Federal Budget: what it means to your business
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Federal Budget: what it means to your business

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From the NSW Business Chamber

Today the Abbott Government released its second budget delivering more than $5 billion in benefits to the 96 per cent of businesses with turnovers of less than $2 million.

This is a massive win for the National Chamber Movement, which launched the Small Business: Too Big to Ignore campaign at the last federal election to put small business issues back on the political agenda.

This email gives you the key things you need to know about the small business package and the other parts of the budget that matter for NSW businesses.

We know you’re busy so we’ve kept our analysis short, but if you want to know more, our national chamber, the Australian Chamber of Commerce and Industry has produced the Budget in Depth document which can be found here, and the full budget papers are available at www.budget.gov.au.

Big wins for small business – $5.5 billion

For the 96 per cent of businesses that have a turnover of less than $2 million the budget provides significant tax relief and new measures to make it easier to invest and grow.

From 1 July 2015, small-incorporated businesses will receive a 1.5 per cent company tax cut and small-unincorporated business owners will receive a 5 per cent income tax discount on their business income up to a maximum of $1,000. These measures are worth $3.3 billion over four years.

All small businesses will also be able to immediately deduct the cost of new assets worth up to $20,000 that they start to use, or install ready to use, from now until 30 June 2017. This measure, which topped the pre-budget wish list voted on by NSW Business Chamber members, should provide a big boost to small business cash flow and a strong incentive to increase investment. The total value of this measure is estimated at $1.8 billion over four years.

For most businesses this will all be good news, but we haven’t heard exactly what it means for businesses just above the $2 million threshold and the last thing we want is for the threshold to discourage business growth.

The budget also includes a package of other positive measures designed to encourage entrepreneurship and reduce red tape, such as changes to the taxation of employee share schemes, deductibility of business start-up expenses, easier access to crowd sourced equity funding and capital gains tax rollover relief for entities that decide to change their legal structure.

An additional $254.7 million for the Government’s Digital Transformation Agenda should reduce the time that business owners and their staff spend dealing with government red tape. However, the Chamber’s recent experience with the ATO’s proposed Single Touch Payroll online reporting changes demonstrates that sometimes these initiatives can be about making things easier for government rather than business.


Tax increases and spending cuts

The budget contains a number of tax increases and spending cuts that may directly affect NSW businesses.

The Government will give the ATO additional funds to pursue GST compliance. This will result in increased expenditure of $2.1 billion and increased revenue of $2.5 billion for a net gain of $445 million over three years from 2015-16. While we are all for levelling the playing field and ensuring all businesses pay their taxes, this does not seem like a very efficient way of raising extra revenue. We are also concerned about the potential for law abiding small businesses to be accidentally caught up in the compliance net.

Another concern for some businesses, particularly larger businesses, will be the changes to paid parental leave entitlements. This measure will save around $1 billion over four years.

The Government has announced plans to strengthen multinational anti-avoidance measures and increase penalties for tax avoidance by large companies. However, there is no estimate of how much revenue this will generate so only time will tell whether these measures will prove effective.

The Government will apply GST to digital goods purchased from overseas companies, which is estimated to raise $350 million over two years from 2017-18 for State governments. This should also be good news for struggling domestic retailers, but at this stage it is unclear how the government will enforce this requirement.

The Government has estimated it will raise $735 million over four years by introducing application fees on foreign investment in real estate, business and agriculture.

The Government will raise an extra $845 million from 2016-17 to 2018-19 by reducing the generosity of the approach used to calculate work related motor vehicle expenses. This will not however affect those who access motor vehicles through leasing and salary sacrifice arrangements.

Support for employment and workforce participation

The budget contains a range of measures to boost employment and workforce participation, which is great news for the economy and businesses looking for new staff.

The headline announcement is $3.5 billion over five years for additional childcare support, which should help get second income earners back into the workforce after children are born – the key challenge will be making sure this increased subsidy doesn’t just push up the price of childcare. The budget also has various other measures to help parents return to the workforce, including support for universal preschool and a trial program for funding nannies.

Businesses that employ people struggling to find work will benefit from a simplified wage subsidy program including a reinvigorated subsidy for employing older workers. There will also be $18.3 million over 4 years for businesses to provide up to 25 hours of unpaid work experience to those under 18.

Community organisations will also receive around $330 million over four years to help young people find work.

NSW Infrastructure

The budget contains a number of key infrastructure measures for NSW, including

  • More than $500 million for duplication of the Pacific Highway
  • $190 million for the Western Sydney Infrastructure Plan, which includes roads around the site of the second airport at Badgerys Creek
  • $450 million for WestConnex and the provision of up to $2 billion as a concessional loan to fast track stage two of this project

The Budget contains total national infrastructure funding of $33.3 billion from 2014-15 to 2018-19. This includes the $5 billion Asset Recycling Initiative, $2 billion of which has already been committed in NSW.

The overall budget bottom line is an important issue for business, since ongoing deficits will ultimately have to be funded through higher taxes.  This year’s budget bottom line came in at $35.1 billion, which was better than forecast in the mid-year outlook published in December.

Looking forward over the next four years, the Budget predicts steadily decreasing deficits and a reduction in the size of government measured as a share of GDP. This is good news, but much of the return to surplus is based on bracket creep, which is a major concern for the Chamber as it represents a structural increase in taxes. The Chamber will be lobbying strongly for the minimisation of bracket creep in the upcoming Tax White Paper.

The Chamber looks forward to keeping you updated on the decisions that impact businesses across our State and nation.

Kind regards,
NSW Business Chamber