Well, there we have it folks – the 2023-24 federal budget has now been dropped by the Labor government.
We reached out to over 290 SMBs last week to unearth what they wanted to see included in the budget and deduce how they were feeling about a range of important issues.
So, what came to pass? Are there meaningful measures in the budget to assist the prosperity of the SMB community? Let’s unpack it.
What was the mood of small businesses ahead of the budget?
As we revealed by our study last week of 290 small businesses:
- Inflationary pressure is considered the biggest concern for Australian SMBs with 92% seeking relief measures in the 2023-24 federal budget.
- Recession fears are also on the minds of small businesses, with 75% stating that they are worried about a recession in Australia.
- Pessimism for SMB support is rife with 13% confident that the federal budget will deliver them positive change.
- Small businesses ranked inflation mitigation, healthcare, and tax cuts, as their most pressing desires for the federal budget.
- With cybersecurity threats on the rise, 90% of SMBs want to see increased measures to combat cybercrime.
How did Treasurer Jim Chalmers frame this year’s budget?
Treasurer Jim Chalmers opened his budget speech with the following summary,
“The Budget we present to the Australian people tonight:
- provides cost‑of‑living relief that is responsible and affordable and prioritises those most in need
- delivers historic investments in Medicare and the care economy – making it easier and cheaper for Australians to see their doctor
- broadens opportunity by breaking down the barriers of disadvantage and exclusion
- lays the foundations for growth by embracing clean energy, and investing in value‑adding industries, people, skills, technology and small business
- strengthens the Budget – with a surplus forecast for this year, with less debt and smaller deficits compared with recent budgets
These are the foundations on which our Government is building a stronger economy and a fairer society.”
1) Cost of living and inflation
Inflation and the cost of living were seen as the most significant concerns among SMBs ahead of the 2023-24 budget. In our survey we found that 92% of small businesses wanted to see measures to reduce inflationary pressure.
The budget revealed a $14.6 billion cost-of-living support package over four years, including $3 billion in one-off energy bill relief for 5 million low-middle income households and 1 million small businesses.
Furthermore, the consumer price index (CPI) is predicted to halve by 2024 (from 7.8% to 3.25%) so we may be looking at an easing of inflation and a strengthening of the economy. Bringing further inflation relief to consumers and business owners, the CPI is also set to reduce to 2.75% by 2025.
Coupled with a prediction that inflation had peaked and would soon begin to recede, small businesses would be pleased to hear several budgetary measures announced aiming to ease the cost of living.
(However, time will tell how effectively these budget inclusions will pan out and whether they will satisfy most businesses.)
It’s likely, however, that many SMBs will have wanted to hear more impactful announcements. And despite this news, we may still see the RBA raise the cash rate yet again, meaning borrowers are not out of the woods just yet.
2) Economic outlook
We found in our study that a whopping 75% of businesses held fears of a recession in Australia.
At this stage, it seems that these fears may be allayed.
Indeed, after a decade of steadily increasing national debt, judging by last night’s announcement, we may be finally looking at a budget surplus!
While this may be short-lived due to significant reliance on short-term high resource prices and associated tax revenue, it’s a buoying sign that Australia’s economy could be on a solid trajectory. It certainly sounds like a significant step in the right direction for Australia’s economic stability.
3) Electricity and power assistance
Our survey found significant support for electricity bill relief, ranked high (namely just below tax cuts, inflation relief and healthcare).
In a win for SMBs, there were some significant inclusions aimed to help businesses save money and relieve the pressures of high energy prices. But do these precautions extend far enough?
So, while it may not be a primary concern, it will likely be seen as a win for many consumers and SMBs.
One of these measures is a modest payment of up to $650 to over 1 million small businesses to help alleviate the high cost of electricity.
A further measure speaks to better energy efficiency, with millions of businesses able to access tax breaks for electrification. This includes a 20% deduction on total eligible spending (capped at $100,000) for heating and cooling upgrades and energy-efficient appliances.
4) Instant asset write-off
In another win for Australian businesses, the tax incentive known as the instant asset write-off will continue until the middle of next year. The scheme allows businesses to deduct the full cost of assets up to $20,000. This applies to each asset, so multiple instances of this tax relief measure can be used.
With tax relief being strongly sought by the businesses we surveyed, this news will no doubt appeal to those who are looking to purchase business-related assets to grow or sustain their operations.
Our pre-budget study found that healthcare was one of the key areas where small businesses wanted to see action.
We tuned into the healthcare measures announced, which included an increased incentive for GPs to bulk bill people under 16s (along with pension card holders and Commonwealth concession holders.)
Further, hundreds of millions of dollars were earmarked to build new Medicare Urgent Care Clinics, which will bulk bill and treat those with urgent care needs. With bulk billing services being radically reduced over the last few years, this is a positive shift.
There were also significant healthcare wins in terms of medication. Hundreds of common medications will have their prices slashed under the proposal, and doctors can now grant two-month prescriptions for certain patients. This should ease access burdens and reduce co-payments.
Our survey indicated that a massive 90% wanted more done to protect businesses from cybersecurity threats.
We didn’t hear much commentary from Treasurer Chalmers here, but we did see $23.4 million go to the ‘Cyber Wardens’ program, launched by the Council of Small Business Organisations Australia (COSBOA).
The program provides educational tools to make cybersecurity and protection simpler for small businesses. How effective this will be is unclear.
There was also attention paid to SMS scams with tens of millions allocated to anti scam centres and an SMS sender ID registry.
7) Climate change and the environment
It’s no secret that the issue of climate changes and environmental degradation is not only a significant social concern but an economic one as well. This clearly doesn’t only concern individuals, but small businesses too.
Namely, our SMB study discovered 51% wanted to see more done in this area.
So, was this addressed? Likely not as much as many hoped…
- The budget included $2 billion for clean hydrogen, $450 million to reduce industrial emissions, $83 million for a Net Zero Authority, and financial support for various other sectors for emission reduction.
- There were also allocations ($355 million) for national parks and marine reserves, $51 million for an environmental information initiative, and $104 million for renewing the Murray Darling Basin Plan.
8) Other SMB focused measures
In other areas, there were provisions for cash flow support to businesses, with 2.1 million eligible to halve the increase in their quarterly tax instalments for GST and income tax in 2023–24, from 12% to 6%.
There was also $394 million destined for an Industry Growth Program, designed to help SMBs and startups develop new products and services.
Full budget resources
For further information on the budget (and to see every measure, inclusion, and exclusion) please refer to the Government’s 2023-24 Federal Budget page.