18/04/2024

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Mixed feelings in business sector regarding the upcoming budget

Mixed feelings in business sector regarding the upcoming budget

Mixed feelings in business sector regarding the upcoming budget

Ahead of the Federal Budget on 9 May 2023, a recent survey conducted among 315 midsized Australian businesses revealed that the majority are optimistic.

In fact, 71 per cent of those surveyed expressed confidence that the budget will positively impact business. However, only half of the respondents expect their financial position to improve post-budget. About a third (32.5 per cent) fear they will be worse off, while 17.5 per cent expect no change.

Cost of living is the top concern

RSM Australia’s Chief Executive  Partner Jamie O’Rourke states that small and mid-market businesses have specific priorities for the upcoming 2023-24 Federal Budget. The cost of living is the top concern for most businesses, with 43.5 per cent of respondents stating it as their primary issue.

Other pressing matters include the introduction of new investment incentives for businesses (19 per cent), reducing government spending on existing services (18 per cent), reducing government debt (13 per cent), and tax reform on multinationals (6.5 per cent). The majority of respondents have positive expectations for the budget and are comfortable with the Albanese Government’s current approach to tax reform, which has focused primarily on large corporations.

However, with inflation running at 7 per cent and the global economic outlook deteriorating, the Federal Government has emphasised the need for a responsible budget that enhances Australia’s sovereign security and economic resilience without adding to inflationary pressures. As a result, new cash injections for businesses or households outside of what the Government has already promised may be unlikely. The Government has promised targeted energy bill relief, including incentives for SMEs to install solar panels, and a focus on helping the disadvantaged.

SMEs demand tax reform in budget

SMEs shared their top concerns for the upcoming 2023 Federal Budget. Staff and labour issues were the biggest pain point, with 38.5 per cent of respondents naming it their top concern, followed by tax burden, supply chain issues, inflation costs, and managing margins. To address these concerns, businesses want the budget to focus on tax reform, migration system improvement, influencing monetary policy, and facilitating further stimulus packages.

Tax reform was the top response, with 37 per cent of businesses citing it as their priority. When it comes to tax reform, multinationals were the focus for 44 per cent of respondents, followed by private groups and individual taxpayers. According to Mr O’Rourke, the appeal for an improved migration system is timely given the Government’s recent announcement of an increased threshold, new skills assessments for skilled immigrants, and a faster visa approval process.

The survey also asked business owners about the ways in which their families have faced increased financial or budget pressure. The top concern was the cost of living (42 per cent), followed by wages not keeping up with inflation, children living at home longer, and having to act as the “bank of mum and dad.” Respondents used various strategies to manage these family budget pressures, including adding a “side hustle,” reviewing or expanding their approach to investments, reducing discretionary spending, and opting for more staycations.

As the 2023 Federal Budget approaches, RSM Australia’s National Tax Technical Director, Liam Telford, stated that the Government is unlikely to continue taxation offsets or rebates due to end on June 30. Mr Telford noted that low and middle-income tax offsets wouldn’t be extended, and several business stimulus measures may also come to an end. Measures most likely to be on the chopping block include temporary full expensing, loss carry-back tax offset, and SME technology investment boost.

Business owners are adopting various measures to alleviate financial or family budget pressures. The survey revealed that the top concerns for business owners were the cost of living (42 per cent) and wages not keeping up with inflation (36 per cent). Additionally, 13 per cent of business owners reported their children living at home longer, and 7.5 per cent stated that they were acting as the “bank of mum and dad”.

O’Rourke stated that the respondents were using interesting strategies to manage these family budget pressures. “Popular initiatives included adding a ‘side hustle’ or extra income stream (39.5 per cent), reviewing or expanding their approach to investments (22 per cent), reducing discretionary spending (21.5 per cent), more staycations (10 per cent) – and ‘closing the bank of mum and dad’ (6 per cent),” O’Rourke said.

With the Federal Budget less than a week away, RSM Australia’s National Tax Technical Director, Liam Telford, warned that the Federal Government is 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,” Telford said.

Telford also mentioned that the following stimulus measures are most likely to be on the chopping block: Temporary Full Expensing, a tax deduction available to eligible businesses on the full cost of certain depreciating assets; Loss Carry Back Tax Offset, a refundable tax offset available to eligible corporate entities to carry back losses to earlier years in which there were income tax liabilities; and SME Technology Investment Boost, an additional 20 per cent tax deduction available to eligible small businesses on expenditure that digitises operations or depreciates digital assets.

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