Marshall Place Associates Live More of Your Life

Thursday, 10 May 2007

Waiting for the other shoe

As both sides of politics are now planning to deliver a safe smart and
successful future, could the Sunrise Twins (Kevin Rudd and Joe Hockey)
be encouraged to reconstitute their double act and make a stand for
small and medium enterprise?

When will they begin to address the barriers to additional employment in the SME sector arising
from the blame game between levels of government? Small-business
expansion is being hindered by layers of red tape and compliance costs.

The budget was strong on providing future funding for anything related to
families and big business but remarkably Dickensian when it came to job
creation and small-business export development.

Where is the Future Fund’s help for micro enterprises and home-based business
across the nation to develop enough to enter new markets, design new
products, services and experiences and, most importantly, take on
additional staff?

The Government will invest just $4 million over four years to provide more face-to-face and telephone tax
assistance to new businesses under the New Business Intensive
Assistance Program, particularly for those who prepare their own BAS –
a process that collects revenue rather than generates the means of
producing more of it.

Nearly half the Australian workforce is in the small business sector, many of them as sole
operators. Despite that, the budget offered nothing to help those
businesses grow, through tax credits or pay-roll tax credits that would
facilitate growth without huge compliance and regulatory costs.

The budget was also silent on the urgent need for a high-speed broadband
network at reasonable prices, or to emulate moves by other countries
that have curbed the failure rate of new business enterprises and
increased their contribution to import substitution and so reducing
trading deficits.

More than 87% of small businesses are now connected to Australia’s comparatively slow and expensive internet
system. Only half of them place orders over the internet and less than
half take orders.

The tertiary education sector gets a bucket of money for more buildings, laboratories and high-tech
investments, and has been given permission to go on a fee-hunting
charge as a next step in the privatisation and “voucherisation” of
education.

But where is the money to encourage the small end of town, the 20% of the workforce made up of independent
contractors (1.9 million owner-managers) and two million more
self-employed or home-based operators who constitute less than 10% of
total national export income to redress our growing national deficit?

Between now and the election the Sunrise Twins should find time to talk to
relevant department heads and premiers about the draft legislation for
Tax Laws Amendment (Small Business) Bill 2007, which was released by
Treasury on February 8 and rejected recommendations of a taskforce on
regulatory reform that would have provided support for micro
enterprises to take on staff and tackle export markets.

Bob Ronai of the Import-Export Training Centre says the biggest problem for
small businesses is to know what to do after they land export orders –
the paperwork, who pays the freight, and how do they get paid? A big
order might seem like a prize, but buying the materials and paying for
labour until it is delivered and paid for could sink the business.

Tim Harcourt, chief economist at Austrade, says: “If we provide sufficient
training and resources and networks for small business, we could double
the number of exporters within five years in Australia.

“International markets are constantly contacting Austrade offices asking for supplies
of certain goods. People need to be encouraged to get into the market,
but they also need a lot of assistance in becoming successful.”

The Sunrise Twins could help small business by pushing for:

• A simplified tax system for small business that is willing to take on additional employees to attempt to expand export income.
• Trust loss provisions and family trust elections that enable consolidation of micro enterprises and small businesses that are seeking to combine
  rather than sell out to get superannuation credits.
• The benefits that could flow from including additional information on activity statements to assist owners and managers rearrange their growth path during the initial start-up phase where there is no income to offset credits for many years.
• Ways of reducing the number of PAYG withholding tables for costs associated with longer-term export development, innovation and market development in the early years and ways of developing a systematic approach to adjusting thresholds in the tax law beyond the current barriers associated with payroll tax, regulatory limits and welfare-to-work tax disincentives.

Adam Price, chairman of CustomCall, says there are dangers in encouraging
start-ups without then providing any investment to support their
expansion and sustainable prosperity.

It would appear that
“economic management” and “education revolutions” that might deliver
votes have a higher priority than sustainable prosperity. Small
Business Minister Fran Bailey has been remarkably successful in setting
up a network of field officers, entrepreneurship awards and area
consultative committees to facilitate small and medium export
development and wealth creation, but this hardly rates a mention in the
budget’s future-building initiatives.

Investing in the success of small and medium business rather than just encouraging
start-ups that either fail or become takeover bait is the other shoe
that we can only hope will fall before election day