The 2019 Federal Election is right around the corner. It’s important as small business owners to understand how your vote will not only affect you but other small businesses just like yours.
There are around 2.2 million small businesses in Australia. The outcome of the upcoming election will have a serious impact on the small business sector.
So, to make things a little easier for you, we have compiled some major topics on each parties’ policies and views that have an impact on small businesses.
Incentives and Jobs:
The Liberal Party (The Coalition) is offering apprenticeship employers a total of $4,000 ($2,000 after the first 12 months and $2,000 at the end of the apprenticeship). This is on top of an existing $4,000 employer incentive.
These measures have been put in place to support around 80,000 new apprenticeships over 5 years. This includes annual renewals every year of what occupations are eligible for it. The Budget plans to create 10 training hubs across Australia, which would cost $50.6 million over 4 years. This will target industries that have skill shortages and youth unemployment in regional areas.
If you are a small business operating in these industries, you have the opportunity to employ apprentices and be rewarded not only through monetary incentives but through their highly trained skills and knowledge.
The Liberal Party also aims to create around 250,000 new small and family-owned businesses over the next 5 years. They plan to establish a $100mil Australian Business Growth Fund to help these businesses grow. The goal here is to give businesses owners access to capital without having to give up any control over their business or its cash flow.
Another plan is to give small businesses that turn over between $2 to $10mil annually easier access to cash whilst retaining majority ownership through a $1bil equity investment growth fund. This will bring the banks, government and superannuation providers together and will offer equity investment to businesses that show promising growth forecasts.
Instant Asset Write Off:
The Coalition Government plans to increase the instant asset write-off threshold from by $5,000 to $30,000 by the end of June 2020. However, businesses must have a cash flow, be making a profit to benefit. It only applies to eligible business use assets and they can gain access to this deduction if they opt to use small business simplified depreciation.
This measure has been made so that businesses have the opportunity to grow. They will have access to the plant and equipment that will allow them to operate more efficiently and effectively.
To break it down further, this write-off brings forward the tax deduction associated with the depreciating value an asset holds into one financial year rather than spread over multiple years.
The Budget included serious notes on combatting the Black Economy. $1bill has been pledged towards the ATO over 4 years to aid the Tax Avoidance Taskforce, specifically targeting
- business’ who fall outside of the small business benchmarks,
- operate through cash only and/or have not lodged their taxes,
- deliberately operating outside the system.
This will give small businesses who are operating within the system a level playing field.
Tax cuts have also been brought forward, including businesses that have turnovers below $50mil. This makes it available for around 220,000 more Australian businesses.
The tax rate will drop from 27.5% from the 2019/20 financial year to 25% in the 2021/22 financial year. Meaning that this drop would happen 5 years earlier than originally planned.
The Coalition will also bring forward the 16% small business income tax offset from July 1, 2026, to July 1, 2021. This is for unincorporated small businesses with an annual turnover of less than $5mil.
Unincorporated businesses are taxed through the personal income tax system to guarantee they get the benefit equal to the cuts to the company tax rate at the same time as incorporated small businesses.
There will be a new $2bil Australian Business Securitisation Fund that will aim to help small businesses access the funding they need at a better rate. The Coalition is pledging $100mil in funding to establish the fund and to also partner with financial institutions to provide equity funding to small businesses.
They also aim to make the competition fairer by changing competition law to stop big businesses abusing their market power, unfair contract legislation and through The Small Business and Family Enterprise Ombudsman.
Incentives and Jobs:
The Australian Labor Party (The ALP) has offered businesses that employ the youth and older workers a tax break to ensure those who have been unemployed for 3 months or longer the opportunities to secure a job and prosper.
To qualify for this tax cut, businesses must have an annual turnover of less than $10mil that employ people who are over 55, under 25 or are carers returning back to work.
The ALP has a strong stance on workers’ rights, they plan to also reinstate penalty rates for employees and also change the rules that determine minimum wage rates.
They will also provide easier pathways for casual workers to transition into full-time employment if they have been with their employer for 12 months or more so that they can benefit from this position including annual leave, sick leave and better pay.
Instant Asset Write Off:
Good news is that the ALP does support the $5,000 increase to the instant asset write off, also indicating that they may even move to make it permanent for all eligible businesses. This fund will supply $2 billion to smaller banks and non-bank lenders to lend to small businesses competitive terms.
Under the ALP investment guarantee, businesses can claim an upfront deduction of 20% of the asset purchase price (costing over $20,000) with the balance to be depreciated consistently with the asset’s effective life.
The ALP will support the corporate tax rate for small businesses reducing to 25% by 2021/22. They also endorse a minimum 30% tax on trust distributions and Australian Investment Guarantee. This allows all businesses an immediate 20% deduction on any applicable investments and eligible assets that are worth over $20,000.
Labor has supported the Coalitions policy to keep the 27.5% company tax rate for businesses with a turnover up to $50mil and to also fast track tax cuts.
Labor has also revealed its ‘tax transparency package.’ Some proposed measures from this include US-style financial rewards for whistleblowers to help prevent tax evasion and compulsory shareholder reporting of tax haven exposure so that the company’s disclosure shareholders dealings.
They also aim to seriously crack down on multinational tax avoidance through denying any deductions to companies that send their royalties to overseas tax havens.
Mostly, Labor is shining the spotlight on larger corporations rather than smaller businesses to ensure these multinationals are complying with the system.
Research and Development:
Labor also proposes to exempt start-up businesses from changes to the R&D tax incentive. This incentive offers start-ups who are making a loss some significant monetary benefits to help keep them alive during product building and proving concept stages in their business.
They plan to run a 6-month review into how they can boost Australia’s R&D spending. This will ensure that the beneficiaries aren’t treated unjustly and that the incentive maintains its integrity.
The ALP also aims to ensure small businesses are supported and able to defend themselves against any anti-competitive conduct through improving their access and routes to justice.
The ALP also plans to push for a new position of Second Commissioner (appeals) within the Tax Office to ensure that any small business disputes are given the attention that they deserve.
This includes their pledge to protect small businesses by making unfair contract terms illegal and also punishable through multimillion-dollar fines.
You can read up on other areas that may affect your business and your vote here.