Only 35 per cent of small businesses are highly confident the Federal Budget will address their challenges, according to new research from Xero. The survey reveals that small businesses are seeking more practical support from the government, with incentives to invest in artificial intelligence emerging as the most requested measure.
Key Findings from Xero Survey
When asked what they most wanted from the government, 23 per cent of respondents nominated AI investment incentives. This was followed by support on late payments to small businesses at 19 per cent and a reduction in red tape at 18 per cent.
Angad Soin, Xero’s managing director for ANZ and global chief strategy officer, noted: “Small businesses’ confidence in the Federal Budget has waned slightly over the past six weeks, but our research shows they are still hopeful the Government will provide support.”
Instant Asset Tax Write-Off Changes
The instant asset tax write-off is one of the headline changes expected in this year’s Budget. The scheme allows eligible small businesses to immediately deduct the full cost of an eligible asset in the year it is bought and used, rather than depreciating it over several years. However, the amount has been repeatedly adjusted since its introduction in 2015.
The most generous conditions were in pandemic-era 2020, when businesses with an annual turnover of less than $500 million could immediately write off assets worth up to $150,000. That was up from $30,000 for businesses with turnover of up to $50 million the year before. The current $20,000 threshold was due to expire on June 30, when it would have fallen back to $1,000, its original threshold. Instead, the government has made the measure permanent, allowing businesses with annual turnover of less than $10 million to continue immediately claiming eligible assets worth up to $20,000.
Russell McCarthy, director of WA Building Inspections, said while he welcomes the change back to $20,000, the amount is not “nearly enough”. “In my mind, it’s insufficient and I’d like them to increase it back to where it was,” said Mr McCarthy, who has operated his building inspection company across the Perth metro area for more than two decades.
Productivity Kick-Start
The Xero survey found that businesses need more support to unlock productivity gains and returns from technology investment. The most popular measures included trusted marketplaces of recommended tools, chosen by 20 per cent of respondents, tax incentives for digital investment at 19 per cent, and free training and education at 16 per cent.
Treasurer Jim Chalmers pitched the instant asset tax write-off change as a push for productivity, allowing businesses to invest in everything from “new tech to tools to machinery”. However, given the amount, Mr McCarthy said many business owners like him would forego investing in new tools to invest in transport.
“I’ve got seven staff and we need drones and thermal imaging equipment. All of those things add up. When you’ve got more than one employee, it becomes difficult to perform,” he said. “You’ve got one bite at the cherry and most will lean towards vehicles rather than other important assets.”
Fuel Squeeze Concerns
Another key part of the Budget was the inclusion of an Australian Fuel Security and Resilience package worth more than $10 billion. The package includes $3.7 billion to establish a government-owned fuel security reserve holding 1 billion litres of emergency diesel and aviation fuel, as well as an increase to Australia’s minimum stockholding obligation by a further 10 days. It also includes $7.5 billion in financial support to help fuel companies access loans, insurance and equity to purchase and store more fuel stock.
While these measures aim to reduce the price of fuel overall, nothing so far will directly help cut fuel costs for small businesses. Mr McCarthy said he hoped the government would give businesses some fuel relief. He also described the recent $100 fuel voucher “sweetener” in the WA Budget as “a bit of a joke”.
“When you consider that the average building inspector is travelling 80km to 120km per day, and we’ve got multiple employees, it adds up really quickly,” he said.
Mr McCarthy warns that the rising prices hitting small businesses will be passed on to the consumer. “Consumers are struggling to get a house, and most are terribly built,” he said. “A building inspection is critical these days so I would feel bad for raising prices, but I can understand why businesses do.”
While he hasn’t raised prices yet, Mr McCarthy said it was only a matter of time if the economy continues on its current path. “I don’t see interest rates dropping or housing sorting itself out overnight, so in a couple of months’ time we might have to hike prices since we’re having to stomach the consumer price increases like everyone else.”
