We put Small Business Minister Brendan O’Connor under the start-up spotlight
Starting a business may feel like a solo struggle, but it may be of some comfort that smaller enterprises now have a representative at the top table of government for the first time in a decade.
Since being appointed federal small business minister in March, Brendan O’Connor had plenty to deal with from his seat in cabinet.
We’ve had the establishment of a national small business commissioner, a proposal for a new corporate entity for small businesses and a federal budget that offered a few incentives to small businesses, but precious little in terms of start-up backing and the scrapping of the promised company tax cut.
O’Connor visited start-up co-working space The Hub last week to meet some of the up-and-coming ventures that now fall under his brief. He fielded questions from the assembled businesses, as well as from StartupSmart after the event.
Here are some of the minister’s answers to the pressing issues faced by new businesses.
What extra influence do you have in cabinet that your predecessors didn’t have before?
Well, I’ve got more influence than anyone else in this position over the last decade. There hasn’t been a small business minister in cabinet since 2001, which means that small businesses haven’t been able to advance their case within cabinet.
It also means that small businesses have had decisions made that are unintentionally adverse to them without someone there to speak up for them.
So I’ve got an opportunity to talk about small business issues, whether that’s getting advice, access to credit or other issues.
I don’t think the two main political parties have had a full appreciation of small business before.
The Liberals have had a few rhetorical flourishes, but then again they made small businesses unpaid paymasters by bringing in the GST.
We’ve had an explosion in business atomisation in Australia, companies set up with two or three people, and we traditionally haven’t catered for them.
These businesses have done well without too much assistance, but our job is to create an environment that will help them thrive and grow further.
What has been your reaction to the small business anger regarding the lack of a budget tax cut?
While I understand that some small businesses and peak bodies would like to see a lower company tax rate, I haven’t seen “anger” about it at any of the public forums I have attended since the budget.
The fact is that the Liberals and the Greens had joined together to stop us delivering that cut.
The Liberals say they were opposed to it because it was funded through the minerals resource rent tax, which we are using to spread the benefits of the mining boom across the economy.
However, I note that Tony Abbott does not apply the same alleged principled opposition to using the mining resource rent tax revenue for our family payments.
We decided not to engage in a pointless political exercise that would end in parliamentary gridlock.
Instead, we decided to use that money to help families and businesses which are finding the going tough now and, importantly, improving consumer and business confidence.
It is still our intention to provide company tax relief, and we will be working with the Business Tax Working Group to come up with a tax cut that will have the support of the Parliament.
And we are introducing a number of tax measures that will assist small businesses – the instant asset tax write-off, the loss carry-back scheme, and trebling the tax-free threshold from $6,000 to $18,200.
Small businesses will also be able to claim up to $5,000 as an immediate deduction for motor vehicles (new or used) which cost $6,500 or more.
Illumination Solar – a social enterprise that aims to bring cheap solar energy to people in developing countries – works here at The Hub and they couldn’t get credit from any of the big banks despite having confirmed orders for 80,000 units from the world’s leading aid agencies. What can you do to improve start-ups’ access to credit?
This is an issue I hear a lot for small businesses. I know from working in my previous role that there are 15 million displaced people in the world, so that’s a fantastic effort by the business and potentially a very big market for them.
This just reaffirms to me that the larger financial institutions, the big four banks, in Australia couldn’t give a toss about small businesses’ access to credit.
They see it as higher risk and a greater cost to themselves. We see it time and again, through the different fees they charge small businesses and the different credit levels they provide.
If the banks don’t see a decent return, they don’t do it. We’ve met with [Westpac CEO] Gail Kelly and others to work out what they can do to open lines of credit, so hopefully something will come of that.
If someone can convince me of a way to help expand credit to small businesses, I’ll listen. If you can convince me, I’ll convince other ministers.
Will you consider starting up a small business bank, as the UK and Canadian governments have? The incoming French President is also keen on this idea.
We have no plans to set up a new bank at this stage; however, we understand that access to credit and managing cashflows are key issues for many small businesses.
We are returning the budget to surplus to provide a buffer against uncertain global times and to give the Reserve Bank the room to cut official cash rates further if it chooses to.
We are also helping small businesses to access credit through initiatives such as investment in residential mortgage-backed securities (RMBS) and personal property securities (PPS) reform.
The government is injecting up to $20 billion in the RMBS market to help make credit more available.
From January 30, 2012 there has been one national law dealing with using personal property (non-land) as collateral for lending and one register.
This should enable small businesses to use more personal property to secure lending, and thus reduce the cost of these loans.
Small businesses can also get easy access to advice and support about finance options through the Small Business Support Line, Business Enterprise Centres run through the Small Business Advisory Service, and through Enterprise Connect.
What measures will you take to reduce red tape?
We have introduced a number of measures to help reduce red tape burdens for Australia’s small businesses.
For example, the Superannuation Clearing House allows small businesses to pay all their employees’ superannuation into a single location for distribution to individual super funds.
The instant asset tax write-off also cuts red tape by simplifying depreciation schedules.
The new National Business Names Registration System will allow businesses to register their name in every state and territory with one simple online registration, paying one low fee.
The government is also working closely with the states and territories to deliver a Seamless National Economy [a set of government reforms initiated by the Council of Australian Governments to cut business red tape] and make it easier to do business.
A number of these reforms have direct benefits for all small businesses – they are not simply designed to assist large multinational firms.
The work being undertaken by COAG to deliver a Seamless National Economy will be complemented by the COAG Business Advisory Forum.
COAG has asked me to work with state and territory ministers, as well as business chambers, to identify burdensome regulation that frustrates small businesses on a day-to-day basis. I will be meeting with the Small Business Advisory Committee next month as part of this process.
We are also establishing the first Australian small business commissioner to help identify unnecessary regulation, and we are requiring departments to consider potential impacts on small business when developing any new policies.
What is the government doing to help the provision of small business advice?
We’ve continued the Small Business Advisory Service in 37 Business Enterprise Centres across Australia, which provide advice on many of the problems that small businesses have to confront.
There are more than two million small businesses out there and maybe these things aren’t as widely known as they could be. We need a greater capacity to communicate these things.
Many of the measures outlined by the government recently appear to be aimed at established small businesses. Is there anything specific you will be doing to help lean, early-stage start-ups get up and running?
I believe that the instant asset tax write-off will particularly benefit new small businesses which invest in new assets to get off the ground.
The National Broadband Network will also give new small businesses easy access to new markets.
The government is running a number of programs, which are aimed at helping entrepreneurs and early-stage start-up businesses.
Powering Ideas, the government’s 10-year innovation agenda recognises that entrepreneurs are an essential part of the Australian innovation system.
The government provides a suite of programs that help entrepreneurs strengthen their business ventures:
- The business.gov.au website, which makes it easier to find information and tools from all levels of government to start and grow a business in Australia.
- The successful Small Business Advisory Service (SBAS) program funds service providers, including Business Enterprise Centres to provide advisory services to small businesses. The recent federal budget included additional funding of $27.5 million over the next four years.
- The national Small Business Support Line (1800 77 7275), staffed by individuals with extensive small business experience, provides small business owners and entrepreneurs with a point of contact for access to information and referral services to improve their business sustainability and better manage their business.
- Commercialisation Australia is a merit-based, competitive assistance program that offers a range of tailored assistance measures for specialist advice and services, proof of concept and early stage commercialisation activities.
- In addition, government initiatives target our entrepreneurial youth. The Questacon Smart Moves Invention Convention is part of Questacon’s Smart Moves outreach program. The Invention Convention is a five-day residential program that brings together a group of innovative and entrepreneurial Australian secondary school students, aged between 14 and 18, from across Australia for a fully funded intensive program. Delegates are chosen to attend the Invention Convention on the basis of their idea for an invention, innovation or business venture.
- The Innovation Investment Fund is a venture capital program that supports 10-year innovation funds to assist high-growth Australian companies to become globally competitive by commercialising the outcomes of Australia’s strong research and innovation capability. The program has supported more than 100 new companies.
- Also, the government’s digitalbusiness.gov.au website helps businesses to understand the benefits of getting online. It provides a “how-to” guide to digital business to enable small business owners to take advantage of online opportunities.
What opportunities do you see for start-ups in the future?
We are having an unprecedented boom in the resources sector, which means we have one sector going gangbusters and others, such as manufacturing and tourism, that aren’t doing so well, although the Australian dollar falling 8% in the last three months would’ve helped them a bit.
We’ve tried to redistribute some of the benefits of the mining boom and provide some tax relief for smaller businesses.
I see some great opportunities if we expand our export market. I hope to be attending a conference in St Petersburg (in August) with 21 small business ministers from around the world to try to work through some of the barriers to exporting.
The export market here is tiny in proportion to domestic consumption. There are things that hinder this, such as freight costs and so on, but there is a burgeoning middle class in China that is crying out for Australian innovation.
The Chinese send their kids here to get the best education. They understand what we can offer. So it would be crazy not to capture some of that in our export markets.
We are lucky to have an amazing mining sector, but we can’t rely entirely upon it when it may not be there in decades to come.
We are well placed, in the heart of Asia, to offer something outside the minerals sector. It’s an exciting time if we can work through problems such as the lack of credit and advice.
There’s no point me being in cabinet if we don’t face down these challenges. I shouldn’t be judged for being in cabinet, but rather on how we can help you grow your business.