Small business supplying the mining industry will be hit hardest by the Henry Tax Review with the Rudd Government’s ‘Super Profit Tax’, particularly sub-contractors to mines operating as sole traders.
“A lot of our clients are sub contractors to the mining industry and it is likely that the new mining tax will have a significant impact on the demand for their services,” said Mr Steven Davies, Operations Director, Bibby Financial Services Australia.
A recent report by the Institute for Factors and Discounters (IFD) revealed that Western Australian turned to debtor finance the most in 2009, with demand rising by 40 per cent.
“A lot of the companies we support in Western Australia are in the growth stage and looking for additional cash flow to support new business ventures and access raw materials. You have to wonder what impact the proposed mining tax will have on SME’s operating in the mining sector in the medium term,” said Mr Davies.
“We support Rudd’s proposed company tax cuts for small businesses from 30 to 28 per cent and the proposed write off for small business assets worth up to $5,000, however people can do the maths and overall some small businesses will be worse off,” Mr Davies said.
The Henry Review announcement follows closely after a Senate inquiry into the ability of SMEs to access financing after an increasing number of small businesses have complained about the lack of funding available.
Managing Director for Bibby Financial Services, Australia, Greg Charlwood, said banks and the Australian Tax Office may still take a harder line this year toward small businesses who are late payers.
“In the past couple years many small to medium sized companies have suffered extremely constrained cash flows and it looks like there will be no change in coming months, particularly as the major lenders are expected to defend their position and continue to restrict funding to SMEs,” Mr Charlwood said.
“Small businesses must pay greater attention to managing cashflow and locating alternative funding sources such as invoice financing to avoid falling into arrears with their suppliers, financers and the Australian Tax Office,” Mr Charlwood said.