Just what is a small business? We currently have a range of definitions by a range of government agencies and banks. At the bottom of this article is some information and a table from a recent Reserve Bank of Australia report that shows some of those definitions. There are probably over 20 different definitions of small business.
Why do we need a better definition? Firstly we need a definition that picks up on the fact that we are people. That will help regulators and policy designers do a better job. We must remember that when it comes to small business the Process must not defeat the Purpose of the Policy - otherwise the aim of the policy will fail.
Currently all political parties and indeed much of the bureaucracy are focused on small business like never before.
But whenever some new support or a new process is developed we find that due to the definition of small business that most of the target group is often missed.
For example the recently announced, and then unannounced, tax cuts for businesses only applied to incorporated businesses. There are some 2.5 million small businesses in Australia and only around 700,000 are incorporated, so most miss out. Also of the 700,000 that are incorporated most do not use the company structure for taxation purposes; they use it more for protection or for family ownership purposes. Only about 300,000 small businesses actually used the company structure for taxation purposes.
We know that governments want to give small business people a break and therefore we also need to get a better definition in place, particularly for taxation purposes.
COSBOA and the Tax Institute recently held a round table on “Can We Better Define Small Business”. This was attended by senior executives from Treasury, the Department of Prime Minister and Cabinet, The Australian Taxation Office and the Department of Innovation. The round table also included representatives from Cabinet Ministers’ offices including the Treasurer and Assistant Treasurer and the Minister for Small Business. The Small Business Commissioner from NSW attended, Sensis was there as were the banks and the Institute of Public Accountants among others. The economics adviser to The Greens also attended. The meeting was addressed by the Assistant Treasurer, David Bradbury, the shadow Minister for Small Business Bruce Billson and the Independent Rob Oakeshott.
This is an impressive list and shows that this issue is not an ideological issue that divides parties and politics. It is something that we all want resolved.
The discussion centred around why we need a better definition and whether it is possible to have one definition for all purposes.
The development of one definition maybe possible but would prove very difficult. It is certainly something that Geoff Fader, a Director and ex Chairman of COSBOA and Chairman of the Tasmanian Small Business Council sees as a worthy target. Geoff will write a piece for our blog on this issue.
But in between time we definitely need a better definition for the purposes of giving small business people a tax break. COSBOA, and others, are on the job to achieve that as soon as possible.
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How to define a small business? (well firstly we are all people)
