Gold Coast SME ignored by Budget says Ciobo
Written on the 20 May 2009
THE GOLD Coast’s gallant SME sector is set to benefit following the Federal Budget's $500 million allocation to small business incentives and support.
The $141 million Small Business and General Business Tax Break will be extended from June 30 until December 31 and the bonus tax deduction has increased from 30 to 50 per cent of the cost of eligible assets.
It should come as good news to the Gold Coast’s struggling SME sector. But shadow small business minister Steven Ciobo has taken a swing at what he calls a ‘failed budget’ and that access to capital and cash flow are the real barriers facing SME.
“The fact is that the small business Tax Break is a mirage,” he says.
“Only 30 per cent of small business owners expect to make capital investments in their business over the next six months, as stated in the MYOB March 2009 Australian Small Business Survey.
“Labor does not understand (that) small businesses must have a dollar to be able to invest a dollar. That’s why it was important for Labor to assist small business cash flow. Where are small businesses going to get the money to go and buy new equipment and machinery if they are under cash flow stress? This is the problem the Coalition has been trying to highlight to the Rudd Labor Government for months.”
To benefit from the tax break a small business must have a turnover of $2 million a year or less. Other businesses can receive the same deductions for eligible assets greater than $10,000.
The Small Business and General Business Tax Break means that a small business that buys and installs a $2000 computer before the end of December 2009 can claim now claim an additional $1000 deduction in its 2009-10 tax return. Or, a business that buys and takes possession of a $60,000 backhoe by the end of December 2009 can claim an additional $30,000 deduction in its 2009-10 tax return.
Ciobo says the majority of small businesses are struggling with cash flow. The catchcry ‘you need a buck to make a buck’ has never rang so true.
The Australian Retail Association has hailed both the extension of the tax break and its increase to 50 per cent as a direct incentive for smaller retailers to inject much needed investment into their business.
ARA executive director Richard Evans, says retailers have been struggling with reduced consumer demand for more than 12 months.
"Small business is the engine room of Australia's economy and the support and incentives offered in the Budget show positive micro-financial management to help retailers push through this economic downturn. This is great news for business owners who are financially distressed and working hard to keep their doors open and maintain staff during the GFC," he says.
"These initiatives coupled with the Rudd Government's stimulus packages, which are beginning to flow from consumers pocket's through to retailers, leave retailers optimistic the Rudd Government is listening to their concerns and supporting small business.”
Steven Ciobo cites the one million unemployed by 2010-11, a record $58 billion deficit, and record net debt of at least $188 billion by 2012-13 are all key markers of the failure of the Rudd Government’s economic management.
“Kevin Rudd and Labor failed in this Budget to help small business cash flow. For Australia’s 2.4 million small businesses, cash flow is their single biggest challenge, yet they’re expected to help pay off Labor’s record net debt of $188 billion,” says Ciobo.
“There is nothing in Kevin Rudd and Wayne Swan’s Budget that will help keep staff on the books, however small businesses are now burdened with paying for Labor’s reckless spending.
“Labor’s Budget is slugging small businesses even more by increasing the fees and charges collected by the Australian Securities and Investments Commission (ASIC), which will cost businesses $84.3 million. This extra tax slug will further squeeze cash flow for millions of small businesses trying to recover from the economic downturn.”
Ciobo says the Coalition has tackled the issue head-on through its 6-Point Small Business Action Plan, which via superannuation guarantees and a tax loss carry back scheme, capital is injected back into business.
“To stimulate economic growth, the Rudd Government needs to invest in small business incentives so they can employ more people and become more profitable,” he says.
The ARA’s Richard Evans concurs: "What we are seeing here is a Government spending more than is being earned. If a retailer were to budget with the optimistic forecasting techniques and declining revenues being used by the Government, it would be rejected by their bankers under the current protocols set by them,” he says.
"This Federal Budget seems more about politics than the need to generate demand and maintain jobs. There is a lot of guesswork and a lot of long term forecasting and projects - but little for job stability now.”
Scott Driscoll, national executive director of The Retailers Association, dismissed the Federal Budget as a ‘political stunt’ that lacks substance.
“The Federal Budget has missed the target on all key elements for the retail and small business sector. The Treasurer claimed to be doing great things by extending a tax rebate on ‘eligible’ business investments, but that is working off the falsehood that small business is in any position currently to access funds to invest,” says Driscoll.
One small business owner on the Isle of Capri has decided not to renew their lease in the wake of the economic crisis. The sushi outlet, a long time favourite haunt for locals, was not aware of the current tax breaks.
Federal Government Incentives
Small Business Support Line ($10 million): This initiative will provide a lifeline for many small businesses that are financially distressed and struggling to survive during the GFC and will provide advice through a nationwide network of small business advisory services around Australia.
Small Business Online ($10 million): Online retailing is a huge growth industry and the ARA supports this opportunity for small business to operate online, reduce costs and improve marketing and customer reach.
PAYG Cash Flow Relief ($720 million): The Budget reduces the GDP adjustment factor for calculating quarterly instalments from around 9 percent to 2 percent. This will free up much needed cash flow for over one million small businesses that pay quarterly PAYG instalments.