2009 Federal Budget Impact on Small Business

A $57.6 billion budget deficit is centred on propping up an economy faced with the collapse of the mining boom and the global financial crisis. The massive nation building infrastructure spending of $22 billion on roads, rail and ports further highlights the degree to which our economy has become reliant on government spending to support it.  Australians face working longer and harder as the labour force shrinks with the government pinning its hopes on economic recovery through its infrastructure program. A real risk is if the recovery is prolonged reining in the deficit will become a high wire act.

It is disappointing that the Government has not recognised the contribution that small business makes to employment and economic growth more. Some incentives include the expansion of the tax investment allowance from 30% to 50% for eligible assets ordered between 13 December 2008 and 31 December 2009 and installed by 31 December 2010. While other businesses can still access the 30% announced earlier this year for eligible assets acquired before 30 June 2009 as well as the 10% rate for eligible assets acquired before 31 December 2009. The announced reduction in PAYG instalments for 2009 and 2010 is only a deferment mechanism providing limited short term cash flow benefits for business.

There is no real relief for small business in the cost of doing business. While payroll tax is a state based tax, it would have been nice to see incentives to compensate the states to reduce the burden of payroll tax and streamline tax procedures. Also the reduction in the superannuation concessional caps by half focuses on the short term tax grab while not addressing the longer term issue of retirement funding.

In all other than an increase in the tax investment allowance there is not much here for the small business sector faced with increasing uncertainty over current and future market conditions.