The 2016 Federal Budget’s support of small to medium sized businesses (SMEs) will boost the Australian economy, a number of SME financiers have claimed.
In the Budget handed down on Tuesday night, Treasurer Scott Morrison announced that from 1 July this year the small business tax rate will be lowered to 27.5% and the turnover threshold for small businesses able to access it will be increased from $2 million to $10 million.
These measures, according to Morrison, will benefit 870,000 small businesses employing 3.4 million Australians.
Scottish Pacific’s head of debtor finance Greg Charlwood said that small businesses are “deservedly the big winners” of the 2016 Federal Budget and that it will help SMEs across the country deliver broader economic growth.
“Having supported SMEs in working capital since 1988, we are pleased to see the benefits for companies with a turnover of $2 million being extended to a sensible level of $10 million turnover, where we see it will have greater impact in terms of business investment and boosting job growth and employment,” Charlwood said.
“We support the reduction in the company tax rate for SMEs — dropping from 28.5% to 27.5% for small incorporated businesses with up to $10 million turnover — as it should energise SMEs, encourage business investment and drive growth and innovation.”
Morrison also announced the Budget will keep the $20,000 asset write off incentive for SMEs announced in last year’s Federal Budget, as well as increasing the annual turnover threshold for this incentive to $10 million.
In addition, the unincorporated small business tax discount will be increased to 8% with the threshold extended from a turnover of $2 million to less than $5 million.
The CEO of invoice funder The Invoice Market (tim), Angus Sedgwick, said this three-pronged approach will deliver a “much needed boost” and is already being praised by SMEs.
“The majority of tim’s clients, small to medium businesses, are quite positive about their future growth prospects and abilities to expand their businesses, despite some doomsayers and negative sentiment prevalent in the market,” Sedgwick said.
“The boost they will receive from either measure, and ultimately an easing tax burden, is obviously welcome.”
The positive Budget news has come at an optimum time, according to Charlwood, with Scottish Pacific’s latest SME Growth Index indicating a continuing decreasing trend of SMEs saying they are in positive growth mode.
Currently, just over half (58%) of SMEs surveyed said they were in positive growth mode.