Not a game changer: Retailers concerned customers won’t spend new tax cut

tax cut

Small business owners say the government’s income tax cut will put money back into the pockets of shoppers but are sceptical the cash injection will turnaround a tough first half of the year.

After a week of bluster and posturing in Canberra, the government’s income tax cuts passed the Parliament late last week, securing a $1,080 in savings for some 4.5 million Australians.

The cuts, which the tax office will implement on 2018-19 tax returns, were sold by Prime Minister Scott Morrison as a stimulus for Australia’s sputtering economy, although low-income taxpayers will save less than those on higher wages.

It comes at a crucial time for SMEs in the retail sector and beyond as the Australian economy struggles with sluggish inflation, low real wage growth and rising underemployment.

Retailers have been feeling the pain for some time, evident in a steady string of company collapses, lacklustre spending in key categories like fashion and patchy consumer confidence in recent years.

Now in a sector-specific recession according to National Australia Bank economists, retail is often cited as a canary to coal mine for broader economic health.

But while consumers can expect a boost to their hip pockets in the coming months, business owners SmartCompany asked said they weren’t waiting with bated breath.

Judith Treanor, founder of online homewares retailer Temples & Markets, says she doubts the cut will have a “particularly tangible effect” on retail spending.

“This is hardly a stimulus package to get consumers shopping, more a small bit of assistance to help with high costs of living,” she says.

While retail spending increased by 0.1 in May, returning to growth after a slow start to the year, sector-wide spending is still on the soft side, falling short of economist expectations.

It is hoped the tax cut will result in a bump for July spending, due to be handed down in August, with executives at larger retail chains preparing for an influx of customers looking to spend their $1,080 in one go.

Dean Salakas, chief executive of retailer The Party People, says more money in the hands of shoppers is good news for any retailer.

“There will be people who spend it,” Salakas says.

Salakas says there’s “no black and white answer” on how much retailers can expect to benefit, but he doesn’t expect the tax cut to put a dent in the effects of broader trends like the rise of online shopping.

“Maybe there will be a bit more demand, but I don’t think it changes what’s happening,” he says.

Beyond the retail sector, James Eling, founder of Marketing4Restauraunts, says he’s not expecting current or prospective clients to benefit enough for him to experience any secondary stimulus.

“We don’t expect the tax cuts to make much of a difference, if at all,” he says.

Business advisor George Morice says his clients aren’t preparing for any big uplift in revenue either.

“They think people will squirrel it away as they are not sure about the future,” he says.

“They said customers seem scared to spend and instead want to build a safety net.”

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Eddie Peters
Eddie Peters
2 years ago

Here we go again. The Government gives the taxpayer a tax cut, which we know will get spent online with overseas companies, because the Government gives them a trading advantage over our own companies, by letting them write out fraudulent Invoice amounts on their invoices, so that the Aussie buyers can escape paying the Border Force Handling Fees, any Duty if applicable and the GST is only being paid by around 30% of the Overseas companies says our Treasury. That means 70% don’t pay the GST. There are also around 30 million parcels arriving at Border Force every month. Peter Dutton says it costs the Government $90 to handle each one of them, regardless of the size or value of it. Some 96% of parcels have invoices attached for less than $1000, so that means the Government handles all those parcels for Nothing. How does that make any sense at all? Even if there was only a $10 handling fee for each parcel, that would bring in around $300 million a month. Is there anything wrong with that? What is wrong with our Pollies when they don’t seem to care about what’s best for Australia, What’s Best for Australian Businesses and what’s Best for Jobs for us Aussies and our Future Generations. This Fraud is an easy fix and they know it. All they need to do is scrap the $1000 Import Threshold in its entirety and get the Banks to collect the Border Force fees and the GST as the transaction takes place online with overseas companies. Its that simple and they know it is, so why are they looking after the best interests of overseas companies and helping them create jobs for their people instead of out own. Now Border Force is even allowing parcels with over $1000 on the invoice to go straight through to and delivered to the buyer with no fees or GST. We have photos of a parcel that is priced $2800 was paid for that went straight to the buyer. It was a metre long 330mm wide and 300 high as well, so you cant say you missed it. The Government missed out on $550 in Handling Fees, Duty and GST and that was just the one parcel. Imagine how much they are missing out on.