Treasurer Josh Frydenberg’s pre-election tax pitch has been welcomed by small business, but with a cash splash taking priority, startups say innovation has taken a back seat.
The coalition revealed last night it will head into the 2019 federal election promising small business an increase in the instant asset write-off cap from the legislated $20,000 to $30,000.
The election commitment was welcomed by SMEs on Wednesday morning, alongside measures to boost exporting through $60 million in grants and a $525 million skills investment promise that would bump up incentives for employers.
Asked whether the government will legislate either of its instant asset write-off increases before the election on Wednesday morning, Minister for Small and Family Business Michaelia Cash said the budget will be taken to the election.
“The Prime Minister has made it very clear this is a budget we will take to the election and Australians will now have a very clear choice,” she tells SmartCompany.
Asked whether businesses could be confident in investing when the write-off increases are yet to be legislated, Cash said the government’s statements can be relied on.
“The Prime Minister has made it clear businesses can rely on the statements of the government.”
Council of Small Businesses of Australia chief executive Peter Strong described the 2019-20 federal budget as “one of the best in recent memory”.
“We have collectively been labouring under an increased debt burden since the 2008 financial crisis and, like any household struggling with rising debt, this has drained positive sentiment and slowed economic growth,” Strong said of the return to surplus.
Strong scored the budget 8.5/10 for small business, further praising the government for proposing funding for an innovation games, which would bring together businesses and education institutions.
Ernest & Young chief economist Jo Masters described the budget as a “flat white, not an Irish coffee”.
“That much-needed boost to productivity and innovation isn’t going to flow from this budget. Nonetheless, it is an economically sound budget and while there is a whiff of electioneering, the government has overcome the temptation to only buy votes,” Masters said.
Masters noted Treasury’s wage growth forecasts, slated for 3.25% by 2020-21, are unrealistic.
“This is considerably more optimistic than the RBA, which in the latest Statement on Monetary Policy, forecast wage growth of just 2.5% in June 2020.”
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Australian Retailers Association boss Russell Zimmerman said further income tax cuts will benefit retailers by delivering a bump in consumer spending.
“Given taxpayers will have this cash as soon as July if their tax returns are complete, this represents a substantial and almost immediate boost to retail spending across the economy,” Zimmerman said.
Cash said the budget supported businesses in improving cashflow and would boost business activity.
“The 2019-20 budget continues to put in place a policy environment that makes it easier to establish, operate and grow a small business in Australia,” she said.
Derek Sheen, owner of e-commerce business Yellow Octopus, said the extension of the instant asset write-off and continued support for SME tax cuts were positive, but lamented the lack of support for startups.
“There seems to be little in terms of incentivising investments in early-stage startups to help them get off the ground,” he tells SmartCompany.
“This is something I think Australia is really lacking when compared to many other places in the world … Australia really needs to step up its game in order to compete in this new global economy.”
The budget did contain some innovation measures, including funding for a Mission Control Centre supporting Australia’s Space Industry in South Australia, and money for unspecified medical commercialisation measures.
Startups wanted more
Startups, however, weren’t very enthused by their single specific mention in the budget, complaining the election pitch was light on innovation.
Silvia Pfeiffer, chief executive of telehealth startup Coviu, says she welcomes more funding for mental health, access to rural GPs and money to get more women into STEM, but would have liked more money for modernising healthcare.
“I would have liked to see a more specific focus on modernising Australia’s healthcare sector. What the government hasn’t yet realised is that change and innovation in healthcare will actually come from digital health and telehealth. It’s the only way to scale our future healthcare needs in an increasingly aging and digitally enabled population,” Pfeiffer said.
Bruce Mackenzie, founder and chief executive of HR startup Humanforce, says business is fighting over a “limited tech talent pool” and this budget doesn’t address that issue.
“Today’s budget from the coalition is slim pickings for high-growth businesses. The lack of R&D and tech growth funding is a glaring omission, given the Treasurer’s statements on the need to build a better, more skilled workforce for Australia,” he said.
The government’s export grants pitch was welcomed by Shortlyster co-founder Carl Hartmann and Frollo chief executive Gareth Gumbley.
However, Gumbley noted investment to help along early-stage startups is still sorely needed.
“We’re all incredibly proud of success stories such as Canva and Atlassian, but need to remember they were small startups once too. If we want to foster and nurture the next generation of Australian success stories, we need to invest in them starting today,” he said.
Hartmann said the export grants will help startups export their IP abroad, but said there needs to be more focus on helping businesses succeed locally.
“If we keep companies here, we need to ensure they have the resources they need to build products locally. Therefore, we still need to make sure we have sufficient skilled migration policies to meet the demand for jobs that remain on Australian soil,” he said.