Again Not Much Reform for Business

Touted as a ‘no frills’ and no surprises budget after the release of the Henry Review Report, this years federal budget has certainly lived up to that expectation. The government's big picture here is to divert resources away from a real wealth generating industry (mining) which is booming to fund further retirement savings, infrastructure (all good so far) and the truth be told but to a lesser extent consumerism (lagging industries) and electioneering funding for later in the year.

Once again from a business perspective the opportunity for wholesale tax reform to reduce the red tape and complexity of the tax system and deliver some equity for business has been missed. Business is still hindered and burdened by taxes such as Payroll Tax (taxing businesses who employ more people is beyond logic) which does nothing to assist business sustainability.

While companies will welcome some tax relief with the reduction in the corporate tax rate from 30% to 28% and for business an immediate write off for assets valued at less than $5,000 they will have to wait for at least two years before these measures commence, hardly providing any immediate benefits to business in a patchy economy. Changes announced to the GST legislation are mainly technical in nature and will have limited impact on mainstream business.

While changes to the superannuation guarantee rate progressively rising to 12% will assist retirement funding the additional impost to business will create upward pressure on wages.

Previously announced in the Henry Review Report the sting in the tail for business people over 50 transitioning to retirement with superannuation account balances over $500,000 (the average balance at 30 June 2009 was $430,000) is that the deductible contribution cap is pegged at the 1 July 2009 level of $25,000. Based on ongoing contributions and if the market rises it is likely that the average balance will exceed $500,000 by 1 July 2012 when the measure commences, the logic of which is questionable.

On the plus side the announcement of $660 million in new funding for skills and education, including 39,000 new training places in high demand sectors and 22,500 new apprenticeships will assist in building capacity for the future.

Overall small business will be disappointed as there is not much here in terms of the long awaited reform and changes to small business policy. On the other hand small business may be concerned by the $445 million that will be handed to the ATO for increased compliance regulation.