How is the 2014 budget going to affect your business?
At 7:30 pm, Eastern Standard Time, thousands of people sat in front of their television screens to watch the release of the 2014 Budget scheme. The budget affected everyone on a different level; but if you’re a business owner you are probably wondering to what extent does the budget affect your business? Well I would like you to the meet the governments “Our Economic Action Strategy”. This, according to Treasurer Joe Hickey, is about bringing debt under control, spending less on consumption and more on investment. What they mean by that is that they are reducing spending to just keeping the wheels of the government moving and directing more to productive investments which will deliver returns in the future. One word comes to mind when I read this, Businesses. The government has vowed to make doing business easier, the budget is very much about the government getting out of the way so businesses can do their thing.
Positive Outcomes for Business
- Company Tax Reduced by 1.5 %
The government has made the decision to cut the company tax by 1.5%.This will drop the rate from 30 to 28.5 per cent from July 1 next year. The reason for doing so is that rather than concentrating on corporate welfare, the governments focus is going to be concentrated on strengthening the overall business environment so that enterprises, small and large, can create more jobs in Australia. The treasurer even specifically told Business in his budget speech that “we need you to help out”.
The reduction, stated above, in the company tax will benefit over 800,000 small and medium sized businesses and for larger businesses it will help the offset of the cost of Paid Parental Leave which is a program that the government has introduced.
The Paid Parental Leave will be something that businesses will need to budget and account for from the 1st July 2015. This is a genuine paid scheme with the possible income cap of $100,000 per annum. This total will include superannuation, and will be benefiting mothers who wish to stay engaged with their current employer. Though this scheme seems to be a hefty cost for businesses the tax decrease will counter the cost for this scheme.
A major benefit of this scheme will be that businesses will be able to fully take advantage of the skills and assets that a female employee can contribute to their business.
Businesses will also be incentivised to employ Australians aged 50 and over through their New Restart Program.This program is to enable older workers to successfully obtain employment. The incentive will be a payment of up to $10,000 if an Australian has been on unemployment benefits or the Disability Support Pension for six months. The outline of the grant is illustrated in the image below; it will offer $3,000 to the employer after the senior employee has been employed for 6 months onfull-time. After a year a further $3,000 will be paid followed by $2,000 of subsidies at the 18 and 24 month marks. This is a massive incentive for businesses that will be able to utilise the wisdom and knowledge of workers who they would usually disregard.
- Small Business Incentives
The government is also concentrating on increasing the opportunity for small businesses or entrepreneurs to reach a higher level of success. Small businesses are noted to make up the vast majority of Australian businesses,and therefore they are aiming to benefit companies by implementing a number of inexpensive yet potentially beneficial changes. The government has even set aside 8 million dollars to set up the Small Business and Family Enterprise Ombudsman; this is to create a single entry point for businesses to find out about government services and programs.
Negative Outcomes for Business
Though everything seems to be in favour for the business world overall there will be some specific industries of businesses that will be majorly affected and in this case not positively.
The fuel excise increase will definitely take a negative told on businesses, particularly transport companies. The fuel excise rate has previously been locked on 38.1 cents a litre since 2001, but the government is now planning on increasing the fuel excise in line with inflation twice a year. By doing this they are planning to fund $80 billion worth of new roads. But the increase in petrol, though beneficial in the sense that new jobs will be created due to the funded infrastructure projects, this will affect many business owners.
An example of how it can affect your business is through freight cost increases, suppliers will have to eventually increase prices to account for the fuel increase; you can only absorb the cost so much and eventually it has to be passed on to the end users and consumers.
- Reduced Benefits for Families
Due to a number of reductions in benefits like New Start, freezes and reductions on Family Benefits, etc…. many people with have less excess cash to spend and they will need to tighten their belts on spending. This will see a reduction in spending of luxury items which will be seen by small businesses in areas like retail, which will also adversely affect suppliers and transport. The hope is that through creating new businesses and employment opportunities, this will offset these reductions and put more money in people’s pockets through work and salaries.
All of the government changes to the budget and their overall effect on businesses are pretty straight forward and are bluntly stated in their budget scheme. But what business owners may forget to consider is the affect the budget has on everyday people as these everyday people are the revenue and cash flow in your business. By considering these issues you can prepare for certain issues that may have a ripple effect into your business. More information about the budget and the changes made can be found via this link; http://www.budget.gov.au/2014-15/content/overview/html/overview_key_initiatives.htm.
Overall the budget has a business focused goal for Australia and is enforcing budgetary cuts or increases to help aid in the achievement of that goal. For the business world the tax cuts and incentives will improve Australia’s international competitiveness and future economic growth. They plan to help business to become easier and therefore for businesses to expand and entrepreneurs to start and build their businesses. So now is the best time to do so. Good luck.