The 2007 federal election – a guide for SMEs
Thursday, November 8, 2007/
Who is best for your business? Labor or Liberal? However you vote, the outcome of the 2007 federal election will make a difference to your business. It’s not just policies that are changing. There are millions of dollars of give aways that business owners
By Mike Preston
Who is best for your business? Labor or Liberal? However you vote, the outcome of the 2007 federal election will make a difference to your business. It’s not just policies that are changing. There are millions of dollars of give aways that business owners can grab. And that’s on top of the huge tax cuts.
There has been a seemingly endless procession of promises that both Labor and the Coalition have made since the election was called in early October – never mind in the months of quasi election campaigning that preceded it.
The campaign proper is now more than half way completed. It’s time to start assessing who you will vote for. Here are the key announcements in five policy areas of central relevance to SMEs: the skills shortage, tax, red-tape, industrial relations, broadband and industry.
We don’t think either party is yet to land a killer blow. What do you think?
The skills shortage
Time and again, SMEs cite the inability to hire enough appropriately skilled employees as the single biggest impediment to growing their business. With a booming economy and unemployment at 30 year lows, both parties have released high profile policies designed to address the skills shortage.
Both sides have committed billions to improving trades education in schools: Labor with its Trades Training Centres in High Schools and the Coalition with its Australian Technical Colleges.
But the Coalition has also sought to directly assist business owners through a multi-million dollar commitment to training vouchers for SME owners and employees.
Labor has sought to trump that commitment with its promise to creat 450,000 new training positions across the country and an independent statutory body to find solutions to the skills shortage should it be elected to government.
Liberal & National
- SME skills vouchers: A $168 million package to pay grants of up to $1500 to businesses employing fewer than 20 people to purchase skills training for business owners and employees.
- Work skill vouchers: The Coalition will spend $390 million on a work skills voucher program providing up to $3000 for people to take courses in areas such as ICT, accounting and administration.
- Incentives for apprentices: An $837 million package over five years to increase apprentice numbers including:
– $2000 wage top ups for apprentices under 30 to provide an incentive to complete their apprenticeships.
– Apprentices in skill shortage areas can also claim $500 per year in their first two years to subsidise apprenticeship tuition fees.
– Apprentices over 30 in skills shortage areas given a pay top up of $150 per week in the first year and $100 in the second to assist in retraining.
– Also $4000 per employer as an incentive to take on apprentices in engineering.
- More Australian technical colleges: The Coalition has committed $2.1 billion to fund up to 100 new technical colleges across Australia, on top of $66 million already committed in 2006-07 for 28 technical colleges.
- More skilled training positions: Labor will spend $500 million to 450,000 new training positions – mainly apprenticeships – across Australia, 200,000 more than are currently available.
- Skills Australia: Labor will establish an independent statutory body to tackle the skills shortage called Skills Australia. Comprised of seven board members, drawn from a range of backgrounds including economics, industry, academia, and training providers. The body will identify where the biggest skills shortages problems are and their causes, and advise government on possible solutions and information to employers.
- Trades training centres: $2.5 billion for trades training centres in 2650 schools across the country. Each school could receive up to $1.5 million to upgrade facilities and purchase better equipment for facilities such as trade workshops, ICT labs, training kitchens or graphic design workshops.
- Work training: Labor has committed $84 million over four years to guarantee one day a week on-the-job training, 20 weeks a year, for relevant students and $8 million over five years to improve linkages between schools and business.
This is an area where there are clear and important differences between the policies of Labor and the Coalition.
For SMEs, the key change Labor proposes to the current regime is abolition of the exemption from unfair dismissal laws for businesses with less than 100 employees, and the abolition of AWAs.
Since the Coalitions’ WorkChoices policy became law, it has been softened by the addition of the fairness test for AWAs, and just yesterday Employment and Workplace Relations Minister Joe Hockey announced a promise of new employee rights to unpaid parental leave and grandparents leave, and a right for employees to request double annual leave on half-pay.
Different policies are also on the table for franchisees. Labor says it will amend the Franchise Code to require good faith dealings between franchisors and franchisees; the Coalition declines to match that promise in its franchise policy.
Liberal & National
- Franchise policy status quo: The Coalition franchise policy does not commit to any significant further reform, but does commit to to assess the recommendations of the Productivity Commission’s review of retail tenancy “very carefully“.
- Additional employee leave: The Coalition has followed Labor in promising to allow parents to allow both parents of a new born child to take 12 months unpaid maternity leave. Employers with more than 100 employees must offer grandparents 12 months unpaid leave to help care for grandchildren. Employers with fewer than 100 employees must offer grandparents a week unpaid leave. Employees will have a right to request double their usual annual leave at half pay.
- WorkChoices: Despite the move away from the name, the central tenets of WorkChoices remain intact – exemption from unfair dismissal for SMEs and Australian Workplace Agreements that provide for more flexible employment arrangements to the exclusion of awards and collective agreements.
- Fairness test: In May this year the Coalition introduced a fairness test for AWAs. In effect, it empowers the Workplace Authority to decide whether an AWA or collective agreement is fair by comparison to a relevant award. The fairness test has created red tape and delay and some observers argue that it makes AWAs more trouble than they are worth.
- Independent contractors: Passed laws in 2006 to entrench the rights of independent contractors but also introduced penalties for “sham” independent contractor arrangements. The policy, offering strong protection to companies being discriminated against for using independent contractors, has been endorsed by industry groups.
- Increased employee leave: Labor will double unpaid maternity leave – and has promised to give both parents the right to take 12 months unpaid parental leave following the birth of a child. If only one parent wants to take leave, that parent has the right to request two years unpaid leave.
- Unfair dismissal changes: Promises to remove the current exemption for businesses with less than 100 employees from unfair dismissal. Labor would implement a fair dismissal code, which it says will be a simple guide to dismissing employees, and promises to remove lawyers from the process.
- Abolish AWAs: Labor says it will do away with AWAs, but existing AWAs will be allowed to continue until they expire, which means valid AWAs will continue to exist until 2013. Employees earning more than $100,000 will be exempt from the award system.
- Fair Work Australia: Labor promises to abolish the Australian Industrial Relations Commission, Workplace Ombudsman, the Workplace Authority and The Australian Building and Construction Commission and give their functions to a new body to be called Fair Work Australia.
- Collective bargaining: Employers will be required to negotiate for collective agreements if a majority of employees vote in a secret ballot to negotiate collectively.
- Franchising changes: Labor has promised to amend the Franchise Code to include good faith obligations, as long as the scope of the obligation is well defined. Will also strengthen the Trade Practices Act with amendments to section 46 dealing with abuse of market power and predatory pricing.
Labor has put cutting red tape at the forefront, promising to appoint a minister dedicated to implementing a “one in-one out” approach to new laws.
The Coalition, by contrast, has largely ignored the issue during the campaign, but did commit serious money to putting together an online reporting mechanism for businesses earlier in the year.
Liberal & National
- Standard business reporting: Has committed $200 million over the next three years to develop a system to make it easier for businesses to lodge statements such as BAS online through standard accounting software such as MYOB. The Government estimates a saving of $795 million for SMEs.
- Standard eligibility for business concessions: Standardised eligibility criteria for accessing small business concessions for GST, capital gains tax, fringe benefits tax and PAYG installments.
- Minister for red tape: Labor has promised to create a cabinet minister to oversee cuts to business regulation, while a senior official would enforce the cuts and restrictions. The minister will enforce a promised “one in-one out” approach under which a new rule could only be imposed after another is cut.
- Superannuation clearing house: A Rudd government would also establish a superannuation clearing house to help SMEs deal with choice-of-fund super laws. The clearing house will handle the form filling, checking and distribution of contributions to funds. Business with less than 20 employees would be offered this service free of charge.
- Government tenders: Labor promises to simplify Federal Government tender contracts and reduce commercial risk for businesses performing low-value government contracts to help SMEs access $26 billion in federal government work tendered each year.
- BAS Easy: Labor promises to allow businesses with annual turnover between the $50,000 GST registration threshold and $2 million to be able to opt for a low paperwork GST reporting method.
SMEs will be hoping that, whoever wins the election, we see less hot air and more action on building a high-speed broadband network across Australia.
The main difference between the parties is how they will fund a new broadband network. Labor says it will spend $4.7 billion on a new network, while the Coalition hopes to tempt a telco to put in a broadband network in the more profitable metropolitan areas by offering regulatory concessions.
Liberal & National
- Private sector tender: The Coalition has set up a competitive tender process for the construction of a broadband network in more profitable metropolitan areas. Does not plan to spend public money to build the network, but is likely to offer regulatory concessions to which ever company wins to tender.
- Regional wireless: Awarded close to $1 billion in government funding to an Optus and Elders joint venture to provide regional broadband, which will invest $900 million of its own money in the project. They will build a broadband network that will cover 99% of the non-metropolitan population via a mix of fibre optic and wireless technology.
- Taxpayer funded broadband: Labor promises to spend $4.7 billion to build a fibre-to-the-node broadband network that covers 98% of Australian homes in partnership with the private sector. Promises to run a competitive tender process to run the network on an open-access network that should increase competition in the sector.
Industry, grants and R&D
The Coalition put most of its cards on the table before this year’s budget when it released a $1.4 billion industry package of business grants and measures designed to promote innovation. Key elements include $9 million per year to provide dollar-for-dollar grants of up to $250,000 to fund R&D, proof of concept and early stage commercialisation and $351 million to establish resource centres across Australia to help businesses improve their productivity.
Labor has also emphasised the need to promote innovation, especially in the renewable energy and manufacturing sectors, but during the campaign has made a pitch to SMEs by promising grants to help implement family friendly workplace practices.
Liberal & National
- Assistance for exporters: $45.5 million over four years to open up new markets for Australia’s exporters, especially in the finance and food and beverage sectors.
- Grants for green-tech companies: The Coalition promises to create a $75 million scheme to help businesses develop renewable energy technologies.
- Green business dollars: A $740 million package of new schemes to help businesses develop and commercialise green-tech and reduce their environmental footprint incorporating:
– $500 million in grants to businesses to encourage the development and commercialisation of renewable energy technology.
– $75 million for SME manufacturers to make their processes more environmentally friendly. SMEs manufacturers will be able to apply for grants to fund up to a third of the cost of greening projects, a minimum of $10,000 and maximum of $500,000 per grant.
– $90 million to improve the energy-efficiency of new and existing office buildings. Grants will be available to subsidise up to 50% of the cost of energy saving improvements to a maximum of $200,000 per building.
– $75 million in grants to match dollar-for-dollar money spent by businesses to develop and commercialise green products or technologies in any area.
- More renewable energy: Labor will require power companies to source 20% of their energy from renewable sources by 2020, creating incentives for industry development.
- Enterprise connect: $100 million to establish 10 enterprise connect centres around the country. Each centre will specialise in fostering innovation in particular industry sectors and will be supported by Industry Innovation Councils comprising business, government, academic and union representatives.
- Manufacturing network: Advice centres will be established to help manufacturing SMEs innovate through access to the latest research and technology and cut through government red tape. Worth $100 million over four years.
- Grants for family-friendly SMEs: a $12 million program to provide grants of up to $15,000 to small businesses to implement family-friendly measures such as flexible rosters or family rooms.
For many SMEs, tax is primarily a state issue – after all, it is state governments that control the most burdensome business taxes such as payroll and stamp duty.
But there are differences in the multi-billion dollar personal tax promises both parties have made in the election campaign. Some will be affected by Labor’s decision not give to the tax cut to those earning more than $180,000 per year promised by the Coalition.
Others may prefer the Coalition’s promise on education tax rebates, which applies to all education expenses, to Labor’s, which is limited to educational equipment. But will the $6 billion price tag on the Coalition rebate pledge fuel inflation in the Australian economy?
Liberal & National
- Tax breaks for home buyers: At the Coalition Campaign launch John Howard announced a $1.56 billion package of tax breaks for first-home buyers and their family comprising:
– a low-tax savings account into which first-home onwers can make tax-free contributions of up to $1000 per year with interest on deposits up to $10,000 tax free.
– Friends or family of the first home buyer can also make a total tax-free contribution of up to $1000 per year towards the first-home purchase of a family member or friend below the age of 18.
– First homes purchased in shared equity arrangements between the occupant and a contributing family member will be exempt from capital gains tax.
- Personal tax cuts: Tax cuts worth $34 billion over five years. The cuts, to be implemented incrementally over the next three years, will by 2010:
– Cut the top 45% tax rate for people earning more than $150,000 (or $180,000 after July 2008) per year, to 42%.
– Cut the 40% tax rate for people earning more than $75,000 ($80,000 after July 2008) to 37% – Lift the threshold for the 30% tax rate from $30,011 to $37,001.
– Leave the bottom 15% tax rate unchanged, but lift the current low income tax offset rate of $750 to $1500, providing an effective tax free threshold for eligible low income earners of $16,000.
Education cash-back: The Coalition has pledged to spend $6 billion to give parents a tax rebate on education expenses – including fees – of up to $400 for each primary school child and $800 for each child in high school.
- Low tax home deposit saving accounts: Labor promises to spend $600 million to create special home deposit saving accounts. First home buyers can make a deposit of up to $5000 per year that will be taxed at just 15%. Another $5000 per year after-tax can also be deposited, with interest from the full sum in the account also taxed at the low 15% rate.
- Personal tax cuts and education rebate: Labor spent $31 billion to match almost all of the Coalition’s tax cut promises. Labor saves $3 billion by not cutting the top 45% tax rate for income earned above $180,000 per year. And $2.3 billion of that money will instead be put aside to allow families to claim a rebate for education-related costs of up to $750 for a child at primary school and $1500 for a child at high school.
What do you think?
Has either party landed a killer blow? Or are there advantages for business from both parties’ promises on the margins? Or is the difference on industrial relations so stark that you have no choice but to go with the Coalition? Or will you decide based on who you trust to run the economy? Or the environment?
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Election 2007 coverage:
Next week Smartcompany will publish the business policies of the Labor Party and the Coalition.
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