Budget 2022: Tax reform, the skills shortage, and climate change are key concerns for SMEs and industry groups

Tax reform, the skills shortage, and climate change have emerged as key concerns for Australia’s small business community ahead of the federal budget, a document the government hopes will balance industry demands for financial support against a red-hot economy and rising inflation.

Small business accounting service provider MYOB today published a report reflecting the top concerns of the local SME community, one day before Treasurer Josh Frydenberg hands down his government’s proposed economic roadmap for 2022-2023.

From a survey of more than 1000 SME leaders and consumers, 45% of respondents said small business tax cuts topped their budget wishlist.

Beyond simple tax reductions, many Australians see the extension of specific pandemic-era relief measures as a priority, MYOB said.

20% of respondents hope for temporary full expensing to continue, allowing firms with turnover under $5 billion to write off the full value of assets they first use or install before mid-2023.

The Council of Small Business Organisations Australia last year called for the scheme to linger past June next year, as supply chain delays mean many big purchases may not be usable within the existing timeframe.

Another 15% of MYOB survey respondents want a further extension of the loss carry-back scheme, a pandemic-era measure allowing unprofitable businesses to claim back a portion of the taxes they paid in more successful years.

SME leaders and consumers are hardly the only Australians calling for business-friendly extensions, either.

Separate to the MYOB report, the Institute of Public Accountants (IPA) on Friday called for the instant asset write-off to become permanent, describing the measure as a “quick win” for the tax system.

In its budget, the federal government will pit its goal of gradually reducing pandemic-era debt — and its expectation of growing economic resilience — against those hopes of expanded small business tax relief.

Indeed, the government’s existing plans are already forecast to save small businesses billions of dollars. In November, Frydenberg said the combination of temporary full expensing, loss carry-backs, and other small business tax relief measures is slated to provide $2.4 billion in benefits to the sector over the 2022-2023 financial year.

But, in broad terms, the SME community still believes further government backing is necessary.

Beyond tax alone, a full 84% of MYOB respondents said fiscal support is still needed through the economic recovery.

Skills a key concern, as business groups call for extended apprenticeship subsidies

Some 42% of MYOB respondents said their business has been materially impacted by skills shortages, reflecting intense competition for qualified workers and a labour market yet to recover from hard border closures.

To address the lingering shortfall, 62% of those surveyed called for incentives to hire apprentices.

That suggestion was aired by the Australian Chamber of Commerce and Industry (ACCI) on Friday, as it advocated for an expansion to the Boosting Apprenticeship Commencements (BAC) program, which subsidises 50% of an apprentice or trainee’s wages over their first year of employment.

The government agreed. In a joint statement, issued Sunday, Prime Minister Scott Morrison, Frydenberg, and Employment, Workforce, Skills, Small and Family Business Minister Stuart Robert, confirmed the scheme will linger until the end of 30 June this year — an extension of three months.

The federal government estimates the policy will help to create a further 35,000 apprenticeships and traineeships, with the entire policy package costing the taxpayer $365.3 million.

The ACCI today said the budget measure should be extended even further.

“As it stands, a three-month extension of the BAC scheme doesn’t build into the federal budget an ongoing commitment for businesses to continue hiring apprentices and trainees amid current economic pressures,” said ACCI chief executive Andrew McKellar.

More broadly, the ACCI has called for state and federal governments to overhaul its vocational education and training system, arguing that “a lack of consistent funding by all Australian
governments has seen the number of funded students decline”.

But business groups are not only keen to inject new talent into their companies, but to upskill their existing employees.

60% of respondents believe the government should fund incentives to “enable employees to upskill in areas relevant to business success.”

The IPA agreed, saying such measures should be a budget priority. “Tax deductions to incentivise career mobility and mid-life career change could improve productivity, particularly with the unemployment rate approaching 4 per cent and nationwide shortages in critical and emerging fields,” the group said in a statement.

MYOB itself claimed now is the time for the government to fund digital skills programs, bolstering the talent of Australian workers.

“MYOB sees a critical moment for the government to support the industry-led creation of micro-credentials focusing on digital business management skills as key to the government’s support of SMEs,” said Helen Lea, chief employee experience officer.

The federal government previously committed $10.7 million to a digital skills cadetship trial, promising to train some 500 applicants in fields like cyber security and cloud computing.

Applications for that trial opened Monday.

Environmental spending more pressing than new pandemic funds, business leaders say

Tellingly, 21% of MYOB survey respondents said funding for the environment and combating climate change was their top budget concern.

While that figure is well behind the 51% of respondents who said the economy is their main focus, Australian business leaders and consumers said environmental funding is now a more pressing issue than further pandemic-focused funding.

A full 77% of respondents said they would like to see bolstered funding in the renewable energy sector, and 60% want to see less expenditure on fossil fuel generation

They’re not alone. A pre-budget survey of leading Australian economists found widespread support for government investment in the net-zero transition.

Industry players are increasingly focused on their own climate impact, too.

The IPA called on the federal government to help Australian businesses assess their ESG impact, reflecting a growing desire for local industries to measure, outline, and mitigate their carbon emissions.