Last night’s Federal Budget has been labeled many things, but overall it’s been called a bit dull for its lack of strength and its reliance on growth in fighting the deficit and national debt.
As they say, with every Federal Budget there are winners and losers and this year’s winners are undoubtedly small businesses and start-ups. That means you. So what did you win? Well, for starters small businesses will receive a tax break from July 1 this year, reduced to 27.5% from 28.5% and a bigger threshold increase from $2m to $10m in annual turnover. Also, the lower rate will be introduced progressively and will continue to fall to 25% by 2026-27.
To give this some perspective, let’s take a look at the hypothetical Bob’s Bakery. Bob’s Bakery has a turnover of $3m which means he’s currently too big to be categorised as a small business. If he has a profit of 20%, he would be paying roughly $180K in tax. Under this new budget, the threshold will be raised to $10m, so Bob can now categorise his bakery as a small business and his tax will be reduced to 27.5% from 30%. This would give Bob a saving of approximately $15K per year under the new LNP Federal Budget plans.
That’s great for existing businesses but what about start-ups?
The reaction today has been mixed. StartupAUS was impressed with the government’s New Enterprise Investment Scheme (NEIS) but also labeled the budget a disappointment for start-ups, saying “This budget was a chance for the government to make good on its rhetoric about continuing to build momentum on innovation and Australia’s economic transition. So, from that perspective, it is a disappointment,” StartupAUS CEO Alex McCauley.
The main point of contention seems to be that more wasn’t done to bolster plans already announced around the National Innovation & Science Agenda, many of which are yet to take effect. In reality, start-up access to capital and the ability to cut through red tape has actually never been better, with multiple opportunities to access funding, from crowd-sourced equity funding, insolvency law reform, intangible asset depreciation funding and tax incentives for investors under the new Culture & Capital plans outlined in National Innovation & Science Agenda. Details can be found here.
So what are the headlines?
- Less tax for a lot more small businesses
- More access to funding than ever before
- Less red tape
This begs the question, what should you do with all that extra cash? Well, we know that everyone will be eager to encourage you to spend it with them, however the right answer will, of course, be dependent on the particular set of challenges your business is facing. My philosophy has always been to ‘make hay while the sun shines’. Increasing your marketing spend may seem low on the priority list right now, but ensuring you invest your tax savings and investor capital back into your business by using growth strategies, can be a great way to drive your business forward.
Now might be the right time to start thinking about;
- Is our branding right?
- Do we have a clear and well-defined marketing plan?
- What communications tactics are we using and how have they gone?
- Are we conducting any research to find out what our customers are thinking?
- Have we clearly outlined our customer journey and their transition across our touch points?
- Do we need an Advisory Board?
- What targets do we need to reach, by when, and how are we going to get there?