Budget 2014: How to assess a federal budget for its impact on small business

Assessing a federal budget from a small business perspective is important given that there are over 2.3 million of us; we make up 96% of all businesses that collect GST, PAYG and other taxes. There are some 750,000 of us who employ over 4.5 million other people, there are some 1.5 million contractors and home-based businesses which might not employ anyone but should never be forgotten.

So the impact of a budget can be substantial and what can look like a benign change in policy or rates may have a profound effect on a lot of people in their own businesses. Any positive impact on our sector will be good for the economy and for future budgets, any negative impact will need to be considered and addressed.

So our strategy is to make sure we acknowledge the good and the not so good – every budget would (you hope) contain good and bad news and we should acknowledge both.

So we assess each budget firstly for specific business support and assistance policies (e.g. the small business commissioner, smallbiz connect, Business Enterprise Centre Funding, export assistance, etc). Secondly, we look for direct impact on costs and the time of a small business person of deregulation or new regulations; and finally we assess the impact, good and bad, of non-direct policies for our sector.

We assess the amount of funding a policy or process might receive and how long that funding is included in budget projections. We assess the compliance required to achieve the changes, the ability for small business people to understand the changes, when the changes are likely to occur and what resources might have been allocated or removed from small business support agencies and regulators.

We also assess other important policy issues. For example, any infrastructure announcements are important. We assess whether the infrastructure funding and process is such that small business will get its share; is it spread out across the nation or just limited to one or two locations or industries?

For example, the Rudd government’s announcement for school infrastructure funding as part of their response to the global financial crisis spread the funds right across the nation, which gave opportunity for small businesses in country towns, cities and regional areas. Infrastructure that is limited to major items, such as one or two roads in one location, will more than likely be picked up by big business and small business might not get a useful part of the funding pie.

Vocational education and training programs and budgets can also have an impact on small businesses and we assess whether small businesses have been ignored or whether they will be able to access training support.  Will programs place extra compliance and red tape demands on small business people and will the process be easy to understand?

We assess any changes in tax rates and processes to see if there is a positive or negative impact on small businesses.  This includes whether there will be extra or less work required in GST collection and payroll activity.  Any change in tax creates a need for some 750,000 small business employers to delve down into their software and change the rates; the same issue applies to superannuation changes. The more often we have to change information in our software the more mistakes will be made.

Paid parental leave is a good example of how governments can get it right or wrong in this area. The previous government had a fine PPL scheme except that they decided to channel payments through business instead of paying direct to the eligible person, this created unnecessary work and confusion and probably created a lot of incorrect BAS and end of year payment summaries. A PPL that pays the person direct is one that will have no negative impact on business.

We assess the impact not just for the whole small business sector but also for specific sectors. For example, changes in company tax rate will have an impact on around 300,000 businesses as only about 700,000 small businesses are incorporated and more than half of these do not use the company structure for tax purposes.  300,000 businesses is still a lot and shouldn’t be discounted, indeed in the real estate sector over 80% of businesses are incorporated and use the company tax process. Over 2.3 million businesses will not get a benefit or a disadvantage from any change in company tax or processes.

We assess any changes in areas such as support to first home buyers or investors. This can impact on small businesses in construction, the real estate sector and retail.

We also look at the budget’s effect on the average person. Will people be inclined to buy more or save more?  Will confidence from consumers be increased or will the budget create a negative vibe and impact on spending?

Other impacts of the budget, good and bad, will not become obvious until weeks or months after the budget night. So we also consult our members for their opinions on impact on their specific sector on the night itself and also as the measures are implemented and changes take place.

This year we do expect a better evaluation from government agencies of budget impacts on small business as agencies and departments have become more and more aware of small business and the differing impacts decisions have on our capacity to operate. This is due in many ways to Small Business Minister Bruce Billson and MP Josh Frydenberg who have been working hard to get agencies to better understand who we are and what we need.

One important issue we will be looking for is the funding of the Australian Competition and Consumer Commission. Rod Sims and his team have a big job in front of them in their recently announced legal battle with Coles over unconscionable conduct. Coles will have a large wiggery of barristers ready to take on the ACCC and the government should ensure that there are enough resources available for the ACCC to make the fight in court equal so that, win lose or draw we know that justice is achieved.

It is also important to assess the budget in the context of the overall strategy of government and we will try to have a balanced response. This budget promises to be mean and nasty, but the government believes it has a mandate to start the process of fixing the deficit.

We must acknowledge that, for example, if there is an increase in fuel excise then we know nobody will be happy and some sectors will be hit harder than others, but our response will include the acknowledgement that this is a broad-based response and everybody will feel the pain, not just small business people.

In the end, small business people are important because, after all, we are a major part of the economy; and we vote, and big business doesn’t.

Peter Strong is the executive director of the Council of Small Business of Australia.