Get ready folks, when Treasurer Josh Frydenberg steps up on Tuesday 29 March 2022 to deliver a pre-election federal budget, you can bet it will be one to watch.
We may not be able to gaze into a crystal ball and pull out the budget facts before they occur, but there’s a lot of information on the ground to sift through.
What are the predictions for the 2022 budget? How will small businesses fare? What’s likely to come to pass?
Let’s dive into a pre-budget analysis to see what may be coming on Tuesday.
It will likely attempt to address the soaring cost of living
With the price of petrol, property, groceries, insurance, rate hikes, and utility costs all rocketing past manageable levels, it’s highly likely there’ll be a lot of effort to be seen as tackling this.
As Canstar’s finance expert, Steve Mickenbecker says, “Australians are facing an increased cost of living at the petrol bowser, in the grocery trolley and with rising insurance premiums.”
“At the same time, wages have not been increasing enough to cover the increase to the monthly household budget.”
Of course, such ‘household’ expenses are also the same outlays that underpin many small businesses.
When the cost of living rises, so too does the cost of doing business. Stock prices, insurance, petrol and personal living requirements will all come to bear on sole traders and small business owners just as starkly.
This increase in living costs will certainly hit smaller businesses (still reeling from COVID-19 and with less resources and cash reserves) harder than larger companies.
We’re going to see a large deficit
When you combine the deep monetary ramifications of COVID-19 with unprecedented climate change and natural disasters, alongside the accompanying government support costs, you have a serious debt storm on your hands.
Luckily, the general economy is looking rather strong and the outlook is rosier than it could be, so there’ll be some balance to the deficit.
It might contain some desperate measures – including for SMEs
According to Deloitte Access economics partner, Chris Richardson,
“Australia’s dumbest budget decisions have occurred at times when a government was headed for an election while being way behind in the polls,”.
With a possible defeat looming (if the polls are to be believed) we will likely see a number of rash vote clutching carrots dangled throughout the budget.
Such goodies are usually targeted at families and small businesses – so there may be something headline grabbing for Australian SMEs. Yet while SMEs will likely be targeted in this budget, the offerings also may look a little better than they really are.
The federal government has dropped a few hints that we’ll likely see some sort of cash splash in the budget for low and middle income earners.
Many observers are predicting that we’ll see a payment – intended to address the cost of living – in the range of $200-$400.
This payment could provide “immediate relief” to household budgets, Mr Mickenbecker said.
If true, it’s also likely that this will hit bank accounts before the election as a little ‘carrot’ incentive.
We don’t yet know who will receive it and whether any SME’s or sole traders will benefit. If chatter is to be believed, it may be granted to pensioners or other concession card holders.
Fuel price measures could be on the cards
With fuel costs ballooning, in no small part due to the conflict in Ukraine, there’s been a lot of chatter about fuel excises and price lowering measures.
With many small business owners and sole traders relying on business vehicles, it’s hoped that there’ll be an announcement on Tuesday that will bring some relief to these SMEs.
The pressure is certainly mounting.
Income tax offset extension?
It’s also looking likely that the lower middle income tax offset (aka ‘the lamington’) may be extended yet again.
The lamington grants eligible taxpayers an offset of $1,080 per annum on their income tax, targeted at those earning under $126,000 per year.
First introduced in 2018, it was meant as a temporary offset, to be replaced by stage two tax cuts. Yet this has been extended twice already and we may see it happen again.
“That actually meant low- and middle-income people were, in effect, getting a double tax cut at that time. That was done for economic stimulus,” explained the Grattan Institute’s chief executive Danielle Wood.
“The challenge the government faces now is they would like to remove that, but what it will mean is that group of lower- and middle-income earners will effectively face a tax rise.”
This would be a boon for sole traders in particular, as many fall into this bracket and of course, pay personal income tax in their business dealings.
Well, these are the primary predictions floating around, but of course we’ll have to wait until Tuesday 29 March to see how it unfolds and what’s in it for SMEs.