After 5 weeks of speculation and commentary the wait and the suspense is over.
Last night Treasurer Scott Morrison handed down his much anticipated budget, and there weren’t too many surprises! But Mr Morrison does appear to have a strong focus on small business, saying “Small business owners are out there fighting for growth in their businesses every day. They deserve our respect and support.” But did his budget deliver on this?
So the big question is, has he delivered respect and support to small businesses? Let's find out?
$20,000 INSTANT ASSET WRITE OFF
As predicted the $20,000 instant asset write off has been extended for a further year. This allows small businesses to write off an asset within the purchase year, rather than depreciating it over several years. As anticipated this has now been extended to businesses with a turnover less than $10 million dollars, previously the only businesses eligible were those with a turnover less than $2 million dollars.
We say: This is a good incentive for small business and we are pleased to see this extended by one year.
BUSINESS TAX CUTS
As previously promised small businesses with a turnover less than $10 million dollars (that are incorporated) will now have a tax rate of 27.5%. But they won’t have to wait for the new tax year, this will be effective from this current year.
We say: This is a real win for businesses, and in particular those in the innovation and technology space. It is crucial that these companies are globally competitive, and relieving pressure on their tax is a great way to help them be more financially viable. Growing businesses both in Australia, and making them competitive globally will only strengthen the Australian economy in the long run.
RED TAPE
SME’s have a lot of red tape in their businesses and the current government is determined to reduce this burden. There are $300 million dollars worth of incentives for the states that remove red tape and unnecessary restrictions on small businesses.
We say: Whilst the Government claim to have stripped $5.8 billion worth of red tape burdens from businesses through its own reforms they actually haven’t specified where or how this has been calculated!
INNOVATION BUSINESSES
There has been some criticism of this budget when it comes to start ups and innovation. Last year the Treasurer’s speech specifically spoke of start ups and entrepreneurs, this year it didn’t. The shadow treasurer Chris Bowen told The Australian last week that the government has “fallen off the tree” when it comes to innovation.
StartupAus CEO Alex McCauley said “We welcome this Budget’s support for certain segments of the innovation sector. It includes new measures to increase competition and access to data in the banking sphere, along with taxation reforms for digital currencies, which will help Australian Fintech companies.
“It also includes plans to introduce Crowd Sourced Equity Funding for proprietary companies, which is a step forward for start-ups looking to raise crowd-funding. It’s encouraging to see advanced manufacturing attracting additional support, too.”
Mr McCauley said however the measures were modest, both in terms of budget impact and overall effect.
We say: It was a lacklustre effort to support innovation in Australia with this years announcement, whilst some basic measures were introduced there was nothing that stood out to assist the growth of the Tech sector.
For more insights you can read our opinion piece on whether the government has done enough to stimulate innovation in Australia.
OVERSEAS WORKERS
Tech companies and innovation companies were worried a couple of weeks ago when the government released their plans to tighten regulations on 457 visas. However, what we didn’t see coming was that on top of these tightened regulations is an annual fee. So for those workers that can still get a visa to work in Australia, there will be an annual fee as much as $1,800 on businesses that hire them. It is anticipated that this will generate $1.2 billion over four years and will fund training for Australian workers.
We say: The tech space is lacking skilled and trained workers in Australia, which is driving the need for them to hire from overseas. The increase in training money for Australian workers is great news, however, there is no guarantee that this funding will go to technology training and in the mean time start ups will be slugged with this fee. This doesn’t appear to show a real commitment to innovation in Australia.
SUPERANNUATION
Left largely untouched after it bore the brunt of the 2016 Budget cuts, there were two beneficial additions.
Those over 65 will be able to contribute up to $300,000 each into their super fund from the proceeds of selling the family home outside of the normal contribution. For those downsizing their main residence this is great news - providing that they have owned the home for more than 10 years. Both members of a couple will be able to use it for the same home. This certainly helps those retirees that are looking to downsize and have most of their wealth tied up in their family home. This comes at a cost to the government of an estimated $30 million over four years. It is also expected that the incentive for retirees to sell their homes will put more large homes on the market and therefore help relieve supply-side pressures on house prices and availability.
In an attempt to appease first home buyers and address housing affordability the Government will allow first home buyers to use their super accounts to save for a deposit for their first home. Individuals can contribute up to $15,000 extra per year to their super – subject to normal contribution limits – and then withdraw a maximum of $30,000 to fund a house deposit, with the ability to combine this with their partner’s super home savings. Although welcome it is a fringe measure at best – with a couple’s maximum withdrawal of $60,000 sufficient to cover only the stamp duty on the median priced Sydney house - and not as generous as pre-budget suggestions of tax-deductible first home savings. Placing it within the sphere of superannuation means that although it benefits from the generous superannuation tax concessions it is still taxed at 15% rather than the taxpayer’s top marginal rate, and as it is withdrawn, at the taxpayer’s top marginal rate less 30%.
In addition, detractors will point to previous first home buyers grants which served to increase house prices and suggest that this first home super savings scheme will have the same effect.
We say: All in all, the 2017 budget hasn’t left us very inspired. No major surprises, and no silver bullets. We are in deficit and will be for more years to come. While the government seems to be committed to helping small business through tax cuts, ensuring that all innovation companies are competitive doesn’t seem to be as much of a focus as it did last year.