Small businesses around the country usually pay close attention to the budget handed down by the federal government in May each year. And with good reason – SMEs were among the big winners in this year’s budget thanks to a $5.5 billion small business and jobs package.
But the policy decisions and allocation of funding by state governments in their budgets can have an equally important impact on your business’s bottom line.
Unfortunately for growing Australian businesses, the policy and funding decisions vary greatly depending on where you are located.
Here’s SmartCompany’s round-up of the state and territory budgets and what they mean for the SMEs in those states.
Small businesses will be substantially better off as a result of the budget Premier Jay Weatherill handed down in June, according to director of taxation at MGI Adelaide, Maree Caulfield.
The major change for SA small businesses announced in the budget is reform to the state’s stamp duty regime. Overall, the government is forecasting a surplus of $43 million in 2015-16 and $654 million in 2016-17.
The government will abolish stamp duty on non-real property transfers, which includes business transfers. Stamp duty on the transfer of commercial properties will also be abolished over time and stamp duty relief for corporate reconstruction will be expanded.
Removing stamp duty on business transfers not only benefits fast-growing businesses that need to restructure, but also people wishing to buy a business in SA. In other states, stamp duty rates can average around 4.5%.
Caulfield told SmartCompany South Australia is now leading other states “in modernising individual state tax systems”.
“Not only are these significantly positive measures for businesses in South Australia – but they represent a progressive step forward in attracting businesses to South Australia or encouraging more individuals to start a business here,” Caulfield says.
“For a long time there have been huge impediments to businesses wanting to restructure as they grow. In most cases these impediments have been related to stamp duty rather than (federal) capital gains tax matters. Hopefully these progressive changes will influence other state governments to follow suit, particularly given the measures in the federal budget to widen capital gains tax rollover relief for small business restructuring.”
SMEs in South Australia will also benefit from the continuation of the government’s payroll tax rebate, which has been extended for another 12 months at a cost to the budget of $11.3 million. The extra 12 months of the rebate, which effectively halves the payroll tax rate of 4.95% for businesses with payrolls of up to $1 million, is estimated to save around 2200 employers up to $9800 each.
The Victorian government handed down its first budget at the start of May, and like their counterparts in South Australia, Victorian small businesses received some stamp duty relief.
The Andrews government allocated $11.4 million for stamp duty exemptions for small business purchasing mobile plant equipment, in a budget that delivered a surplus of $1.2 billion in 2015-16.
Other budget measures aimed at stimulating the Victorian business community include $200 million to establish a Future Industries Fund. The fund will offer grants of up to $1 million to Victorian businesses in high-growth sectors.
Innovative Victorian businesses are the target of the government’s $508 million Jobs and Investment Fund, $60 million of which has been allocated to a ‘startup initiative’ to help early-stage businesses grow.
The Victorian government said it also wants to help small businesses by reviewing and reducing red tape and improving access to government tenders below $3 million.
Mark Stone, chief executive of the Victorian Employers’ Chamber of Commerce and Industry, welcomed the state budget at the time, praising the government’s commitment to improving Victoria’s infrastructure, particularly in regional areas, and creating jobs.
“The budget’s strong focus on jobs and infrastructure will be well received by business,” Stone said in May.
“It is likely to spur business and consumer confidence, translating into further private sector investment and employment.”
New South Wales
Delivering an underlying surplus of $713 million in 2015-16, the New South Wales government’s key focus in its budget was infrastructure. Over the next four years, the government plans to spend $86.6 billion on infrastructure projects.
Hand-in-hand with this spending on capital works is the government’s Jobs Action Plan, which it says will help create an extra 150,000 jobs over the next four years.
Small businesses will receive $27 million over four years through a Small Business Employment Incentive. Eligible businesses that do not pay payroll tax can receive a grant of up to $2000 when they hire new workers as of July 1 this year.
There’s also a $25 million Jobs of Tomorrow Scholarship Fund, with 25,000 scholarships for students to study for qualifications for technology and growth jobs. The government will also spend $190 million to encourage interstate and international businesses to set up a base in NSW.
SMEs in NSW may also benefit from the government’s Small Biz Connect program that includes small business advocacy and dispute resolution services and multicultural advisers.
Also, small business operators who are lottery agents may be eligible for a shop refit, with the government providing $15 million over 10 years for lottery agents to refurbish their shops.
This month’s Queensland state budget placed emphasis on startups, with the $24 million Startup Queensland program aimed directly at encouraging entrepreneurs in the Sunshine State.
The program is part of a wider $180 million Advance Queensland initiative, which also provides $46 million for a Future Jobs Strategy to identify new areas of growth and industry collaborations with researchers.
New companies established in Queensland will also be exempt from paying payroll tax for three years. Employers that hire apprentices and trainees will benefit from a payroll tax rebate of 25% on those workers’ wages and will be exempt from payroll tax until June 30, 2018.
But while the payroll tax-free threshold for all Queensland businesses is currently at $1.1 million, the recently elected Queensland government has deferred plans to increase the threshold indefinitely.
It is one area in which the Chamber of Commerce and Industry Queensland would like to see movement, although the CCIQ did acknowledge the government resisted the temptation to increase any other taxes, fees or charges in the budget that delivered a $1.2 billion surplus for 2015-16.
“Ultimately, CCIQ would like to see the government further ease the burden on small business through initiatives like increasing the payroll tax exemption threshold from $1.1 million to $1.2 million,” CCIQ director of advocacy Nick Behrens said.
However, the startup community has welcomed Queensland Premier Annastacia Palaszczuk’s focus on entrepreneurship and innovation, with StartupAUS chief executive Peter Bradd telling SmartCompany sister publication StartupSmart, the budget measures will create “thousands of local jobs”.
“It’s a well-known fact that high-growth startups generate 70-90% of new jobs,” Bradd said.
Handed down at the end of May, the 2015-16 Tasmanian budget was focused on jobs and Adam Brooks, parliamentary secretary for small business and trade, said at the time SMEs will benefit from the government’s $315 million jobs package. The government said the funding will create 8000 new jobs.
“Tasmania’s 36,000 small businesses, employing more than 105,000 Tasmanians, are a vital driving force in the Tasmanian economy,” Brooks said.
The recently elected Tasmanian government delivered a deficit for 2015-16 of $59 million but said it will return the state’s budget to surplus in 2016-17.
The Tasmanian government extended the state’s First Home Builders Boost scheme, worth $20,000, until the end of the year and Brooks said this budget measure will stimulate the state’s building sector.
Similar to the Victorian government, the Tasmanian government also said in May it will improve the access SMEs have to government tenders.
Part of this will be done by insisting Tasmanian companies are involved in the $31.5 million refurbishment of the Spirit of Tasmania ships, but more generally the government has introduced a ‘Local Benefits Test’ that will applied to government tenders to help local companies win those tenders.
The government is also hoping to “proactively” attract businesses to Tasmania and allocated $8 million in the budget for that purpose. However, details of how the Business and Jobs Attraction Scheme will operate are not yet available.
“We are sending the message Tasmania is not only open for business, but is the best place to move to and operate a business,” said Minister for State Growth Matthew Groom in May.
The Western Australian budget stands out among all the state budgets as containing the least amount of new funding to benefit SMEs, although this is largely due to the continued deterioration of the state’s books.
The WA government revealed a forecast operating budget deficit of $2.7 billion in early May, due to a $10.2 billion decline in general government revenue.
This fall in revenue led the government to introduce a $1.3 billion package of revenue and sales measures, including an expanded asset sale program and a flat land tax worth $300 for taxable land with unimproved value between $300,000 and $420,000. Other land tax rates will also increase.
The further increases in land tax to meet the budget shortfall were met with disappointment from the business community, with Chamber of Commerce and Industry chief executive Deidre Willmott saying the focus should instead be on structural reform.
“At a time when business confidence is at record low levels, another tax increase will further erode competitiveness and profitability and may have further negative impacts on economic growth,” Willmott said.
In some good news for WA small business, however, the government confirmed it will increase the payroll tax threshold, from $800,000 to $850,000, on July 1, 2016. The government also confirmed a previous plan to introduce a diminishing payroll tax threshold for employers with taxable wages between $800,000 and $7.5 million.
Australian Capital Territory
Like its counterparts in Victoria, Queensland and Tasmania, the ACT government revealed dedicated budget measures to assist the business community when it handed down its budget in early June, withsmall businesses among the big winners.
The ACT government’s forecast deficit for the 2015-16 financial year is $407 million.
The government’s business initiative – titled Confident and Business Ready, Building on Our Strengths – is worth $11.8 million in new funding over two years and in a boon for SMEs, the payroll tax threshold will jump from $1.85 million to $2 million.
The program also includes $6 million for an Innovation Development Fund and a Trade and Investment Fund. The government said in June this funding will go towards commercialisation and export support for businesses, as well as support to attract investment. Another $1.4 million will be added to the existing Brand Canberra program, which is aimed at attracting new residents to live, work and invest in Canberra.
SMEs also stand to benefit from the government’s focus on improving access to government tenders, as part of the same Confident and Business Ready program. There are two new procurement programs.
The Local Industry Advocate will be an office dedicated to making sure local businesses get a look in for all ACT government work, while the Small Business Innovation Partnership will give local firms opportunities to provide products and services to the government. If successful the government will work with the businesses to develop the products and services to sell to other governments and clients.
Cutting red tape is also on the agenda. The budget includes $4.7 million over four years to create a “one-stop shop” to make it easier for businesses to deal with the government. A common digital platform called Access Canberra will mean businesses need to go to just one place to access government services and the processes for business licensing and gaining access to land titles will also be streamlined.
Entrepreneurs and business owners in regional areas of the Northern Territory were singled out by the NT government when it handed down its budget at the end of April.
The government said it will spend an additional $1.47 million to support the business sector and non-government organisations.
Under the title of Business NT, the government will fund dedicated Business Development Officers (BDO) in the regional areas of Nhulunbuy, Katherine, Tennant Creek and Alice Springs.
“The dedicated BDOs will be the go-to person for business in the regions,” said Minister for Business Peter Styles.
“They will be trained and have a toolkit at their disposal to encourage smarter business procedures to flourish to help make life simpler for Territorians.”
Styles said the “increased presence on the ground” will help strengthen businesses and make them more competitive, and therefore create more jobs.
Businesses that take on new apprentices and trainees are also expected to benefit from an extra $4.4 million per year as part of the government’s Training for the Future program.
The scheme is made up of three types of grants, including a commencement grant of $1000, a completion grant of $2000 and a recommencement grant of $500 if an employer takes on an apprentice or trainee at some point during their training.
The NT government is projecting a deficit of $285.2 million in 2015-16, which is up from $92.3 million in 2014-15. However, the territory’s net debt position has improved, dropping approximately $1.6 billion from $4.1 billion in 2014-15 to $2.5 billion in 2015-16.
Where to from here?
Despite some wins for SMEs across each of the state budgets, and some concerns, tax experts believe a more consistent approach to supporting business across the nation should be the end goal.
“There needs to be a consistent approach across states. There should not be a difference between doing business in South Australia and doing it in Queensland,” MGI’s Maree Caulfield says.
Caulfield says one way to achieve this could be by reforming the goods and services tax.
“We would support a move by the federal government to increase GST rates while providing personal tax rate cuts to compensate low income earners, so that the states can remove the more inefficient taxes which make doing business more costly,” she says.