The recent federal budget has drawn praise for moving beyond a singular focus on deficit reduction. The government sought to support small businesses, with a package including a tax cut for small businesses, a $20,000 asset writeoff.
Speaking at a post-budget roundtable hosted by Xero, guests were less than enthusiastic about the measures for small business, however, claiming they didn’t go far enough.
“Although there was a great focus on small business, which is exciting, it was way too conservative,” said Trent Innes, managing director of Xero Australia.
“The area that I am really concerned about at the moment is that they didn’t make it easier to become a small business. There is still a lot of red tape to become a small business. It’s not that easy. And we hear that time and time again from small businesses.”
Education for small business owners, incentives for investors, more support for alternative lending and new regulations around employee share schemes were all touted as measures that could be adopted to not only help small businesses grow, but also encourage more to start in the first place.
“The asset write off is in theory fantastic, and we are seeing some small businesses that use it. But that is very traditional and I’d love to see that tailored towards technology, so we actually try and modernise small business, and try and make it easier for them to exist,” said Innes.
“We should start thinking about what kind of rebates we could put in place to encourage them [small businesses] to go down that path, rather than the traditional old asset write off.”
The $20,000 asset write off came under considerable scrutiny – with Mark Bouris pointing out that tax incentives like these can only be utilised by those actually making a profit.
“Just generally speaking, are the hairdressers all going to go out and buy new machines? Are the barbers going to incorporate a whole load of new technology?” said Bouris.
Xero’s head of accounting James Solomons arguing the average small business with $2 million in revenue – the definition of a small business prior to the budget – doesn’t have the money to go out and spend $20,000 on an asset. And even if they did, it may not be advisable.
Instead, Solomons believes the government should focus on building up the capabilities of small business owners.
“[The government] offer these tax cuts and they offer these incentives, but never education. They never actually focus on helping the small business educate themselves better,” says Solomons.
“[The government] should be giving write offs, or 150% tax incentives, to encourage small businesses to go and get strategic advice. They throw these things out there, and the average small business person goes out and buys a car, and then runs out of money.”
Solomons’ contention is backed up by research, with the University of Technology Sydney finding financial mismanagement to be the leading cause of small business failure, while access to capital doesn’t even make the top five.
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