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SME owners make it clear what they want from new Federal Government

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Whether the new Australian Federal Government is Labor or Liberal, small business owners are very clear about what actions they want the new government to take to provide the right environment for them to flourish.

Scottish Pacific’s latest SME Growth Index research asked more than 1200 small business owners and leaders from around Australia what were the key business concerns they want the Federal Government to address.

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In this post we’ll take a look at what SMEs want the Federal Government to take action on, and talk about strategies away from the ballot box that small business people can use to stay on top of their daily business demands.

To set the scene for these results, let’s first take a look at what both major parties are offering the small business community by way of election promises.

 

Major parties’ pitches to small business

The latest Federal Election campaign (with voters going to the ballot box on May 18) is taking place amidst a backdrop of a flat economic outlook, a troubled property market and a post-Royal Commission into Banking environment that combine to create much business uncertainty.

With the RBA, in their last meeting before the Federal Election, keeping rates at the historic low of 1.5% following a flat CPI for the March quarter, many experts are predicting a post-election rate reduction to 1% to help kick-start the housing market.

 

ALP’s small business pledge

ALP small business policy has been set for some time, but at their recent election campaign launch the ALP pledged tax breaks for SMEs that hire young and older workers, and committed to a tax crackdown on multinationals sending royalties to offshore tax havens.

Opposition leader Bill Shorten announced his new jobs tax cut for businesses with a turnover under $10 million, if they take on over 55 or under 25-year-olds who have been unemployed for more than three months.

This involves a 30% deduction for up to five new workers’ salaries in their first year on the job, with a $50,000 cap per company.

 

LNP’s SME promises

The LNP is hoping for SME support on the back of their tax rate reductions (from 30%, to 27.5% and a pledge to reduce further to 25%) for businesses with a turnover of under $50 million.

According to the LNP, almost 350,000 small businesses have already benefited from the instant asset write-off, which has been extended until 30 June 2020. The instant asset write-off and corporate tax rate reduction are also supported by the ALP.

 

What really matters to SMEs

Since the first SME Growth Index was created in 2014, every time small businesses have been questioned about what they want from government, the response has been clear: company tax cuts and a reduced regulatory burden are the most pressing reforms SMEs want action on.

In SME Growth Index results for the first half of 2019, SMEs were far more focused on seeing government action on issues that impact their day-to-day business lives, rather than seeking big picture projects such as the NBN or Securitisation Fund.

Business owners mostly want the new Federal Government to enact company tax cuts. This was the top response, with 27% of business owners wanting SME tax cuts to be the new parliament’s top small business priority.

 

Call to simplify SME taxes

“Simplifying the complex tax system and cutting red tape, and on a state basis getting rid of payroll tax, would have the biggest daily impact for Australia’s small to medium business sector,” Scottish Pacific CEO Peter Langham said at the release of the SME Growth Index.

“These are the everyday impact items that will energise SMEs, encourage business investment and drive growth and innovation,” he said.

Almost a quarter of SME Growth Index respondents were keen for the instant asset write-off to be extended – they would have been happy when this was announced by both the government in the early Federal Budget, and also by the opposition in the leadup to the announcement of the federal election.

This provision was extended for the 2019/20 financial year, having been expanded to include accelerated depreciation on assets valued up to A$25,000 (above the previous limit of A$20,000).

 

Cutting red tape would be popular

One in five SMEs want the newly elected government to prioritise cutting red tape by reducing their administrative and regulatory burden and fewer than one in 10 thought reducing SME energy costs should be the main government focus for SMEs.

Perhaps surprisingly, given the vocal campaign by the small business ombudsman regarding extending legislation to ease late payment times and mandate participation in the Australian Supplier Payment Code, only around 2% of small businesses named this as their preferred top post-election priority.

Working on SME infrastructure and education was not high on business owners’ agenda. Dedicated SME infrastructure such as fast tracking the NBN (less than 2%) and educating on cybersecurity (1%) were seen by SMES as unimportant for the new government as opposed to action on tax cuts and red tape.

This finding is interesting considering that in a 2018 survey, Too Small to Fail? Australia SME Cyber Preparedness Report, conducted by Chubb and YouGov, 71% of SMEs said they had experienced a cyber-attack or error in the past 12 months and 45% of SME owners were not confident that their employees who have access to sensitive data are fully aware of their data privacy responsibilities.

Over the past few years the Federal Government has made a number of moves to simplify BAS and these efforts may be paying off, as in the latest SME Growth Index only one in 10 SMEs named further BAS simplification as their top priority.

This is a change in attitude since 2017, when the Index found that streamlining BAS was what one in four business owners thought should be the top government priority.

 

Impact of cash flow

The fact that so many business owners want a focus on practical, everyday issues such as tax issues and red tape, when combined with the SME Growth Index finding that 53% of SMEs are expecting to grow in 2019, highlights the importance to small business of staying on top of cash flow issues to keep money in the business to support growth.

There are simple, daily ways to improve cash flow and overall business finance – including improving invoice processes, renegotiating supplier and customer contracts and better stock management. One action that can have the biggest positive impact on cash flow is having the right type of funding in place, as this will help optimise the working capital in a business.

 

The Invoice Solution

One style of funding that grows in line with a business is invoice finance . Also known as debtor finance , this involves a business securing a line of credit by using the business’ unpaid invoices as collateral for the credit.

A business receives a cash advance on their outstanding invoices, so they don’t have to wait for slow-paying or late-paying clients.

Debtor finance can help any business that supplies products or services to other businesses on standard trade credit terms. Unlike the traditional bank overdraft, with invoice finance there is usually no need for the business owner to provide real estate security.

As a stand-alone facility, it can sit alongside any other business borrowings an SME might have, including the overdraft, term loan or asset finance.
Scottish Pacific offers businesses a range of funding solutions, including invoice finance.

To learn more about business finance and talk to an expert, contact Scottish Pacific today.

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