With my small business chairman hat on my head, as well as my chairman of a large business hat on too, I read the outcomes of the federal government’s budget with interest.
I’m not going to look at the “what could’ve been” or highlight the “this is terrible for me because” arguments as they are well and truly covered in all mainstream and industry-specific media.
However, there are two things that are much welcomed by those already running small businesses, and those who may be leaving government jobs and starting micro or small businesses.
Firstly, the lowering of company tax rate is welcome, with the government confirming its commitment to cutting the company tax rate from 30% to 28.5% as of July 1, 2015. It’s a genuine saving in tax for all businesses with a turnover of less than $5 million as the corresponding increase in the paid parental leave levy of 1.5% will not be applied.
It may not seem a lot, but the two things that kill small business are tax and interest rates. Both these things take cash out of young and fragile businesses, often just enough cash to shut them up for good in their first four years. Places like Hong Kong and Dubai have always had a very vibrant small business sector as the tax rates are low to zero.
The second may not be as obvious, but it is a very real issue for many small business owners, especially new business owners. The introduction of unfair contract provisions for small businesses is very good news. Whilst there is currently a very high profile ACCC case being waged between a giant in Australian retail and major Australian and multinational corporations, on the subject of how the large retailer may use its buying power to leverage its scale with the, well, large manufacturer.
Down at SME level the large manufacturers very frequently use their buyer power to leverage their scale with the small and the, frankly, minute. Suppliers of services and products used by these large companies are sometimes faced with professional procurement teams whose sole purpose is to transfer money from the small to the larger.
Over eight years of building a small business to a large one, my partners and I had to on many occasions resort to expensive lawyers to solve contract issues with large and recalcitrant corporations. Money we could ill afford to spend. The announcement that SMEs will be protected from unfair contracts imposed by big businesses via access to the same unfair contract provisions currently available to consumers under the Australian Consumer Law is a step in the right direction. The scheme will include new legislation to make unfair terms in standard form contracts with small businesses void and provide a better negotiating environment between large and small businesses.
In its simplest form, it allows a small business owner to say to the employee of a large corporation: “If you were a shopper would you accept this condition of purchase?” This, if used sensibly, will allow new and existing small businesses the chance to grow by entering into fairer and more reasonably framed contracts. I hope it does.
Kevin Moore is a retail expert and the chairman of Crossmark Asia Pacific Holdings.