The budget released last week was disappointing for most SMEs. But it has widely been overlooked that the budget was even worse for budding entrepreneurs and start-ups looking for a much-needed kick-start to their ventures.
There was very little in the way of support for early-stage innovation and vision, especially when we compare Australia’s efforts to overseas models.
The onus is now on the government to show that it has a genuine interest in new enterprises and helping them get the finding, contacts and advice needed to turn them into tomorrow’s champion businesses.
As for the budget itself, an about face on the previously announced reduction of the company tax rate is a major disappointment.
In its wake, a small handful of other announcements were made, all of them lacking the widespread impact that the tax cut would have provided.
The company loss carry-back rules were one of those concessions that in reality will only benefit a small percentage of SMEs.
Assuming the government’s Business Tax Working Group recommendations will be adopted, the carry-back will only apply to companies.
This means that the 67% of Australian businesses that operate as sole traders, partnerships or trusts are left out in the cold, as far as this measure is concerned.
The carry-back also only applies to revenue losses, retained by the company and is limited to the balance of the franking account.
In essence this means that the loss carry-back rules will only apply if the profit has been retained in the company. If the profit has been distributed to owners as dividends, then the loss carry-back rules will provide no benefit or only limited benefits.
Unlike an across the board reduction to the company tax rate, the carry-back loss provision means companies have to actually pay tax and then attempt to claw it back if they meet the criteria and conditions of the provisions as indicated above.
Looking at those conditions, it could be interpreted that this measure gives preferential treatment only to businesses that are in a loss position and excludes those that flourish and make a profit.
Rather than reward some businesses and specifically exclude others from obtaining support, measures should be adopted that provide broad-based assistance to all SMEs.
From a start-up’s point of view, however, the worst part of the budget was what it left out.
It was disappointing that there were no measures to encourage investment in small start-up businesses, as the future contributors to our economy.
Where were the measures like the UK Enterprise Investment Scheme that uses tax incentives to support small start-ups?
The announcement of funding to provide support to individuals seeking to establish a business within two years of completing a trade-related apprenticeship is a welcome measure.
Support will be provided in the form of business skills training and mentoring to further assist getting new start-up businesses off the ground.
While the detail is yet to be revealed, this support and mentoring is likely to have some positive impact in terms of gaining a successful start in the difficult initial years.
However, this measure is again limited purely to trade-related businesses at the exclusion of other start-ups that are just as equally deserving.
The measures to provide and extend small business advisory support through the Small Business Advisory Service, Small Business Support Line and Small Business Commissioner are welcomed, so far as the impact is seen in actual improvements experienced by small business.
Reports have shown the tax compliance costs to small business alone have substantially increased over the last 10-15 years.
Tax isn’t the only administrative burden placed on SMEs though. The Small Business Advisory Line continues to receive over 4,000 phone calls every year with the number one reason for those calls relating to registration and license issues.
The Small Business Support Line is expected to help the Small Business Commissioner provide a one-stop shop for services and information, and the Commissioner will also ensure small business interests and needs remain at the forefront in policymaking, including those related to administrative burden.
Given the additional funding to further support and extend the pursuit of these objectives for small business, we look forward to seeing further detail and the type of changes that will bring this policy objective into reality, in a way that recent budgets seem to have missed the mark and lacked any real impact in delivery.
Marc Peskett is a director of MPR Group a Melbourne based business that provides business advisory, capital raising, grants services, as well as tax, outsourced accounting, finance lending and wealth management to fast growing small to medium enterprises. MPR Group is a member of the Proactive Accountants Network. You can follow Marc on Twitter @mpeskett