It’s been tough going recently for small businesses in terms of initiatives introduced by the Government. While it may seem the Government is acting for the greater good, small business will bear the brunt of many of these changes.
The Government recently announced from 2013 the rate of superannuation will rise incrementally from the current nine per cent to 12 per cent by 2019. In addition to this they also announced a reduction in the company tax rate from 30 per cent to 29 per cent from 2012. While a tax cut may seem to be an advantageous outcome, what the Government is giving away in one hand, they are taking bucket loads back in the other.
The costs associated with the rise in superannuation will be far greater than any benefit from the cut in company taxes. Apart from the cost upfront of having to outlay more cash for wages, a small business will also have to pay the cost of implementing these changes. I don’t believe the Government appreciates how difficult it can be for small businesses to administer changes like these and not just once or twice but between 2013 and 2019, the superannuation rate will change a total of seven times.
The other aspect to consider in relation to the company tax rate reduction is the fact that most small business owners draw the profits out of their companies in the form of a dividend. What this means is even though the company may pay less tax, the business owner will end up being taxed more, effectively wiping out any real benefit.
The Government’s Paid Parental Leave Scheme (GPPL) will also be introduced from 1 January 2011. Although this scheme will be funded by tax payer’s money, it will still rely on businesses acting as paymaster.
The level of red tape and compliance costs for small businesses is increasing and becoming impossible to manage. I wonder when the government will start looking at ways to simply our system rather than imposing changes and expecting small business to just make do.
These changes are symptomatic of a government that wants us to believe they are in favour of small business but are in fact only focused on their re-election. The reality is they have not provided workable solutions that will result in real benefits for small business.
