Small rewards for small business in budget 2023–24

Among the measures announced were:

• An increase of the instant asset write‑off to $20,000 from 1 July 2023 until 30 June 2024
• A new Small Business Energy Incentive that provides businesses with turnover less than $50 million with a bonus 20 per cent tax deduction for eligible depreciating assets, up to $100,000 for energy-saving upgrades.
• Cash flow support by halving the GDP adjustment factor to 6 per cent (applied to pay as you go [PAYG] and GST instalments)
• A new Cyber Wardens program to help small businesses build resilience to cyber threats
• Support to help SMEs compete for tenders and improve SME awareness of federal government contracts
• And an industry growth initiative to help start-ups commercialise concepts and grow their operations

While several SME finance leaders have welcomed the measures, there has been some disappointment that more support hasn’t been forthcoming to help the ‘engine room of the economy’ thrive.

Engine room of the economy needs more than was offered

Guy Callaghan, the chief executive of SME fintech Banjo Loans, said: “While there were certainly some winners in the 2023 budget, SMEs appear not to have made it onto the podium.

“The engine room of the Australian economy, employing around 7.6 million people across a wide range of sectors and contributing around $418 billion to GDP, needs more than this budget offered.”

Similarly, Wayne Morris, CEO of working capital funder Fifo Capital, said: “As far as small businesses are concerned, this is a conservative budget that is unlikely to translate into real stimulus and growth.

“While the announced measures may alleviate some high input costs, particularly in terms of electricity, and benefit businesses seeking asset write-offs, they fall short of delivering the comprehensive economic improvements small businesses need to succeed.

“Small business owners were hoping for ambitious budget measures to help them cope with the pressure of rising interest rates … Unfortunately, the limited measures announced are unlikely to restore small businesses to their vital role as the engine room of the Australian economy — the force that drives productivity growth and ensures that profits are not the exclusive right of large corporations.”

Instant asset-write off welcome but much reduced

The main initiative that has been flagged as beneficial to SMEs is the extension of the instant asset write-off.

However, Jon Sutton, CEO of debtor finance lender ScotPac, commented that while the extended instant asset write-off was “good news for SMEs planning to purchase assets up to $20,000 as it provides an extra incentive for them to invest in growing their business” (and has wider ramifications for supply chains), it “represents a reduction in the asset value limit and turnover eligibility threshold from the initial policy introduced in 2020”.

Moreover, Brent Starrenburg, head of Connective Asset Finance, flagged the write-off had reduced from $150,000 to $20,000 and the eligibility threshold changed from firms with $500 million turnover to firms with a turnover of less than $10 million.

“The message for brokers is to act now in initiating conversations with clients to take advantage of the opportunity left this financial year,” he said.

“Asset financing brokers must be proactive in supporting small businesses to understand and navigate this updated policy and provide them with the necessary financing solutions that meet their needs.

“The instant asset write-off has been a critical measure in stimulating the economy since its inception. While it may not be as generous as before, this latest change is not a surprise in the current high inflationary environment. It will continue to support smaller investments in electronics and small-scale machinery and tools for example.”

Likewise, Beau Bertoli, co-founder and chief revenue officer at Prospa, also welcomed the instant asset write-off extension but said the government would “need to do more to ensure the small business community has the resources it needs not only to survive, but thrive in today’s climate”.

“According to Prospa-commissioned research, 84 per cent of business owners said they were expecting major challenges over the next 12 months, driven by increased operating costs (42 per cent), higher inflation (35 per cent) and increased costs of freight and transport due to rising fuel costs (30 per cent),” Mr Bertoli said.

Nevertheless, he said that the measures — including the energy rebates — would “go some way towards offsetting the forecasted electricity and gas price spikes of 5–18 per cent”.

“With Australian small-business owners struggling to navigate the harshest cost-of-living crisis in decades, yesterday’s budget will come as a relief for those SMEs forced to live month-by-month,” Mr Bertoli said.

He also welcomed the investment in helping SMEs build resilience to cyber attacks.

Missed opportunities

When it came to what was missing from the ‘wish list’, Fifo Capital CEO suggested that potential solutions could have included incentives for large corporations to collaborate with SMEs; initiatives to develop domestic supply chains; or tax relief for low turnover businesses.

Other criticisms of the budget 2023/24 include the fact that there has been a reduction in support for the underpromoted Self-Employment Assistance Small Business Coaching program and the Entrepreneurship Facilitators Program.

The Australian Small Business and Family Enterprise Ombudsman Bruce Billson (who largely welcomed the budget) said it was “disappointing” support had been reduced as “these programs have low awareness and can help with the success and durability of many of the 1.6 million Australians who derive their livelihoods from self-employment and make a vital contribution to the economy”.

“There is support for small and family businesses to tackle immediate pressures, particularly with high energy input costs, an asset write-off boost to help re-equip and invest in productivity, tax administration changes that will help with vital cash flow challenges and much-needed advice to deal with cyber security fears,” Mr Billson said.

“Energising enterprise can deliver a stronger economy and these measures are a step towards delivering that.”

Some have also suggested that more could have been done to make business productivity a centrepiece of the budget (Master Builders Australia CEO Denita Wawn), to remove red tape, and to address the primary cost-of-doing-business pressures.

As Business NSW CEO Daniel Hunter put it: “There is a cost-of-living crisis which is being addressed, but there is a cost-of-doing-business crisis that needs more attention over the coming 12 months.”

[Related: The key housing measures of the budget 2023/24]