Small business advocates have delivered a mixed response to Prime Minister Julia Gillard’s announcement yesterday of a $12 billion budget shortfall, saying now is a good time to introduce some much-needed tax changes. However, some advocates and economists have warned the announcement may have a detrimental impact, with Gillard warning that new taxes may be imposed in order to pay for new spending on disability insurance and education. Finance Minister Penny Wong told the ABC this morning the government is considering a wide range of options, and did not deny the possibility of a levy to fund the National Disability Insurance Scheme. While economists say the deficit is not an economic problem, as Australia’s credit rating is secure, the impact on confidence could impact businesses. “The impact here is more on confidence and uncertainty,” CommSec economist Savanth Sebastian told SmartCompany this morning. “Until we get confirmation about what measures are put in play, that will be a concern. We’ve seen some improvement in confidence, and further cuts to tax concessions could have a detrimental impact.” Gillard said yesterday the budget will be affected by a drastic fall in revenue of about $12 billion. The Australian Financial Review has reported this will translate into a deficit of between $16 billion and $17 billion. Gillard also said yesterday the shortfall would mean putting “every reasonable option on the table” in order to plug the gap, “even options previously off the table”. The Prime Minister said the government would spend “less in some areas than we had hoped, to raise more in revenue in some areas than we had planned”. While the government has not targeted any specific areas, previous speculation had pinpointed self-managed superannuation and high-income earners as potential sources of revenue. Peter Strong, the chief executive of the Council of Small Businesses of Australia, told SmartCompany this morning the government should consider financing SMEs in order to boost medium-term growth. “We need to have better targeted funds for businesses that are identified as growing quickly,” he says, also adding the government should consider taxing purchases made overseas in order to raise GST revenue. However, Strong says the size of the deficit isn’t necessarily an issue for small businesses, per se. “At the micro-level, we look for solutions. What this suggests to me is that we need to get our micro-economics right.” Savanth Sebastian agrees the size of the deficit isn’t necessarily a large problem, especially as it has shrunk since last year, but points out the impact on confidence such a big budget gap could have. “We’ve seen some improvement in confidence, and that translates to business confidence,” he says. “Further cuts to tax concessions and revenue can have a detrimental impact on that early boost to confidence.” Sebastian also says the deficit means the Reserve Bank is in a position to ease interest rates even further. However, not every business group is so pleased. The Australian Chamber of Commerce and Industry released a harsh response to yesterday’s announcement. Head of economics and workplace relations Greg Evans said the latest writedown “puts the onus on the government to properly deal with spending”. “Business is indicating that a major cause of uncertainty is the inability for the government to get its fiscal house in order and to set out a pathway back to surplus.” “This has become our number one economic priority as without a sustainable budget there is no scope for the major economic reforms required such as delivering a tax system that promotes incentive and enables productivity improvements.” This story first appeared on SmartCompany.
Above: Opposition leader Tony Abbott. The Liberal Party will abandon its promise to cut company tax by 1.5%, should it be elected, new reports have suggested, disappointing business groups which have long called for a cut in this tax rate. Opposition Leader Tony Abbott (pictured above) has consistently said he would fund a $3.3 billion parental leave scheme by raising company tax a further 1.5% on the biggest 3,200 companies while introducing a cut of the same size for other businesses. In net terms, this would have resulted in companies outside the top 3,200 having a company tax rate of 28.5%, down from the current 29%. But now, sources have told The Australian Financial Review a 1.5% tax decrease was still possible, but unlikely. This would mean the top 3,200 companies are slugged with an extra tax but other businesses would receive no relief. A spokesperson for Shadow Small Business Minister Bruce Billson told SmartCompany commitments can only be made based on the latest information. “As of the last budget we believe that we can introduce a modest cut to company tax,” he says. “Unlike the Government we will not make reckless spending promises without taking into account changing budget forecasts and a deteriorating budget position.” The move, if it is accurate, is sure to disappoint businesses. The business community reacted negatively last year to the Government’s announcement it would abandon a company tax cut for SMEs. Abbott yesterday reaffirmed his commitment to the paid parental leave scheme and said it would be funded by increasing the company tax rate for Australia’s largest 3,200 companies. “It's been a signature policy of ours since early 2010 and I want this important reform to be one of the things for which an incoming Coalition government is remembered,” he said. “I want to stress that this isn't just a women's issue, it's not just a families issue, it's an economic issue and if we can get more women productively into the workforce, that's good for the economy as well good for families as well as good for society.” Earlier this year SmartCompany investigated the policy changes small business leaders wanted to see this year and a cut in the company tax rate was a regular feature. SmartCompany contacted the executive director of the Council of Small Businesses of Australia, Peter Strong, but he was unavailable to comment prior to publication. Executive director of the Australian Retailers Association, Russell Zimmerman, previously told SmartCompany changes to the current tax system are needed. “If there are good reasons to make changes, changes that make more economic sense, then surely we should make those changes,” he said. Chief executive of the Australian Industry Group, Innes Willox, was quoted in The Australian Financial Review as saying there were “deep concerns” about Abbott’s parental leave scheme. He said the proposal would, “put a huge additional cost on bigger companies”. “At times like these businesses need reductions on cost burdens, not new ones”. The move comes alongside an admission from the Opposition the budget may not return to surplus for some time, with Opposition Treasurer Joe Hockey signalling a longer than expected wait. “We are not going to go down the path of austerity simply to bring the budget back to surplus because it would end up being a temporary surplus, depending on how big the deficit is that we inherit,” he said yesterday. Earlier this year Hockey pledged on ABC Radio’s AM program the budget would be returned to surplus in the first year of governing, “and every year after that”. This story first appeared on SmartCompany.
Small and medium-size businesses are most likely to fail because of an inability to manage costs or anticipate rising costs, according to a survey of more than 1000 Australian owners of SMEs. The survey, published yesterday by accounting software provider CCH and global information services group Wolters Kluwer, revealed SMEs see inexperienced management, a bad business model and lack of access to capital as other key reasons for small business failure. Of those surveyed, 61% of SME operators said small businesses failed because of an inability to manage costs, 50% said inexperienced management, 50% said poorly designed business models or no business plan, 49% said insufficient capital, 37% said poor or insufficient marketing, and 35% said insufficient time managing the books. Respondents were able to pick multiple reasons for failure and only 26% identified failure to seek professional advice as a key reason for failure, while 70% trusted their "gut instinct" over any professional advice. But the chief executive of Wolters Kluwer Asia-Pacific, Russell Evans, told SmartCompany the majority of SMEs which shun professional advice were doing so possibly at their peril. Evans points to a separate CCH survey of more than 210 accountants servicing small businesses which ranked bad business models as the main reason SMEs fail. This view is backed up by ASIC data on 5600 business failures in 2011-12, which cited poor strategic management as the most common cause of failure, attributed to 19% of SME failures, with another 15% of failures attributed to poor financial control. "It's a contrast, as if you look at the reasons why an SME owner feels an SME has failed it is inability to manage costs, while the accountants say it is a poorly designed business model," Evans says. "A lot of SME owners are fixated on their craft and what they do and they tend to chase revenue, they may send out lots of invoices and not understand the cost drivers." A typical problem for SME owners is buying lots of inventory of the wrong sort of product because they feel revenue means success, according to Evans. He warns a lot of small businesses are failing to identify they are introducing costs into their businesses which are eroding their margins. "SME owners are incredibly busy until the day they go broke, but accountants say because they have seen this before they can provide advice not just about revenue drivers but profit drivers," he says. Evans says the first couple of years of an SME's operation is often identified by SME owners as a make or break period. "If that is the make or break period they should be reaching out to professional advisers for more than just doing tax returns," he says. CCH's survey found SME owners typically open up to the advice of their accountant as their businesses grow. SME owners with a higher turnover of $1 million plus were more likely to consider their accountant as their most trusted adviser, not only for transactional accounts but for advice on business growth, than owners of businesses with turnover under $1 million. Peter Strong, executive director of the Council of Small Business Australia, told SmartCompany relying on gut instinct rather than professional advice is common in small business because it works. "If you don't use gut instinct then you become very slow at responding and that is not the nature of small business," he says. Strong says there are areas for small business where professional advice is needed."I wouldn't employ gut instinct in filling out a form or around financial management and anything to do with cashflow, marketing and long-term planning, we all need assistance with that," he says. But Strong warns the survey results are problematic as they do not split SMEs by industry. "It's a continuing problem of putting all SMEs in the same bucket; if you went to different industry sectors you would find some talk a lot to professional advisers, for example, real estate agents use a lot of professional advice," he says. This story first appeared on SmartCompany.
Small business leaders around Australia are concerned the appointment of Gary Gray as the sixth small business minister under the current government creates further uncertainty about the direction of small business policy in Australia. Given Gray has also been handed responsibility of the resources, energy and tourism portfolios, SME advocates believe he will not be able to adequately dedicate his time to understanding the needs of small business. Council of Small Businesses of Australia executive director Peter Strong told SmartCompany he’s disappointed by the rate of turnover in the position. “We run on confidence, but it’s hard to be confident when we’re unsure of the future. There have been a lot of surveys done and uncertainty is the biggest problem,” he says. “I don’t know how much he understands, we’ll have to see if he understands the issues facing small business about competition law and consumer problems.” “He needs to sit down and give the industry confidence and set some policies.” Prior to his position in government, Gray worked with companies such as BHP Steelworks, Wesfarmers and as an advisor to Woodside Petroleum. Strong says when it comes to the small business minister, background is important. “If you have a background like [Opposition Small Business Spokesman] Bruce Billson does in small business, then you are more likely to understand the problems businesses face.” Without that, Strong says it comes down to the attitude Gray has and if he has the capacity to understand the fact we’re not just business we’re people,” he says. SmartCompany contacted Gray for comment but received no response prior to publication. Australian Retailers Association executive director Russel Zimmerman told SmartCompany Gray won’t have the time to develop an understanding of small businesses prior to the September election. “It would be nice to see a person allocated the role stay in it long enough to be able to get to understand small businesses.” “It’s going to be hard for him to get a grasp on the portfolio. If they are returned again, we hope they’ll bring some stability,” he says. Zimmerman says an election needs to be held because the government has recently become a “farce”. “I think there was a good reason for the government to go to the people because it’s become a farce,” he says. Zimmerman says he’s also concerned with the number of responsibilities Gray is taking on board. “Tourism and small business go hand and hand, but certainly his other role will not be necessarily associated with small business,” he says. Gray is yet to communicate with Zimmerman or Strong, but both industry representatives say they hope he will do so soon. Accounting group MYOB released a new report today which found SME dissatisfaction with the federal government remains high at 54%. MYOB chief executive Tim Reed told SmartCompany the number of recent small business ministers is “appalling”. “It’s a message which says government policies have not been well explained to small business owners,” he says. This story first appeared on SmartCompany.
Irate business groups across Australia have slammed Prime Minister Julia Gillard's announcement yesterday confirming penalty rates are here to stay.
Under an Abbott government, the Productivity Commission could be charged with overhauling workplace laws, but penalty rates will remain unchanged.
The country's banking regulator has said it will start cracking down on banks if it believes lending standards have become too relaxed, as some reports have indicated, but business leaders say SMEs are still strapped for cash.
Two weeks after his appointment, Chris Bowen has finally spoken up as the country's newest small business minister, but his criticism of the Coalition's small business policies hasn't been wholly accepted by the community he has been chosen to represent.
Business leaders have criticised the federal government's proposal to have workplace bullying complaints heard by the Fair Work Commission, saying the move will increase confusion and encourage "forum shopping".
It’s only been a few weeks since Mark Brennan stepped into his role as the inaugural Australian small business commissioner, following the announcement of his appointment in October.
Small business has expressed its hesitation over the federal government's planned expansion of flexible workplace laws, saying they could threaten the viability of businesses in certain industries and place undue pressure on struggling SMEs.
A small business group wants fewer regulations but more support for home-based businesses, which are being touted as “the way to Asia”, ahead of the HomeBiz Connect program.
The Coalition has revealed a policy for small business emergency assistance, including concessional loans of up to $100,000, with a business group now hopeful the party will unveil costed policies in other areas.
The small business sector has been handed its fourth minister in two years, with former immigration minister Chris Bowen assuming the role as part of an unexpected cabinet reshuffle.
Yesterday’s announcement of the 2013 federal election date garnered a largely positive response from business groups, but there are now concerns about “policy paralysis” within government.
Prime Minister Julia Gillard’s surprise announcement about this year’s federal election has been welcomed by the business community for giving “certainty” to small firms.
They are a vital, but often invisible part of the Australian economy – soloists who work from home, often in a spare room, contributing innovation and wealth well away from the top end of town.
Primary school students will be taught the fundamentals of business and economics under a new move by the Gillard government, but a small business group says a more specialised program should be implemented.
The Council of Small Business Organisations of Australia has slammed the federal government's proposed anti-discrimination legislation on the basis it does not protect small business and vilifies small business owners.
Business groups have downplayed the Federal Government’s concession the budget is unlikely to return to surplus in 2012-13, with one group describing the move as “neither here nor there”.