Federal Budget 2020


24th September, 2020

Here’s what small business is looking for in this year’s Federal Budget

Wage relief, superannuation tax cuts and mental health assistance made easier. Here’s what SMEs want from the Federal Budget, writes Nina Hendy.

It’s been a gruelling year for Australia’s small business fraternity. The COVID-19 pandemic has damaged the lives and livelihoods of many, while others shore up their offering by turning to online trade.

Now, with the October Federal Budget looming large, small businesses are expecting some major incentives to get the wheels turning again in their business as part of a broader economic push.

Here’s a rundown of what small business operators are hoping to see in the Federal Budget, to be handed down in Parliament on 6 October.

Key things small businesses should look out for in Federal Budget 2020:

  • Changes to insolvency laws to offer flexibility in times of hardship
  • Changing current awards system to a more simplified schedule, making the legislation clearer and easier to apply
  • Deferring increases to the Superannuation Contribution Guarantee, and reducing tax on super payments
  • Helping businesses go digital to increase efficiency
  • Other forms of debt relief

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“Driving a post-COVID economic recovery presents a once in a generation opportunity for the Federal Government — and all governments — to make changes that will significantly benefit Australia’s SMEs,” chief executive of MYOB, Greg Ellis said in a recent statement to the media.

“This Budget must instill confidence for small business owners, many of whom believe recovery is still 6-12 months away.

“Confidence that there will be a COVIDSafe level of normal that they can predict so that they can reinvest in their businesses and make sound decisions for their own livelihoods.”

Remove the pain of insolvency

Small businesses that have been pushed to the brink want current insolvency practices overhauled.

This is of increasing importance as JobKeeper moves into a new phase, with some businesses no longer eligible and having to choose between their own viability and the number of staff they can support.

The Insolvency Practices Inquiry final report handed down by the Small Business Ombudsman Kate Carnell in July last year has found that in many cases, small businesses aren’t getting the chance to turn their business around, and are instead finding themselves with zero control over the process.

“The reforms will allow small businesses to restructure their debts while remaining in control of their business, and for those businesses that sadly do need to wind up, the liquidation process will be changed to make it quicker and easier,” said Carnell.

Changes have been announced by Treasurer Josh Frydenberg, which will go a long way to fixing this issue, with more detail expected in the Budget.

Wage relief and a simplified awards schedule

There’s a push on for small businesses to make it easier for to employ people. The change would operate as a model schedule to be integrated into all awards and would allow businesses employing fewer than 40 full timers to opt into the scheme.

The measures, proposed by the Council of Small Business Organisations of Australia (COSBOA) ask for a specification of a single all-hours rate, greater flexibility in employment, stand-down provisions and a change to redundancy and unfair dismissal provisions.

COSBOA describes the current measures as complex and cumbersome, which put SMEs at a clear disadvantage.

Superannuation tax cuts for employers and workers

One way to alleviate some of the financial pain felt by small businesses would be to defer superannuation guarantee increases and cut taxes on superannuation payments. The measure would help the millions of Australians who dipped into the early access superannuation program this year, withdrawing the allowed $10,000 to cover expenses.

READ: What are accountants and bookkeepers watching out for in the Budget?

It’s a measure Small Business Ombudsman Kate Carnell is pushing for: proposing a two-year deferral on legislated superannuation guarantee increases, while also cutting the 15 percent tax on compulsory employer superannuation guarantee contributions to 7.5 percent during that time.

Digitisation to drive economic growth

COVID-19 has highlighted the importance of digital adoption by SMEs, as working from home and remote collaboration become the norm.

As such, the ability to learn about and integrate new technologies is even more important than ever before, and MYOB believes this is fundamental to post-COVID economic recovery effort.

In line with this belief, MYOB has provided policy recommendations to Government that aim to make digitisation easier for small businesses.

“We must provide SMEs with a structured framework to adopt digital processes in areas with profound impact on business recovery.

“By implementing legislation which mandates digital adoption, together with the provision of incentives for uptake, in a way that favours quality, homegrown Australian technology companies, we create a thriving Australian digital ecosystem in which SMEs and a competitive Australian technology sector can flourish,” said Ellis.

MYOB is calling for three key changes:

  • To mandate B2B eInvoicing with industry rollout — helping SMEs to overcome the challenges of late payments — a critical concern for 44% of Australian SMEs
  • To revise online payment frameworks to protect SMEs from fraudulent liability
  • To deliver tax incentives for SMEs to increase adoption of essential digital tools

Alleviate the costs of shutting up shop

Shutting up shop can be an expensive process, and through no fault of their own, many small businesses have found themselves in the financially difficult position of having to cover costs due to tough trading conditions and lockdowns this year. This has been a particularly gruelling time for businesses in Melbourne.

Break-lease termination fees, equipment costs and other costs associated with running a business have been accumulating for many, through no fault of their own.

Small businesses are hoping that further financial assistance will be forthcoming, given many have had (and will have) to face the gut-wrenching decision to close.

Enhanced mental health assistance

The enormity of extended lockdowns has taken its toll on small business owners and their workers.

While mental health packages have been announced, further assistance in the budget is hoped for to help businesses deal with the psychological distress on small business owners.

The Federal Government is making record investments in mental health services and support – with expenditure estimated to be $5.2 billion this year alone. But making sure this expenditure flows down to small business owners and their teams in an effective and access to access way is needed.

Better access to credit or relief from existing debt

Obtaining credit to rebuild businesses is extremely difficult, just when the need for financial support has never been higher. And while the Federal Government has set aside $40 million in small business loans, many aren’t borrowing, with just 4.5 percent of the Government’s SME Guarantee Scheme funds being utilised.

COSBOA believes a Revenue Contingent Loan (RCL), which allows money to be provided to eligible firms in the form of a loan, could be a better approach. These loans only allow repayments to be made when a small business has a comfortable capacity to repay.

Payment deferrals on loans has also been raised. Whatever it looks like, small businesses want greater loan support to help with the rebuild phase.

Reduced costs of business advisory

A small business viability program that enables small business owners in financial distress to obtain a voucher valued up to $5,000 to access tailored advice on the state of their small business could save many from the brink, Ombudsman Kate Carnell believes.

The voucher concept would ensure the business has access to the expertise they need to get professional support on judging business viability via a financial expert.

Removal of the Fringe Benefits Tax

Abolishing Fringe Benefits Tax (FBT) for at least two years would bolster small business recover and provide a boost to the economy, which is on the table as a potential tool to stimulate cash flow.

As it stands, small businesses are required to pay FBT on items that large businesses often provide in-house such as meals, gyms and childcare centres, which creates major inequity in the system.

Carnell explained that a weekend away, lunch at a restaurant or a team bonding game of golf all attract FBT.

“High rates of FBT acts as a disincentive to business spending with small businesses, particularly those in the hospitality and tourism sectors, which are hurting the most right now,” she said.