Talking Cents

Budget 2013 keep calm and carry on your small business accountant discusses

Treasurer Mr Wayne Swan has handed down his sixth Federal Budget this week and being an election year hopes were set quite high by many sectors of the economy all looking for some form of assistance, relief or economic stimulus. Unfortunately, the politics of a failing Government facing a looming election seem to have once again stood in the way of delivering much needed reform to a flat economy.

Small businesses owners  and industry bodies have been crying out for assistance from the Government for some time now. The overall economic figures of inflation, unemployment and GDP growth all seem to indicate that the economy is in relative good shape. Those at the coalface of the economy (no, not the mining sector), the retail store owners, trades and service professionals will all testify that for small business the economy remains flat and cash flow is tight. The global situation has dictated that lending institutions have become less willing to lend and this of course flows though to impact on the cash flow needs of small business. So with that background of the last few years, it was to be hoped that the 2013 budget would at least attempt to give the small business sector the confidence boost it needs. Alas, it was not to be. There are some small measures that will undoubtedly assist small business, both through direct assistance and through indirect flow on effects, however the much needed tax reform issues have once again been put in the too hard basket.

With that background in mind, let's take a walk through this years budget changes that are likely to impact on you and your small business.

As part of its need to fund the NDIS the budget sees an increase in the standard Medicare levy from 1.5% to 2.0%, effective from 1 July 2014. Employers will need to ensure their accounting and payroll systems take this rate change into account when calculating PAYG withholding on staff payroll. Whilst the net impact on employers is zero, the levy increase will of course see consumers with slightly less spending money in their pockets. To provide some relief the budget announces that the low-income threshold for the Medicare Levy will rise to $33,693.00 for families.

Self education expenses claimed as a tax deduction by individuals will now be capped at $2,000.00 per tax year. This move is a cheap and easy way of saving as it will impact on relatively fewer low income earners. What it does do, is dumb down our country in a time when investment in our human capital is critical. For most professionals there are very few courses and seminars that cost less than this amount. Pressure will now be placed on employers to fund the cost of training as employees see the benefit of claiming a tax deduction disappear. Not a cost small business needs added to their budgets at this time. A country striving to be known as the clever country should be encouraging further education of its workforce, rather than the opposite.

For any small business the struggle to deal with staffing issues is always a stressful and time consuming process. Fair Work Australia has received an additional $21.4 million in funding to clamp  down on workplace bullying. Whilst this move is to be commended, as no bullying should ever be tolerated, let's hope that FWA does not come down too harshly on small business and takes more of a friendly, educational and reconciliation style to their approach, rather than a heavy handed fine based approach.

In what now seems to be an annual approach the ATO has received additional funding in a bid to clamp down on certain targeted areas. This years budget sees an additional $77.8 million allocated over four years to expand the data-matching program. This has already yielded a return to the ATO coffers as the ATO matches income tax and GST related data with other agencies in relation to property and vehicle transactions. Any anomalies are then investigated by the ATO. A further $67.9 million over four years will also be allocated to increase compliance activity in relation to trust structures. As well as targeting known tax minimisation schemes the ATO will also be given powers to look into businesses using trust structures to artificially divest themselves of income and reduce their tax obligations. 

In a partial reversal of previous changes the upper superannuation contribution limit for

individuals over 50 years of age will increase to $35,000.00 from 1 July 2014. For those aged over 60, the maximum contribution limit will increase to $35,000.00 effective from 1 July 2013. This allows small business owners closer to retirement to pump funds into their superannuation funds in a bid to fund their own retirements. There was no information in the budget on changes to the upper limit of non-deductible contributions.

In order to keep fringe benefits at rates in line with the highest marginal personal tax rates, the rate of FBT will rise to 47% effective from 1 April 2014. This is an increase of 0.50% and the increased tax rate will impact on the ability of businesses to provide fringe benefits as a way of packaging employee remuneration.

Some positives for a select few small businesses can be found in the announcement of $30 million over five years to help start-up businesses when placing bids for government contracts and tenders. $12.9 million has been allocated to see small businesses make the most of the NBN, most of these funds will end up in the hands of regional small businesses. Rural firms will also receive a boost of $19.2 million to connect apprentices with businesses, funds being set aside to help individuals and families move to regional areas to take up apprenticeships.

Start up businesses looking to register a business will be hit with an increase to the registration fee, now at $32.00 per year.

The treasure also took time to remind employers that the change in compulsory superannuation contributions will rise to 9.25% effective from 1July 2013. Whilst this had previously been announced, it's a reminder of the extra admin burden and cash flow drain on small business.

There were plenty of other minor announcements in the budget, but most related to big business or to a relatively small sector of the economy. Sadly, there were no attempts to engage in major tax reform or to further implement the changes recommended in the Henry review. It is to be hoped that the extra spending on the NDIS and the education reforms feed through the economy to positively impact on small business.

The opposition leader Mr Abbott has already promised in his  budget reply to engage a taxation white paper to reform our nations taxation system to relieve the red tape burden on small business. After all, that is the sector that will lead the economic recovery in the years to come. It will be an interesting time over the next six months to see who is in power and just how much of their agendas and policies will be implemented.

No matter what happens come September when the Federal election is held, one thing is clear, the small business sector needs to stop looking to our nations leaders for major reform, their agenda is far too shortsighted given the current politic environment. Small business need to focus on what they do best, creating innovative, leading edge small businesses that take advantage of their own drive to succeed, their personal strengths and possible opportunities for growth as they appear during our economies slow but steady return to a more positive environment.