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Treasurer Jim Chalmers handed down his third budget, forecasting a second surplus of $9.3 billion in 2023-24 followed by a sea of red tape over the next four years. There are bold expectations that the level of inflation will be back in the Reserve Bank of Australia’s target band sooner than expected.
The Institute of Public Accountants believes the budget did not go far enough to address Australia’s complex taxation system to boost productivity, competition and innovation for small businesses.
IPA’s General Manager Technical Policy Tony Greco examines the Treasurer’s announcements, budget inclusions and the bottom line for tax, accounting and small business.
The budget centrepiece, Future Made in Australia, does not appear to have any focus on small and medium sized businesses (SMEs). Many are grappling with the increasing cost of doing business and face being left behind.
The Australian Small Business and Family Enterprise Ombudsman estimates that 43 per cent of small businesses are currently not making a profit, with 75 per cent taking home less than the average wage despite working longer hours than average employees.
Sustained cost of living pressures have eroded consumer spending and demand for goods and services, which has hurt the small business sector and consumer confidence more broadly.
The small businesses instant asset write-off will be extended for another year until 30 June 2025. Businesses with a turnover of $10 million or less will be able to deduct $20,000 from eligible assets.
While this is a welcome measure, it is not a permanent feature of our tax system and subjected to the whim of the government each year. Small businesses may not want to invest in ageing capital assets until their profitability improves.
Some 70% of small businesses that are unincorporated owners will benefit indirectly from the stage three tax cuts.
Under the tax cuts in 2024-25:
The government will also provide $41.7 million over four years from 2024–25 to support small businesses with regulatory and support services.
This includes:
Some 457 nuisance tariffs will be removed from 1 July 2024 streaming the importation of $8.5 billion worth of goods annually (toothbrushes, hand tools, fridges, dishwashers, clothing and menstrual and sanitary products).
The Commissioner of Taxation will be given the discretion to not use a taxpayer’s refund to offset old tax debts, where the Commissioner had put that old tax debt on hold prior to 1 January 2017. This discretion will apply to individuals, small businesses and not-for-profits and will maintain the Commissioner’s current administrative approach.
The government will spend $187 million over four years from 1 July 2024 to strengthen the Australian Taxation Office’s (ATO) ability to detect, prevent and mitigate fraud against the tax and superannuation systems. This includes:
The Government will extend the time the ATO has to notify a taxpayer if it intends to retain a business activity statement (BAS) refund for further investigation.
The ATO’s mandatory notification period for BAS refund retention will be increased from 14 days to 30 days to align with time limits for non-BAS refunds. Any legitimate refunds retained for over 14 days would result in the ATO paying interest to the taxpayer (as is currently the case).
This will have effect from the start of the first financial year after the legislation takes effect.
The Government will provide $168 million over four years from 2024–25 to implement reforms to strengthen Australia’s Anti-Money Laundering and Counter-Terrorism Financing Act 2006, to enhance Australia’s ability to detect and disrupt illicit financing.
Funding includes:
There was not a lot of joy for small businesses facing significant headwinds. Like individuals, SMEs are also suffering from the cost of doing business crisis, with eroding margins eating into profitability.
Small businesses are looking for any red tape reduction and productivity boosting incentives to help absorb cost pressures that are threatening their financial sustainability.