The number of small businesses seeking assistance with debt management has soared by 20% in Australia, according to the ASBFEO. However, many businesses are finding little relief from existing government programs.
A staggering 94 per cent of small-to-medium-sized businesses believe the Federal Government should be doing more to help them survive in the current economic climate, new research reveals. From small business tax cuts to COVID-era loan guarantees and low-rate loans, Australian SMEs believe direct Government support will help them fight inflationary pressures, wage increases and a drop in customer spending.
In an environment of rising costs, weaker demand, labour shortages, and higher interest rates, 7742 companies went into external administration from July 2023 to March 2024 – a 36 per cent rise from the previous year. Business loan comparison platform Small Business Loans Australia commissioned a survey of an independent panel of 204 business owners and decision-makers to gauge what measures would address these economic challenges effectively.
The business respondents were presented with existing Government measures plus five further ideas – lower small-business tax rates, COVID-era loan guarantees, wage subsidies, lower-rate loans, and a higher cash rate. Almost all respondents chose at least one alternative, indicating that existing Federal Government measures were not enough. Only 6 per cent of respondents indicated they do not need any further Government support.
Direct financial relief vs financial management support
A significant 52 per cent of respondents want cuts to the 25 per cent small business tax rate, with support jumping to 65 per cent among over 55-year-old business respondents. South Australian respondents were the biggest supporters of company tax cuts (67% of respondents) while ACT respondents overwhelmingly backed financial aid such as wage subsidies, reflecting a strong preference for direct government intervention.
Additionally, strong support exists for direct financial assistance, with 41 per cent advocating for measures such as wage subsidies to alleviate pressures associated with meeting minimum wage increases. The minimum wage in Australia increased on 1 July by 3.75 per cent, seeing an increase to $915.90 per week or $24.10 per hour. The Super Guarantee rate is also rising 0.5 per cent annually, putting further strain on SME budgets.
Interest rates a dilemma for SMEs
The survey also showed around a quarter (27%) of respondents would like the Government to bring back SME loan guarantees. In 2021 and 2022, the SME Recovery Loan Scheme offered SMEs secured and unsecured loans of up to $5 million, with capped interest rates and extended repayment periods.
However, respondents were divided on interest rates. Surprisingly, one third (34%) supported the Reserve Bank and the Government in fighting inflation by maintaining or increasing the cash rate, but 39 per cent would benefit from reduced interest rates on business loans.
Alon Rajic, Founder and Managing Director of Small Business Loans Australia, says these figures could indicate that businesses are looking for immediate financial relief from their debts, as opposed to assistance in managing them. “In the last tax year, nearly half (43%) of small businesses were not profitable. Business owners need money back in their bank accounts to help alleviate or minimise their debts, not just manage them. This is reflected in our survey, with strong support for more action from the Government including measures such as interest rate cuts to business loans and cuts to company tax rates.”
Are existing Government supports helping SMEs at all?
The survey found that 77 per cent of SMEs benefited from existing Government incentives, such as the extension of the instant asset write off, energy bill relief, its free Debt Helpline and free financial counselling. However, this figure was significantly lower for supports that did not directly offer financial relief.
Specifically, 49 per cent of small businesses perceived the instant asset write-off to be helpful, and 57 per cent considered the energy bill relief beneficial.
The full survey results, including breakdowns across the major states, can be found here: https://smallbusinessloansaustralia.com/will-small-businesses-benefit-from-the-new-federal-government-incentives-in-fy2025/.
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