Tuesday, 10 September 2013
With a Coalition victory at the federal election, several aspects of the operating environment for businesses big and small look likely to change in the near future. With a reputation for being sympathetic to business, the Coalition’s plans, and how these are implemented and assimilated into the operations of the “engine room” of the economy, as small and medium sized businesses have been variously described, will shape the future of the wider economy.
Here are some of the Coalition’s policies (issued as part of its 23-point small business policy) likely to have an impact on business.
One of the key planks of the Coalition tax platform is the promise of a 1.5% cut to the company tax rate, effective July 1, 2015. The pledge also has a follow-on effect for small business however, as under the Coalition’s paid parental leave plan, bigger businesses would be required to pay a 1.5% levy on profits. This leaves smaller concerns with the cut, but not the levy — although larger businesses will not pay any more tax than at present.
And while the Coalition has stated that it won’t raise the rate of GST, the tax will still be part of an overall review, so commentators are not ruling out adjustments just yet. One issue they say may make a re-appearance is the low value threshold, which retailers have lobbied over for years.
There are however some unwelcome plans. The Coalition has pledged to scrap the increased asset write-off threshold to its original $5,000, and get rid of the accelerated car depreciation rules as well. The rise in the instant asset write-off to $6,500 allowed small business to immediately reduce their tax bill instead of spread it out over three years. This is likely to be the case again under Coalition plans.
The loss carry-back scheme is also on the Coalition’s chopping block. This was only legislated days before the end of the last financial year, and allows small businesses to “carry back” losses to offset past profits, giving them a tax refund up to a cap of $300,000 each year from tax previously paid.
Discontinuing the loss carry-back will give the Coalition $900 million over the four-year forward estimates, while discontinuing the instant asset tax write-off will give it $2.9 billion over the forward estimates.
The Coalition also pledged to reverse Labor’s proposed toughening of the FBT treatment of cars leased for personal use. With the election intervening, the changes were not legislated.
The Coalition changed its policy on the national broadband network (NBN) earlier this year. Rather than oppose the project, the NBN rollout under the Coalition will continue, but with a significant change.
The Coalition version of the NBN does not favour a fibre-to-the-premises option, rather it will be fibre-to-the-node, with final connections made to your business (and your home) via the existing copper network. Businesses and individuals will be able to choose to connect their premises to the node with fibre, but it will cost – and the amount of this connection is still unknown.
Compliance and red tape
The Coalition has made regulation and red tape a big part of its pledge to small business. It has set a goal of saving $1 billion every year by eliminating unnecessary expenses, and has even stated that it would set aside two sitting days dedicated to getting rid of unnecessary regulation and link red tape reduction targets to government departmental performance.
Part of the red tape plan is to shift the burden of administering superannuation from employers through having compulsory superannuation payments remitted directly to the Tax Office at the same time as employers remit their pay-as-you-go (PAYG) payments. Increases to the compulsory super rate will be delayed by two years.
Employer involvement in the new parental leave arrangements (see below) will be eliminated under the Coalition. Also environmental regulations that are largely duplicated between state and federal levels will be erased.
Paid parental leave
The Coalition’s parental leave system offers generous benefits for those eligible, with parents to receive 26 weeks at their existing pay rate (capped at $150,000), along with superannuation.
As mentioned above, it proposes to pay for the scheme with a 1.5% tax increase for the country's biggest businesses. However unlike the incumbent scheme, the Coalition aims to relieve businesses from acting as paymasters. Instead, every payment will be made through the government.
The Coalition has said that small business will be a cabinet portfolio within the Treasury department in a new government. It has also committed government departments and agencies to paying small business suppliers on time within 30 days, and if not apply interest at the same rate as the “general interest charge” applied by the Tax Office to late tax payments.
The Coalition has said it will keep the Fair Work system in place, although there will be some changes. Unions will have fewer right-of-entry allowances, while the Australian Building and Construction Commission will be fully reinstated.
The Coalition has said that individual flexibility agreements will receive some changes, with it set to widen conditions under which IFAs can be negotiated.
There will be some other changes including creating an appeal division within Fair Work, allowing the Fair Work Ombudsman to consult small businesses as well as employees, and only allowing the Fair Work Office to hear bullying claims, for example, after they have been investigated by other groups.
Skills and education
A huge part of the Coalition’s plan is a new HECS-style apprenticeship support scheme, which will cost $80 million. Apprentices can borrow $20,000 under the scheme for tools and equipment, to be distributed across four years. Finishing the training triggers a discount.
Other education policies include creating an infrastructure fund for schools (dependent on a budget surplus), along with commissioning the Productivity Commission to conduct a review of the child care system.
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