Whether its tax cuts, dispute resolution, payment times or the endless stream of platitudes about backbones and the economy, small business remains on the lips of most politicians heading into polling day on Saturday.
Since making it back into cabinet last August, the sector has been a particular fixation for the Coalition, which has run down the list of issues facing SMEs with self-professed enthusiasm.
The cabinet reshuffle, sparked by Malcolm Turnbull being toppled as prime minister, was less favourable for startups, as we’ve covered at length in our StartupSmart election explainer.
Nevertheless, under Scott Morrison, the Coalition has allocated billions of taxpayer money to small-business support, legislating tax cuts, an extension to the instant asset write-off and a $2 billion Business Securitisation Fund.
Get daily business news.
The latest stories, funding information, and expert advice. Free to sign up.
Labor has responded by matching the Coalition on the larger measures listed above, while embarking on its own small-business reform agenda, spearheaded by Shadow Treasurer Chris Bowen and Shadow Assistant Treasurer Andrew Leigh.
In some policy areas, such as unfair contract terms and tax advice clinics, Labor has a more concrete platform, while in others, support for already legislated Coalition policy has made them competitive.
But Labor’s industrial relations policies have many businesses worried — particularly its pledge to restore penalty rate cuts and change the rules guiding the Fair Work Commission to deliver bigger minimum wage increases.
Labor’s line of defence has been some form of the argument that higher wages mean higher spending, which is money in the bank for small business.
Keep an eye out for our separate wages and industrial relations explainer later this week.
Wage worries aside, energy policy (and by extension, climate change) remains a key election issue for small business and Australia more broadly, and Labor’s targets in this area are clearly more ambitious.
The standard Coalition line on that distinction is some form of the argument that Labor’s plans will wreck the economy. Either way, you can check out the policies side by side in our small-business energy and climate policy explainer.
Then there are the other big areas of small-business policy, from tax reform to payment times and red tape. Below is a breakdown of the state of play in the small-business policy space heading into Saturday’s poll.
We’ll skip over the fine detail of each measure in this article, for the sake of brevity, but you can read in detail about each announcement, including reactions from business owners, industry advocates and experts, by following links.
Tax: the good, the bad and the ugly
Broadly, there are two sides to small-business tax policy: how much you have to pay, and what’s being done about the body shaking the cup, the ATO.
Tax cuts for small and medium businesses managed to survive the Senate last year and a rate slice from 30% to 27.5% came into effect last July.
Last October the Coalition went further, bringing forward further cuts to 25% for businesses with revenue under $50 million a year to 2021-22 instead of 2026-27.
Labor supported the plan, valued at $29.8 billion, saying it was willing to “compromise in the national interest”.
The Coalition has also legislated further support for the instant asset write-off, extending the scheme to 2020 and increasing the threshold twice, first from $20,000 to $25,000 and then again to $30,000.
There is, however, a lingering concern many businesses don’t know how to access the scheme, don’t have the money to participate, or haven’t even heard of it.
Similar to concern about the inaccessibility of government grants, response to these concerns on both sides of politics have been relatively scant, beyond the creation of new websites.
In addition to the instant asset write-off, Labor is also offering businesses its Australian Investment Guarantee, which will enable businesses to deduct 20% off the value of any new eligible asset worth more than $20,000.
The investment scheme will cost taxpayers more than $850 million by 2021-22 and more than $15.2 billion over the next decade.
But Labor also wants to crack down on misuse of discretionary trusts by slapping a 30% tax on distributions to prevent things like income splitting.
The $7.7 billion policy could catch some small businesses using trusts legitimately in the crossfire though.
Labor also has a plan to cap deductions on tax advice at $3,000, which stands to make getting advice more expensive for some businesses, and by extension, business harder to come by for tax agents.
Tax office reform
Turning to the tax office, efforts in Canberra have been centred on dispute resolution recently after a series of concerning allegations about the ATO’s relationship with small business surfaced last year.
Last November, the Coalition established an advice and support service within the small business ombudsman’s office to assist with resolving tax disputes, additionally creating a dedicated desk within the Administrative Appeals Tribunal (AAT) for SME appeals.
Labor has no plan to overturn this, and will additionally establish a new commissioner within the tax office dedicated to handling appeals.
The goal of the university-based clinics is to provide free tax advice and assistance with ATO disputes to small businesses and other taxpayers.
But the devil is in the detail. The Coalition has committed $1 million in funding to set up 10 tax clinics across the country, but only as part of a 12-month trial.
Additionally, as SmartCompany revealed earlier this year, there are lingering concerns about ATO involvement in the trial, including their status as the body handing out the money and reporting back to the government.
In contrast, Labor has promised ongoing funding for the clinics and Shadow Treasurer Andrew Leigh says the ATO won’t be involved in funding the clinics or reporting on their operation.
Access to finance
The issue: it’s difficult to get a business loan in Australia. And things have become worse in the wake of the banking royal commission, as the big four take a risk-averse approach to lending.
To address this, the Coalition introduced and subsequently passed legislation to establish a $2 billion Business Securitisation Fund, which will support non-bank lenders in a bid to improve competition in SME finance.
Prime Minister Scott Morrison has also recently outlaid $100 million in taxpayer money for an Australian Business Growth Fund, which will strive to provide about 50 high-potential SMEs each year with access to affordable loans to turbo-charge their businesses.
There’s a bit of uncertainty around this though. While it is broadly expected regulator APRA will change the rules around lending risk to enable the scheme to move forward, several major banks who would be asked to become investors have baulked at the policy.
Multiple research projects have identified red tape as a big issue facing small-business owners recently. A concerning survey even linked administrative work to a lack of sleep among directors last month.
Both major parties support a radical simplification of Australia’s business registers, which has been tied to the introduction of director identification numbers.
It’s expected these reforms will cut red tape for businesses as they won’t have to maintain as many registries with various regulators.
Going further, the Coalition has also doubled ASIC reporting thresholds so many SMEs who previously had to submit no longer need to.
A total $300 million has also been committed to states and territories in an agreement with the federal government to undertake red tape reduction measures in their own jurisdictions.
There will be some added red tape under the Coalition’s 2019 budget measure to require ABN holders to “confirm the accuracy” of the details provided on applications.
Late payment of invoices is a prominent issue in the small-business sector, with recent research indicating it remains a key driver of cashflow problems.
The Coalition has supported research into the extent of the issue and also committed to ensuring government departments pay small business contracts within 20 days from July 1.
Earlier this year, Prime Minister Scott Morrison also promised to force Australia’s largest 3,000 companies to reveal data about how quickly they pay small businesses.
The policy will also require those businesses to commit to paying invoices within 20 days if they want to tender federal government contracts.
Labor supports the Coalition’s plan on payment times.
Justice and competition
Legal advice is expensive and pursuing a dispute through the courts is time-consuming — with neither of these things being conducive to running a successful small business.
But the reality is thousands of small-business owners are forced to contend with the legal system each year, often with great personal and financial cost.
Arguably, the Coalition’s most significant small-business reform during its time in government, is the creation of the Australian Small Business and Family Enterprise Ombudsman out of Labor’s Small Business Commissioner in 2017.
Since then, the Ombudsman has assisted many businesses with their own disputes, but has also conducted research, and under current ombusdman Kate Carnell, has engaged in public advocacy on prominent small-business issues.
The Coalition also introduced unfair contract terms law for small businesses in 2015, however, those reforms have been criticised by Carnell and the ACCC for lacking teeth.
The primary issue is unfair contract terms aren’t currently illegal, although both major parties support toughening the laws and extending the number of businesses they apply to.
Labor has also announced a number of competition-focused policies in recent months, outlining plans to increase penalties for companies breaching competition law, provide more funding for the ACCC, empower some groups to make “super complaints” and enhance merger reviews.
The opposition also took advantage of the chaos in the dying days of the last parliament to pass measures which improve support for small businesses undertaking public interest legal action against large companies.
Illegal phoenixing sounds cooler than it is. This $1.8-3.2 billion problem is aptly named though, describing the practice of continuing the business of a liquidated business under a new company to avoid paying debts.
The Coalition has an entire policy package for stamping out the issue, including creating tougher penalties for directors, introducing director identification numbers that track business owners past individual companies, and making directors personally liable for GST liabilities.
Labor supports director identification and increasing penalties, additionally advocating name and shaming offenders and implementing a tradie pay guarantee.
Announced in February, Labor has promised sub-contractors working on big Commonwealth projects will have access to a guarded piggy bank protecting them from going unpaid due to dodgy insolvencies.
In the wake of the banking royal commission, there have been calls from both major parties for a compensation mechanism for victims of banking misconduct.
The Coalition set up the recently formed Australian Financial Complaints Authority (AFCA) last year to deal with financial services complaints, both legacy and current.
The body has been a hit with small businesses so far, and has even appointed its own dedicated small business ombudsman.
There’s up to $1 million in compensation for victims with cases dating back to 2008 from July 1 under the Coalition.
Under Labor the headline figure doubles to $2 million, and the banks will pay for the entire thing through their banking fairness fund.
The skills shortage
Vocational education and training is in for an overhaul regardless of who wins the election this Saturday, with both major parties planning big changes to arrest declining apprenticeship rates.
The Coalition has pledged $585 million to reform the VET sector, promising to create 80,000 new apprenticeships if it wins the election.
Under the Coalition plan, businesses can expect their apprenticeship incentives to double to $8000 per placement and incentives for workers to increase as well.
Their Delivering Skills for Today and Tomorrow program has proposed $347.9 million in funding over the next five years for boosting apprenticeship investments in areas of identified skill shortage.
There will also be an investment in streamlining the funding process for businesses and apprentices to improve accessibility and a further $132.4 million would be spent over four years establishing a National Skills Commission to consider long-term reforms to the sector.
Labor has promised to invest more than $1 billion in TAFE and apprentices if elected, $200 million of which will be spent on upgrading TAFE campuses.
Labor has also promised to provide 150,000 apprenticeship incentives to boost the number of Australians going into the industry and undertake a national inquiry into post-secondary education to identify opportunities for further reform.
Labor has pledged to outlaw pay parity clauses in the accommodation sector, which giants like Expedia and Booking.com have used to restrict the ability of small-business owners to advertise their own rates online.
This policy has been welcomed by the sector, although Expedia has indicated it will punish businesses for taking advantage.
The Coalition has promised to establish an automotive industry code of conduct to protect independent car dealers from being pushed around by large car manufacturers.
Labor, meanwhile, will force car manufacturers to share technical information with independent mechanics to even the playing field with authorised dealers.