Looking For Opportunities In 2011 Federal Budget

Business Success Is In Your Hands
Predictably, there was little direct help for small business in the recent federal budget. In spite of the contribution small businesses make to the general economy and to employment, the small business sector is widely ignored at budget time by federal governments of all political persuasions. As we’ve said before, you can’t expect the government to contribute towards the viability of your business (you’re not a bank after all). That’s your job.
Tough or All Talk?
The government has stuck doggedly with its plan to bring the budget into surplus by 2012/13 – I’ll leave it to the economists out there to discuss whether that’s in the best interests of the country.
The government spruiked the budget as being “tough” but there was very little in the way of hard or controversial decisions. It’s clear that a minority government is going to steer a steady path through controversy (carbon tax and offshore refugee processing aside).
Look Strategically Beyond the Cuts and Handouts
Our advice to small business owners is to look past the immediate handouts and see whether the economic landscape has been reshaped in a way which offers indirect benefits to the strategically canny businessman.
Thinking strategically means looking at the spending as well as the savings to see what opportunities exist for your business.
There Are Opportunities
One way or another, Australia’s population will have to increase to cope with the demand for labour, and all associated services will have to catch up with demand. As a business owner you need to ask yourself if you have an opportunity to supply growth areas and travel in the fast lane of WA’s two-speed economy.
Looking at the budget in terms of strategic opportunities, here are some pointers:
• There is going to be spending on roads, rail, ports, health care, especially mental health.
• There are structural changes to training and workforce participation and, wait for it, a program for the installation of digital set-top boxes for pensioners.
• Education and training is a major initiative in this budget and $558m has been made available to provide training opportunities for 130,000 skilled workers. The Labour Outlook Remains Bleak
The education and training initiative may not be a major benefit to small businesses (unless you’re in the skills training arena) because 130,000 new workers is a drop in the ocean compared to the 2.4 million skilled workers that Skills Australia estimate will be needed by the mining industry alone by 2015. So don’t expect any supply driven labour cost savings in the next 10 years.
Not Only Wage Costs Will Go Up
Any strategic planning you do against the backdrop of this spending should also take into account that interest rates will probably rise – at least once over the next 6 months – and power costs will continue to increase.
Here’s The Small Print
Many of the direct tax adjustments for small business are timing differences which offer short term cash flow positives but no absolute savings. Changes include:
• lower PAYG instalments with PAYG payments set at last year’s taxable income plus 4% (rather than 8%) but this only applies in the 2011/12 year.
• Businesses have the ability to claim an immediate $5,000 deduction on the cost of motor vehicles purchased in 2012/13 (plus 15% on the remainder in the first year and 30% per annum thereafter)
• In 2012-13 small business will be able to claim an immediate deduction for assets costing less than $5,000 (previously $1,000)
• Changes to the statutory formula for the calculation of FBT on motor vehicles will be phased in over the next 4 years to replace the four tier structure based on mileage with a flat 20%. If you are supplying a vehicle to employees as part of their salary package you may need to revisit the way you are calculating FBT and ensure you are minimising any cost impacts on your business.
Not a lot of cheer I’m afraid but there is little doubt that we are on the cusp of a major resources boom and substantial private funds will flow into major infrastructure. Supply to the resources sector will see continued demand and lifting State Royalties will not appreciably affect this growth. All business owners need to consider the opportunities.