Retailers blast Federal budget but industry welcomes skills boost

Retail bodies say small businesses should feel “ripped off” by the lack of relief in the 2011 Federal budget, but industry groups have welcomed the strong focus on skills.

Handing down the Gillard Government’s first budget last night, Treasurer Wayne Swan reiterated the Government’s plan to bring the budget back to surplus by 2012-13.

This was a resounding message of the Labor party in the lead-up to the budget, generating widespread speculation that taxpayers could expect it to be tough.

And while the Government has introduced various taxes and has slashed spending across a range of initiatives, small business owners haven’t lost out completely.

Initiatives for small businesses include reducing income tax installments paid under PAYG, an early reduction in company tax rates to 29%, and an instant write-off for all assets costing less than $5,000 from 2012-13.

But not everyone is impressed, with the Australian Retailers Association arguing there is no real relief to retailer business costs or red tape, and no new incentives for business investment.

“The reduction in the company tax rate to 29% for incorporated small businesses, as well as the tax write-offs for assets under $5,000, were announced firstly as part of the Henry Tax Review and then again in last year’s budget announcement,” ARA executive director Russell Zimmerman says.

“Moreover, businesses won’t be able to claim the write-off until the 2013-14 financial year but retailers need some relief now.”

The tourism industry has also missed out on any additional assistance, despite an intense lobbying effort focused on the sector’s struggle to attract overseas visitors due to the strong Australian dollar.

But Australian Industry Group has welcomed the focus on skills and training, which includes a National Workforce Development Fund to bring in 130,000 new training places.

The Government revealed that $3 billion will be spent over the next six years to tackle Australia’s skill shortage and encourage the long-term unemployed back to work, amid a declining unemployment rate.

AIG chief executive Heather Ridout says these investments will ease capacity constraints in tight economic times.

“However, more could have been done to reduce the risks associated with the lopsided economy by investing in innovation, business capabilities and exporting,” Ridout says.

“More could have been done to offset the risks to the economy due to the impact of the strong dollar on sectors such as manufacturing, tourism and education, which are on the wrong side of the resource boom.”

“The small business measures specifically… are welcome. Ai Group believes however, that the threshold of $2 million turnover for the car write-off measures should be increased in line with the recommendations of the Henry Review.”

Meanwhile, the Tax Institute has welcomed the measure to allow refunds of excess concessional super contributions of up to $10,000 for first-time breaches from July 1.

“This measure will likely bring relief to around 80% of future breaches of the concessional caps,” Tax Institute senior counsel Robert Jeremenko says.

The institute also welcomes the commitment to return the budget to surplus from 2012-13, and the overhaul of the car fringe benefits tax.

“[The FBT reform] is a sensible reform that is a step towards a simpler fringe benefits tax system. It will also remove any incentive that may exist for people to drive further just to pay less tax,” Jeremenko says.

Finally, the major banks believe businesses will benefit from the budget, with Commonwealth Bank chief economist Michael Blythe particularly impressed with new policy measures designed to lift labour force participation.

“New policy measures announced have a heavy labour force focus and the associated boosts to skills will help ease pressures as the labour market tightens,” Blythe says.

CBA economist James McIntyre says the budget has also delivered some good news for small businesses in particular.

“The extension of the asset write-off to motor vehicles is supportive of investment, particularly for small businesses seeking to upgrade their vehicles in order to adapt to rising petrol prices,” he says.

“The early cut to the company tax rate for small businesses… is also a big boost to investment, jobs and cashflow.”

However, McIntyre says it will be interesting to see whether the budget has done enough to take the pressure off interest rates.