Three months after the 2015 Budget announced a $20,000 tax break to small businesses, Tim Reed, CEO of MYOB, provider of business management solutions, shares his professional view with Dynamic Business on the effect these budget measures can have on the Australian small business community.
Commenting on the $20,000 tax break, Mr Reed said “small businesses really are the engine room of the Australian economy and it’s the first time in over a decade where they have been put front and centre with the government recognising the economic contribution they make.”
Mr Reed believes the government can achieve three things for business through the budget: they can deliver an underlying confidence to small business owners, reduce the amount of taxes small businesses have to pay and simplify processes around compliance and administration.
According to Mr Reed, it’s within this framework that the government has really “won” with the $20,000 tax deductible threshold but says there is still opportunity for improvement.
He said the size and scale of the immediate $20,000 asset write-off has really created an air of confidence for small businesses who did not feel they were “front and centre.”
“Taking it to $20,000 made a really loud statement.”
“There’s been a lot negative sentiment over the ‘wind-back’ of the mining investment boom, about what’s happening in China and our challenges in adjusting the economy – the government recognised that small businesses were picking up on the overall negative commentary and the need was there to do something to lift the sentiment,” he said.
With the measures effectively bringing the tax write-off forward, previously taking place over many years, Mr Reed said that bringing this more in line with actual payments for bulk purchases will positively affect a business’ cash flow – the maintenance of which presents a challenge for many small businesses.
When asked whether the two-year life span of the tax break may limit the long term benefits, he responded “it is a bridge over a period of time that encourages small business owners to continue to invest to drive productivity and see them through what could be considered a negative period of growth for the small business sector.” There’s always a risk of an investment ‘drop off’ towards the end of the period because businesses bring purchases forward but he says he would encourage the government to make this a permanent component beyond 2015.
“Small businesses are an essential part of the future of the Australian economy,” said Mr Reed. “It will make a difference to whether entrepreneurs decide to start a business or not, knowing that the government is supporting them.”
While congratulating the budget measures, Mr Reed believes there’s still more opportunity to really put small businesses “front and centre.” According to research carried out MYOB, the cost to Australian businesses of compliance work relating to GST payments is more than double that in New Zealand. “We want to see more focus on the issue of red tape and the burden of regulation but continued focus on boosting confidence and reducing taxes.”