The lead up to a federal election is always an interesting time, as the political parties tout their wares and make all sorts of promises to various sections of the community.
This year has been no different, but in a post-budget blitz that saw as many as 28 bills passed through the senate late last week, amongst them were a few big wins for small and medium-sized business.
“Overall, there were some really positive measures for small and medium-sized business in the federal budget,” says Michael Mekhitarian.
“And to be honest it’s really heartening to see that the government has focused on SMEs this year because in the past few years, it has had a tendency to focus on smoothing out the business environment for large corporations, and yet, SMEs are the backbone of this country, and they need support, at every level of government.”
There are three significant budget outcomes for SMEs. Firstly, is the expansion of the instant asset write-off.
The expenditure cap on the instant asset write-off has been increased, and medium-sized businesses with revenue up to $50 million per annum will now also have access to the scheme, which allows businesses to immediately depreciate eligible asset purchases.
“There is however, a small caveat here,” says Michael.
“Businesses who purchased assets before budget night on April 2 2019 will only be able to claim under the previous $25,000 cap, but eligible assets purchased after April 2, 2019 will fall under the $30,000 threshold.”
The government estimates that more than 350,000 companies have used the existing write-off and it expects about 22,000 additional businesses to now be eligible.
And, under the increased cap, in the words of the treasurer himself, “Cafes will be able to purchase a new fridge or grill, a plumber could buy new tools or a courier a new van.”
“For small businesses with tight margins and who really need to watch their cash flow, this is a boost,” says Michael.
“It is a shame that the instant write-off hasn’t been made permanent. Right now, it just seems like a campaign for votes on election day, but there’s always hope that the government will see how beneficial this is for small and medium business and keep it going. I think there’s reasonable pressure to do so, but we’ll have to wait and see,” he says.
“In the meantime, businesses wanting to take advantage of the expanded instant write-off can do so now, and it is in effect until 30 June next year.”
The second big win for small business is the government’s $2 billion business securitisation fund legislation.
“The devil is in the detail,” says Michael. “And until this is fully implemented, we can’t judge its merit, but the idea is solid. The initiative is designed to better help small business access to finance.”
Essentially, the Australian Business Securitisation Fund (ABSF) outlines an investment of up to $2 billion by the government in warehousing and the securitisation market, providing significant additional funding to smaller banks and non-bank lenders to on-lend to small businesses on more competitive terms.
The fund will be administered by the Australian Office of Financial Management (AOFM).
And lastly, but by no means least, tax cuts for small business.
In a surprise announcement, the government has brought forward planned tax cuts for small and medium business. The tax rate will drop from 27.5 per cent in the 2019-20 financial year to 25 per cent in 2021-22 — five years earlier than planned.
“Overall, these three measures in particular will significantly help small businesses,” says Michael.
“And while it’s never easy to determine exactly what is behind government decision-making, some of these measures seem to suggest that the government is taking very seriously the horror stories that came out of the recent Financial Services Royal Commission, particularly the numerous struggles that small businesses face getting adequate access to funding.
What is also heartening is that medium-sized enterprises have been included in the extended asset write-off – just because these companies have a bigger turnover, doesn’t mean they don’t have similar issues to small businesses. And, of course, tax cuts are welcome at any time. Other initiatives too, such as incentives to hire apprentices and various assistance packages for flood victims and farmers, are also real positives.
If you’re uncertain what these measures mean for your business, or how you might take advantage of them, contact us and we’ll talk you through it.”