016 budget looks to reduce the corporate tax rate to 25% for all businesses by 2026-27. But is that too late? That is 10 years away, and with so many small businesses struggling now, what will the government do to stimulate the economy and help small business cash flow now?
The first piece will be to lower the tax rate for businesses with a turnover of less than $10 million to 27.5%. But is this good enough? It is also a divisive topic amongst parties. Controversial Senator Pauline Hanson has said “I will support the government in a tax cut (for businesses with) up to $50 million in turnover,” she told radio station 2GB. “They are the people who employ people.” However, the Labor Party only supports cutting taxes for small businesses with a turnover less than $2 million. However, it looks as though the Coalition have got the votes to get their tax cuts policy through for businesses under $10 million turnover.
The instant asset write off scheme where businesses could write off asset purchases in the year they were purchased rather than depreciating over time has been well received. It has provided the benefit of helping businesses buy equipment to help grow and expand their offering, as well as stimulating the economy by increasing purchases that might otherwise not have happened. So the big question for next Tuesday’s budget announcement will be whether this offer will finish on June 30 as planned, or whether it will be extended for another year. Small Business Minister Michael McCormack says he is ‘hopeful’ that it will be extended and is certainly very supportive of the program.
Set to be ‘off the table’ for next weeks budget is $13 billion of savings that were proposed but haven’t been able to be passed. These included cuts to welfare and education. These were deemed necessary in order to protect Australia’s AAA credit rating. It is therefore expected that these savings will be created through alternatives including a $2.3 billion in welfare changes that has already been passed through the Senate in March, and changes to higher education that will save $2.8 billion. Preserving our AAA credit rating is important, not just for the implications on the Government’s borrowing expenses, but it also affects every other borrower in Australia.
So no matter what happens next Tuesday night, you can guarantee that there needs to be some big cost savings somewhere as preserving the AAA rating will be paramount for the Government.
Watch out for our special edition straight after the Budget announcement or get in touch with any questions you want answered contact us.