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Business investment is a key theme in the 2020-21 Budget. Treasurer Josh Frydenberg announced tax changes that are a “game changer” in the way Australian businesses manoeuvre out of one of the worst recessions on record. These changes hope to incentivise capital expenditure and support businesses to offset losses that have been widespread during the pandemic. Eligible employers can also receive up to $200 a week under the JobMaker hiring credit.
Up to 99 per cent of businesses are impacted by these changes, so it is crucial to understand how to optimise their application. We chatted to Richard Spencer, Chief Customer Experience Officer at Business Australia, on how businesses can navigate the 2020-21 Budget.
How does this budget impact Australian businesses overall?
From a SME perspective, there’s never been a budget that has been designed to do more. But also arguably there’s never been a time where businesses need more help. The range of different measures designed to help SMEs get back on their feet and grow again is fantastic. Also bringing forward income tax cuts will be great for revenue. This is probably the best budget SMEs could have hoped for.
What were the key budget policies that help SMEs?
From a demand perspective, the income tax cuts are fantastic. It gives people more disposable income so people feel like they can spend more, which drives revenue for businesses.
The ability to carry-back losses is great for short-term cash flow. This is particularly important for companies who would have had to shut down in the first or second half of FY 20 and would have lost lots of money.
The instant asset write-off allowances are tremendous if you need certain assets. It’s important that you make sure you need the asset before you actually spend money on it. Cash control and management of cash flow is going to be really important in how businesses will continue to thrive. It’s awesome, but we need to make sure that SMEs actually need the asset.
The RDTI investment has also prompted people to start thinking about how they will unpack their own business to get it in the right position after we get out of this crisis. It’s going on a lot longer than we thought it would, but there’s plenty of data pointing to the fact that the businesses who maximise core competencies and review supply chains and target markets now will be in a better position to thrive when money comes back into the economy.
An example is Stagekings. As an organisation pre-COVID, they made stages for plays and operas, which stopped dead when gatherings were limited. They quickly pivoted to start making desks and other equipment to make working from home easier for people. This not only kept people working but Stagekings actually doubled their workforce because they thought about the core competencies in their business. If businesses analyse themselves and unpack those competencies and find out what they do well and what people will need and how to transform operations, this budget gives businesses the breathing space and opportunity to reposition for the future economy.
Do these opportunities apply to all businesses equally? What about small businesses that don’t have the cash to buy new assets?
You need to step back and look at all the other funding that local, state and federal governments have put in, which are all designed to create short-term cash flow boosts.
Also the loss carry-back is an opportunity to carry back losses into profitable years, which is phenomenal in terms of cash flow. Cash is king, and it always is king.
What are the top ways that businesses can take advantage of the budget?
I think they need to focus on two things simultaneously.
First, how do I survive through this crisis. At the same time, how do I make sure I’m in a strong position when the money comes back into the economy. I think huge elements of the budget have created that breathing space to help business managers to take a step back and consider what their business will look like once the pandemic is over. It’s now when such work needs to be done.
Richard Spencer’s top tips
- 1) Focus on short-term survival
- Purchase assets if needed
- Carry back losses into profitable years
- 2) Don’t neglect long-term strategy
- Engage in R&D
- Think about your core competencies and how to best use them
- Review your supply chains and target markets
Richard Spencer is the Chief Customer Experience Officer at Business Australia, where he is responsible for maximising customer engagement and retention, acquisition and profitability.