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Budget provides well considered structural reform to ensure future small business growth

Updated: Apr 28




The Council of Small Business Organisations Australia says that this year's Federal Budget provides well considered structural reform that will greatly benefit small businesses in the medium and long-term, ensuring they are well positioned to recover, grow, and thrive in the increasingly digital world.


COSBOA CEO Alexi Boyd said “The Government should be highly commended for its commitment to reducing the regulatory burden on small business people, making their lives easier as they focus on recovering from the effects of pandemic restrictions.


“Supporting small business is so important. We’re at a time where we risk losing small businesses to the accumulated pressures of the last few years. The loss goes beyond jobs and other economic indicators. Small businesses are essential contributors to culture, community, and the history of a place. Neighbourhoods and towns are often identifiable by the unique mix of shops, cafes, and other small businesses that line their high street. If a small business is lost, part of its community is lost with it.”


COSBOA understands that this budget will benefit small businesses in several areas: investment in skills and training, support to digitise small businesses and their employees, structural reforms to taxation, and incentivising small businesses to upskill employees.


1.Supporting Small Businesses to Go Digital – $1B Technology investment boost


Small businesses with less than $50 million in turnover receive a bonus 20% deduction for the cost of expenses. The deduction can be applied to digital infrastructure and software, as well as cyber security investments and training by RTOs. There is a recognition by the Government that digitisation is an important factor in their development, and that cybersecurity remains a major impediment to small business growth.


Alexi Boyd said “COSBOA is pleased with this news. This funding is a welcome boost to assist and encourage small businesses in their digitisation journey. Small businesses are particularly vulnerable to cyber threats and need assistance to understand and engage with implementing better digitisation practices.


“We hope that this encourages more small businesses to digitise not only their processes but their cybersecurity, their infrastructure, and their software. However, small businesses better get their skates on - there’s only one year to access the deductions, and some investments affected by supply chain issues will take longer to access.”


2. Structural Reforms to Taxation

The GDP uplift rate on Pay As You Go (PAYG) and GST will be reduced from 10% to 2% in the 2022-2023 income year. This will lower PAYG instalments, saving small businesses and sole traders $1.85 million. An additional long-term measure will allow companies to calculate PAYG instalments based on financial performance and receive refunds if financial performance declines. This will be implemented in 2024.


Ms Boyd said “These are welcome measure to increase cashflow in the medium and long term. The reduced uplift rate will assuage some financial anxiety for those small businesses that are surviving right now but may be anticipating cash flow stress next financial year. Allowing instalments to be calculated based on financial performance is also a welcome reform, as we have seen with the Pandemic that financial performance can change suddenly and dramatically.”


The budget also contains measures to leverage technology to automate tax requirements, and the ability for manufacturers, importers and distributors of alcohol and fuel with annual turnover of less than $50 million to lodge and pay excise on a quarterly basis rather than monthly.


Ms Boyd said “Reducing the number of steps that small business owners need to take in order to be compliant is always greatly appreciated. In a small business it’s usually one person, or a few people, responsible for all areas of compliance on top of actually running the business day-to-day. It’s heartening to see the government recognising this and making things simpler.”


The final taxation reform affecting small business is the decision to allow single touch payroll (STP) data with state and territory governments for Payroll Tax reporting.


On this measure, Ms Boyd said “On the one hand, this is encouraging news and means that state and territory governments will be better equipped to reduce onerous reporting methods as part of the Payroll Tax system. On the other hand, it will give state and territory governments more resources to go their own way and diverge from the federal government. We would like to see national consistency and state harmonisation, not disunity.”


Regarding all reforms, Ms Boyd cautioned “The devil is in the detail. That’s why it’s important to ensure good, early consultation on codesign and delivery from trusted advisors, industry associations and digital service providers regarding reforms in this space.


“We also need to make sure the implementation time frame is realistic and take into consideration COVID-19-related fatigue. Accountants, bookkeepers and digital service providers worked themselves to the bone to get small businesses JobKeeper and other support measures – many are facing burnout and need a break.”


3.Investment in skills and training


The Government has committed to extending enrolments for the Boosting Apprenticeship Commencements and Completing Apprenticeship Commencements wage subsidies, whereby employers are compensated for 50% of eligible apprentices’ wages for the first year of the apprenticeship, 10% for the second year, and 5% for the third year. Enrolments will extend to the end of June 2022.


Ms Boyd said “This is an excellent boost to industry and will help more than just tradies. COSBOA understands there has been high demand for this program. This will be particularly appreciated by small businesses that are still recovering from COVID-19 and experiencing very tight cashflow. Often the first person to be let go in tough times is the apprentice – this program means small business people can afford to invest in an apprentice to help grow their business and invest in their training.


"Additionally, it is pleasing to see the government enabling small businesses to access a 20% bonus deduction for eligible external training courses for upskilling their employees. However again, sole traders are left wanting – since they are not employees they are unable to access this deduction."


Another budget measure in the realm of skills is the Digital Skills Cadetship Trial, which will give opportunities for workers to increase their capabilities and expand their existing skills in cyber security, data analytics and cloud computing through both classroom learning and work placements.


Ms Boyd said “This trial represents an important step towards addressing the shortage in digital skills, a critical area we need to target for the future. We know that small businesses who invest more in digitisation are more resilient than those who don’t. It’s COSBOA’s hope that this initiative will give small businesses better access to job seekers with the skills they need to manage and grow their businesses in the digital world.”


However, this year’s budget is not all perfect. Ms Boyd said "The budget lacking in more immediate relief measures to address the number one issue for small business right now: workforce shortages.


"More needs to be invested into addressing the biggest, single problem being experienced by small business owners – worker shortages. We would have liked to have seen more invested into resources for speeding up the process associated with processing visas, simplifying the process of hiring a skilled worker from overseas, and a commitment to extending the removal of tax restrictions or impediments to those who want to engage more in the workforce.”

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