One-third of business owners predict personal hit from budget

A RSM survey of mid-sized Australian businesses found that businesses are feeling positive about the upcoming federal budget, with 71 per cent confident it will have a positive impact on business conditions.

Only half of respondents expect their own business or personal financial position to be better off post-budget and almost a third (32.5 per cent) fear they will be worse off.

RSM Australia chief executive partner Jamie O’Rourke said cost of living is by far the top issue for mid-market businesses and is also the issue business owners want the government to prioritise.

Around 43.5 per cent of business owners identified this as a pressing issue.

“Other pressing issues businesses want the Budget to address include introducing new investment incentives for business at 19 per cent, reducing government spending on existing services at 18 per cent, reducing government debt at 13 per cent and tax reform on multinationals at 6.5 per cent,” he said.

“This, combined with the fact that the vast majority of respondents have positive expectations for the Budget, points to the small and medium sized business sector being comfortable with the Albanese Government’s current approach to tax reform, which has focused largely on the big end of town.”

The federal budget is expected to tread a responsible path to enhancing Australia’s economic resilience that also avoids adding to inflationary pressures.

Inflation is still running at seven per cent and the global economic outlook is deteriorating.

“This doesn’t bode well for new cash injections for businesses or households outside what the government has already promised, such as targeted energy bill relief with an already announced incentive for SMEs to instal solar panels, and a focus on the disadvantaged,” said Mr O’Rourke.

Budget wish list for businesses

The biggest pain point for respondents in the survey remains staff and labour issues at 38.5 per cent. This was followed by tax burden at 22 per cent, supply chain issues, inflation costs and managing margins.

Businesses want the government to undertake tax reform, while a third of respondents want the government to also expand and improve the migration system.

The Institute of Public Accountants (IPA) previously stated reform around taxation had stalled in Australia, partly due to tax discussions becoming the subject of political trench warfare.

“Over the years, successive governments had begun a process of dialogue on how to create a tax system that supports higher economic growth and living standards, improves international competitiveness and adjusts to a changing economy,” the IPA said in its pre-budget submission.

“In 2010 we had the release of the Henry Review into taxation followed in 2015 by the Rethink paper on tax reform. Despite these efforts, we have not seen movement on fundamental tax reform, instead we have experienced a piecemeal approach to tax policy.”

The IPA said simply tinkering at the edges to create ‘stopgap’ solutions would not address the need for fundamental reform.

Business owners in the RSM survey also called for the government to have a more active role in influencing monetary policy and facilitate further stimulus packages.

“This focus on tax reform is ongoing for business, and the appeal for an improved migration system is timely given the government just announced an increased threshold and new skills assessments for skilled immigrants, along with a faster visa approval process, as part of the Independent Review of the Migration System,” said Mr O’Rourke.

In terms of tax reform, business owners said priority was reform focused on multinationals, followed by tax reform of private groups and for individual taxpayers.

“It is time to provide a financial health check grant to incentivise directors of small businesses to assess if their business is viable for this different future,” said CA ANZ.

A financial health check grant would fund directors to work with their trusted adviser and bring the business’s books and records up to date, produce a cash flow forecast for at least the next three months and explore the various pathways available to building a sustainable business, the accounting body explained.

“This will prepare the business if the next step is to appoint a registered liquidator to restructure, administer the business back to health or exit the market,” it said.

“Such a grant will strengthen the economy as the earlier a business under financial stress acts, the more likely it can be restructured or administered and retain employees or, if no longer viable, exit with some return to its creditors.”

CA ANZ is also calling on the government to provide businesses with resources for cyber security.

The accounting body said further awareness was needed of the tools and resources s produced by the Australian Cyber Security Centre (ACSC) to implement cyber security practices, which are available to businesses at no cost.

Offsets and rebates likely off the table

RSM Australia’s National Tax Technical Director Liam Telford said the Federal Government has shown it’s unlikely to continue taxation offsets or rebates due to end on June 30.

“Dr Chalmers has already confirmed low and middle income tax offset won’t be extended. The future also looks bleak for a range of business stimulus measures that are also due to end on 30 June 2023,” Mr Telford said.

Mr Telford said stimulus measures most likely to be on the chopping block include temporary full expensing, loss carry back tax offset, and the SME technology investment boost.