The 2019 budget speech has happened. Some are happy, while others are left wanting. The treasurer rightly said that SMEs are the lifeblood of the Australian economy. So they really need the fuel to get them from A to Z. In the meantime, the budget will heavily affect who comes into power in the upcoming Federal elections. And SMEs are thinking carefully about who has their best interests at heart.
Labor VS. Liberal?
Right now the Prime Minister and opposition leader are busy promoting their relevant budgets over the coming weeks until the election is called. Current sentiment suggests that Labor will most likely win the upcoming election. However, contrary to this dominance in the two-party preferred stakes, opinion polls still maintain that Prime Minister Scott Morrison is more popular than opposition leader, Bill Shorten. Morrison’s campaign warns that Shorten will kill the Australian economy with an extra $200 billion in additional taxes. Saying that if this happens it will hold “every small and family business back … holding our economy back.” So Scott is clinging on and fighting to maintain power.
How will Morrison’s budget affect small and medium businesses in Australia?
Here’s a quick recap on how SMEs will be affected by Morrison’s budget
Export Sector Gets Top Dollar
The aspect of the announcement most relevant to SMEs is the Export Market Development Grant (EMDG) which is set to increase by $60 million. The more money invested in the export trade, the better for SMEs, right? To some extent, yes. These funds will enable SMEs to export their IP and take their products further and wider. More territory covered means more profits.
On the flip side, businesses located only in Australia need support too. And from the looks of things, this was largely unaddressed in the Liberal-led budget. Local businesses need funds available in order to grow and prosper. This requires resources – an item largely unaddressed by Frydenberg and his team.
Small business instant asset write-off
This year’s Budget extends existing tax relief for small and medium businesses. The government dropped its un-PC tax cuts for big business. Now focussing on smaller businesses and start-ups. The result is that they are bringing forward tax cuts and widening the instant asset write-off. This will include businesses with turnovers below $50 million. The government’s intention is to benefit some 970,000 businesses with approximately 5,2 million staff in their employ.
Further to this, the prospect of a lower tax rate is a helpful one. However, will it be enough to offset the far more urgent problem facing small businesses – their shrinking access to credit? In an effort to curtail this problem, entrepreneurs are turning to fintech lenders like Beyond Merchant Capital. Lenders, who have huge sums of unsecured working capital (and flexible terms) that will give SMEs a lifeline during unsure political times.
Banks To Watch Their Backs
This year’s budget acknowledges the Royal Commission’s findings. By pumping $550m into bank regulators the budget hopes to keep this sector under scrutiny and open up a more fluid banking system. That said, the worry is that this process might be held up by the big banks. A further by-product here is that as a result of the scrutiny, banks are pulling back on funding for small business left and right, leaving less funding options for SMEs. So whichever party comes into power still needs to address the opportunities provided by Tier 2 banks and fintechs who can offer Australians a better deal both now and long term.
Extra incentives for apprenticeships
Morrison’s budget also aims to invest in education. This is a worthy initiative because small businesses need talented minds to elevate and grow. The current incentive promises double payments for apprenticeships, for fields from carpentry and plumbing to hairdressing and baking. The Government says that this will support up to 80,000 new apprenticeships over five years. Further to this, Morrison’s government also proposes 10 “Training Hubs” across Australia (costing $50 million over four years). This will target youth unemployment in regional areas.
Where to from here for SMEs?
What we have is a mixed bag for small businesses. In the meantime entrepreneurs need to do what they do best and think forward and out of the box. Says CEO Larry Prosser of Beyond Merchant Capital, “While the government has a wide lens over Australia’s economy, our vision is directly and solely focussed on small and medium businesses. We offer a fast and flexible funding solution that can take these businesses forward regardless of external political factors.”
Speak with a lending specialist today about funding the growth of your business.