Jon Sutton, CEO of ScotPac, Australia and New Zealand’s largest non-bank business lender, shares his small business budget wish list.
The drip-feed of Federal Budget initiatives ahead of the Treasurer’s big moment in parliament means we can already form a clear picture of what the government hopes to achieve.
With the 2021 Federal Budget, it’s about all consumer confidence and jobs, jobs, jobs.
For those of us working in, or in support of, the small to medium business sector, the key lens through which to view tomorrow night’s Budget is whether it offers a good scaffold for economic recovery.
The signs are there that it will.
Here are some of the initiatives to boost the small business sector that I would like to see when the Treasurer steps up to the Despatch Box tomorrow night.
Reduced compliance costs
The Prime Minister has already flagged that this issue will be addressed, and this news will be positively received by the small business sector.
Every round since the first ScotPac SME Growth Index in 2014, SMEs have nominated red tape and compliance obligations as the issue having the biggest impact on their cashflow and growth.
In our most recent round (H1 2021) red tape and compliance were pinpointed by almost twice as many respondents as the next two most pressing cash flow concerns (difficulty meeting tax payments on time and failed credit applications).
This is an easy win area for the Government to make inroads, by reducing the red tape and regulatory burden on small business owners.
Instant asset write-offs
While the Government could just continue or expand this initiative for another year, I would like to see it become a permanent fixture for the SME sector.
This instant tax write-off is good for businesses, it allows them to buy the vital equipment they need in order to continue growing. We’ve seen with our own clients the positive impact the instant write-off can have on business growth.
In the past few years, we’ve seen this initiative lead to a spike in demand for our asset finance funding, so we know how important this is for small to medium businesses.
Get rid of payroll tax
Yes, it’s a state not federal issue, but I’d encourage the Federal Government to fund the states so they can streamline, or even abolish, payroll tax. This would be a great initiative for a jobs-focused budget, because any small business owner will tell you that payroll tax can be significant roadblock to hiring.
Major infrastructure spending
This should be strongly supported. Interest rates are so low that now is the time for the Federal Government to really accelerate investment in infrastructure – not just in the capital cities but also in regional Australia to allow further investment to thrive and encourage decentralisation to continue.
Further insolvency reforms to assist restructuring
Despite the strong steps made towards pandemic recovery, there are still regions, sectors and specific businesses that are struggling. Continuing the insolvency reforms already underway would be a further step towards providing stronger protection to a greater number of businesses.
New rules that came in on January 1 this year already seem to be responsible for keeping insolvency rates low, and I’d welcome Budget initiatives that strengthen a small business’ capacity to restructure and survive.
Now is the time for businesses to think about how they should structure going forward, especially those SMEs with creditor debt issues. ScotPac has been at the forefront of providing funding that allows businesses to restructure and invest in growth, and it is obvious that restructuring is top of mind for many businesses in 2021.
Supporting economic recovery
The SME sector has an important role to play in helping lead Australia out of the economic downturn created by the pandemic.
Already this year, positive signs of recovery are there.
Our SME Growth Index found promising green shoots, with an eight-point increase in the number of businesses expecting positive growth in the first half of 2021.
This reflects a strong bounce back in revenue confidence for many businesses and while some SME segments may still need help, most have made a good recovery to date.
And yet, we still see signs of reticence for business owners to invest.
It is vital that business owners have the confidence to invest. Until they are comfortable to invest in their own growth, it will be hard for the Australian economy to really take off.
I’m very hopeful that a small business-friendly 2021 Federal Budget will provide this impetus.