Australian Small Business and Family Enterprise Ombudsman Bruce Billson discusses the 2023-24 Federal Budget and small business with Selina Green on ABC Radio SA South East.
Selina Green
Small businesses have been put in the winners category by the ABC's federal budget coverage. So what relief will those small business operators out there be getting from the immediate pressures facing them? Things like rising freight costs, rising energy bills, staff shortages, a global slowdown in the economy.
Well, let's hear about how small businesses are set to gain. I'm joined this morning by the Australian Small Business and Family Enterprise Ombudsman. Bruce Billson good morning and great to catch up with you again.
Bruce Billson
Selina, fab to be with you, and a shout out to the SARDI (South Australian Research and Development Institute) crew. They do great work for your state and have some punks and peanuts do that to their research facilities is really disappointing. So our thoughts are very much with the SARDI crew that are having to navigate that annoyance.
Selina Green
Absolutely. So what do you reckon, Ombudsman? Fair to call small businesses winners overall?
Bruce Billson
Look, there's some good stuff in there. There's some some points that are really dealing with challenges that are here and now for small business, They’re the good things. There's certainly scope for doing a bit more to energise enterprise into the future and really encourage that spark within small business. But there's some quite credible measures in it for the here and now issues that many of the small, family and farming businesses of the south east are dealing with.
The energy relief is, I think, quite timely. I mean some may point to whether it's enough given the size of the the uplift in energy prices, but it's a $325 deduction on power bills and small businesses are eligible for that. Most states are matching that.
There's some encouragement there for people to look at energy efficiency measures, you know, a bonus depreciation deduction that you can reach for if you're electrifying, say, kitchen equipment or for your dairy industry, methods of heating water and all that to support production. There's some encouragement there.
The instant asset write-off. Now for your listeners that aren't familiar with that, that's where a business that's had a profitable year and has the cash to maybe buy a new ute or a new piece of farm equipment or something that'll improve their productivity, can actually deduct the value of that capital purchase from their profit and therefore reduce the profit, pay less tax. That’s an attempt to explain what an asset write-off deduction is for people that aren't jazzed about accounting and balance day adjustments and all that.
That's still there, but it's come off a a much more generous base. So previously there was a much higher level of expenditure that could be treated that way. That's come down to $20,000. So at least it's there still, but it's not as generous as it was. So they’re some of the things that stand out as pluses in the budget for small and family businesses in the south east.
Selina Green
So, I understand for the asset write-off threshold that was increased during COVID, I guess as a way to sort of give businesses a little bit of a helping hand, that's now come back to more around what it was pre-COVID.
Bruce Billson
In the normal state of affairs, the instant asset write-off is about $1000. Now during COVID, that was limitless at one stage, it was $150,000 at other stages. That measure has ended and rather than defaulting back to the normal $1000, it's now $20,000. So that's some encouragement. There's also that additional bonus for electrification and more efficient energy use. So that's quite good.
But the key thing is you need to be profitable and to have the cash to take advantage of that. And that's where some of the cost pressures that many businesses are facing means that might be delicious in theory, but maybe a little bit out of reach. But still a positive.
Thinking about that cash flow issue, though. For your listeners, for people that pay company tax and other installments to the Tax Office, they normally step up from last year. They basically say, oh, look, you made X amount of dollars, here's the tax that you paid last year. We'll break that up into four and you pay roughly that same amount each quarter in advance, sort of like prepayment of the tax that's expected. And then that's stepped up to take account of various factors, anticipated growth in the economy, inflation and things like that. Now, because it's been higher inflation, that step up, if nothing had been done, would be 12%. A lot of business would say, whoa, I don't have an extra 12% of profitability in sales in my business. Why am I paying tax as if I am at that level?
So the government said, look, that's too much to ask. They’ve dialled that back to 6%. So that should be a cash flow benefit for many of the small and family and farming businesses in the region.
Selina Green
Good to hear. I’m speaking with Bruce Billson this morning, who is the Australian Small Business and Family Enterprise Ombudsman, and we're talking about what was in this week's federal budget for those running a small business. Speaking of tax, I understand there has been a little bit of breathing room for those small businesses that are a bit behind on their tax bill as well.
Bruce Billson
Where there's more flex if a small business needs to adjust their tax return. And the key thing for all of your listeners, always stay in touch with the Tax Office, always keep your reporting and your installments up to date. If you're having trouble paying them, talk to the Tax Office about that. But don't not put anything in. Don't go to ground. Don't pop their head in the sand.
Sometimes people will put in a tax return in that, you know, when they when the dust settles, it might not be right. And there was a limitation for how far you could go back in amended your tax returns. So that's been changed. That used to be two years Selina and now that's four.
But something to watch out for. In the budget there are extra resources for the Tax Office to, well frankly, go a little harder to make sure people are paying their tax bills. And, you know, we all want to have people doing the right thing. Good business pays. They pay their tax, they pay their staff properly. They pay their suppliers in a timely way.
That, though, is something that people will note, that there's an uplift in revenue that the government anticipates, and they're achieving that by providing more funding to the Tax Office to increase their compliance efforts.
There's also a couple of little tidy ups around tax administration and some internal review options. So if you are not happy with where the ATO lands, you can you can ask them internally to have a second look at it.
You're not sure that's quite for you? You can come to us at the Australian Small Business and Family Enterprise Ombudsman's office and we offer a tax concierge service where we get alongside small and family businesses that are maybe having an arm wrestle with the behemoth that is the Tax Office and need a little bit of help navigating that.
Selina Green
Ombudsman, always great to catch up with you. A bit to unpack there. Thanks so much for your time this morning.
Bruce Billson
Thank you Selina. Fab to be with you.
Selina Green
Bruce Billson there, who is the Australian Small Business and Family Enterprise Ombudsman. A good port of call if you're running a small business and you need a little bit of a hand navigating some of the minefields that pop up for those running a small business.