What’s in the Budget for franchisors and franchisees?

Small business is being passed some benefits in this year’s Federal Budget.

Small business wins

Small Business Minister Michael McCormack said on Tuesday evening that extending the popular $20,000 instant asset write-off shows the Government is ‘backing’ small businesses.

In Scott Morrison’s Budget the Government has extended the $20,000 instant asset write-off to businesses with an annual turnover of up to $10 million. The write-off program was set to expire on June 30 but will be available for another 12 months.

Ross Watson, principal, SMB, at accountancy firm RSM Australia, said “The extension of the immediate write off by small business will be welcomed. This together with the change of the definition to businesses with an aggregated turnover of less than $10m (passed by Senate but not yet by the House of Representatives), will provide an immediate deduction and hence a lower tax bill to a broader range of businesses.

“For equipment vendors that have a cost of less than $20,000, they may experience a lift in sales or at least be able to maintain existing sales levels.

Adam Joy, CEO, Australian Lottery and Newsagents Association (ALNA), applauded the government’s extension which will support immediate investments.

“Cash flow is essential for our members, as many are investing in new shop fit components to renew their retail offerings right now,” he said.

However, he added “We would like to see this become a permanent fixture though as well as the threshold increased, to incorporate more standard small business investments like delivery vans.”

Retail response

The Australian Retailers Association (ARA) supports the Government’s continued Small Business Information Campaign which includes introduction of the GST low value goods, reducing company tax and extending the $20,000 instant asset write-off scheme for another 12 months.

However, Russell Zimmerman, executive director of the ARA, said there was disappointment about the delay to the reduction of the low value threshold and the restricted application of the asset write-off scheme which excludes businesses beyond $10 million turnover.

Investing in infrastructure and additional skills funding get a tick from the ARA, but it believes the Government has missed the mark in focusing its strategy to return to surplus through additional taxation as opposed to cutting spending.

Zimmerman said “The ARA urges the Government to make cuts to concurrent spending instead of slugging consumers with a Medicare levy tax hike.

“A tax, is a tax, is a tax, however you dress it up. The Medicare levy increase of 0.5 percent to fund the NDIS is just a tax hike in another form that will hit consumer pockets hard.”

The ARA believe the substantial levy on five of the biggest banks, in conjunction with stricter regulation, will go a long way to reduce Australian debt and hopefully stimulate a return to surplus if implemented correctly.

But both the ARA and ALNA showed concern that the costs will be passed on by banks to everyday consumers and small businesses..

“Without adequate safeguards to protect customers from these forwarded costs, we are cautious that this levy could prove counter-productive for retail growth,” said Zimmerman.

Concession confusion?

The Government’s stance on keeping the turnover threshold for the Small Business CGT Concessions at less than $2 million will lead to confusion by small business operators in regard to the concessions they can access, believes RSM’s Ross Watson.

“In addition, the Government announced the Small Business CGT Concession will be tightened to deny eligibility for assets which are unrelated to the small business.

“The Budget papers cite as an example arrangements where ownership interests in larger businesses do not count towards the test for determining eligibility for the concession.

"The government provided little detail on the measures,” Watson said.

Less red tape, more skills funding

The ALNA pointed to other positive initiatives such as the $300 million over two years to State and Territory governments to reduce red tape.

Adam Joy said removing unnecessary red tape and restrictive measures like State payroll tax is essential.

“Funding these reforms with a focus on small business efficiency will drive forward Australia’s economic performance.

“We hope another issue for our members, of funding practical competency-based training and skills gaps will be addressed by the four year, $1.5 billion announced to establish the new Commonwealth-State Skilling Australians Fund.

"This will focus on training workers in new skills and the more employees are better skilled and trained, the more we will have a positive impact on B2B and retail growth for our members.”

The ARA also praised the additional skills funding in the 2017 Budget, and encouraged the Government to work directly with retailers to address specific skill shortages which affect the core operations of retail businesses.

"On the whole, the 2017 Federal Budget is a step in the right direction for reducing Government debt and providing economic conditions conducive to reinvigorating growth in the retail sector," Zimmerman said.

There was general support for infrastructure investments, in particular the major projects including the Western Sydney Airport, Melbourne Tullamarine Airport Rail and other regional initiatives as catalysts to boost economic growth.