6th October, 2020
With the economy in recession, the Government is touting a number of stimulus measures, tax breaks and other incentives in the upcoming budget. So what will bookkeepers and accountants be paying close attention to this evening?
As trusted advisors to Australia’s businesses, accountants and bookkeepers stand at an invisible ‘front line’ of the impacts of coronavirus on our economy.
Beginning the year with the fallout from record-breaking bushfires, many of these experts have invested countless hours of their time to stay on top of current events, digest new legislation, and then help their clients receive and process stimulus, wage subsidies and plan for a new reality. And that’s on top of the work they would otherwise normally do.
There’s no mistaking: the quality advice of experienced bookkeepers and accountants can mean the difference between success and failure. That is especially the case in a year like 2020.
Now, with estimates of two million workers set to lose JobKeeper as it enters its second phase (and more to follow when JobKeeper ends in March next year), sound business advice is at a premium.
With the Government set to hand down the 2020 Federal Budget tonight, what measures will bookkeepers and accountants be paying the most attention to?
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Last week, Treasurer Josh Frydenberg made one of the largest pre-Budget announcements this year, announcing the small business entity turnover would be increased from $10 million to $50 million.
The measure will allow an estimated 20,000 businesses to be eligible for ten tax concessions usually only available to small businesses, which will arrive in three phases according to the Treasury website:
- From 1 July 2020, eligible businesses will be able to immediately deduct certain start-up expenses and certain prepaid expenditure
- From 1 April 2021, eligible businesses will be exempt from the 47 percent fringe benefits tax on car parking and multiple work-related portable electronic devices, such as phones or laptops, provided to employees
- From 1 July 2021, eligible businesses will be able to access the simplified trading stock rules, remit pay as you go (PAYG) instalments based on GDP adjusted notional tax, and settle excise duty and excise-equivalent customs duty monthly on eligible goods. Eligible businesses will also have a two-year amendment period apply to income tax assessments for income years starting from 1 July 2021
“We know that the pathway to recovery is not through higher taxes but through a more competitive and efficient tax system that supports jobs and promotes investment,” said Frydenberg.
“Australia’s more than three million small and medium businesses are the engine room of our economy, which is why reducing their tax burden is critical in ensuring they not only survive the crisis, but continue to invest, grow and create jobs as the economy recovers.”
The Government has also flagged it wants to remove fringe benefits tax (FBT) from any training and education delivered to their workers that have been made redundant or will be made redundant in a bid to improve workplace flexibility.
The move would allow employers to deliver training that isn’t necessarily relevant to a worker’s current role in order to prepare them for an entirely new position, which would normally incur FBT.
While there have been clear nods like these around changes to tax legislation for businesses, what’s less clear is whether or not we’ll be going ahead with legislated increases to the super guarantee, with contributions set to rise from 9.5 percent to 10 percent next year.
The seemingly small increase will have far-flung impacts for struggling small businesses in the midst of a recession, but there may be indications the Government could announce a freeze on these increases tomorrow night.
The Guardian recently reported the Government is currently ‘considering the findings of a treasury review of the retirement income system’, which it won’t release without an accompanying policy response.
Modeling by actuaries Rice Warner and also presented by The Guardian shows that a freeze at the current rate of 9.5 percent of wages ‘would bolster the budget in the short term, but the by mid-2040s ths would be outweighed by the increased cost of pension payments’.
Is the Government about to make some serious changes to the pension and super systems? We’ll have to find out tomorrow night.
Business advisors will not only be keeping a close eye on developments that will impact their clients today, but also for policies that will help support them into the future.
It’s a challenge for advisors, and it’s also MYOB’s mission.
“We must provide SMEs with a structured framework to adopt digital processes in areas with profound impact on business recovery,” said MYOB chief executive Greg Ellis when discussing the key initiatives MYOB was calling on the Government to enact.
“By implementing legislation which mandates digital adoption, together with the provision of incentives for uptake, in a way that favours quality, homegrown Australian technology companies, we create a thriving Australian digital ecosystem in which SMEs and a competitive Australian technology sector can flourish.”
Since then, we reported on Prime Minsister Scott Morrison’s announcement of a $800 million stimulus package, dubbed the ‘JobMaker Digital Business Plan’.
The largest portion ($420m) of the funding is set to go towards merging the Australian Business Register with 31 other registers used by government agencies, with another $120 million incentivising businesses to take up digital technologies, and $19.2 million to help businesses start transacting online.
But it’s not just a clarion call to modernise our business sector that the Government wants to project at this year’s Budget. We’ve also been told to expect a new focus on Australia’s often-overlooked manufacturing industry.
It might be considered a reactionary step in the face of COVID-19, but the Government appears to be taking a step off the globalist accelerator by shoring up our production capabilities at home, with the announcement of $1.4 billion set aside for this purpose.
Morrison unveiled the ‘Modern Manufacturing Initiative’ last Thursday, saying that $1.3 billion would be invested into projects over the next four year, targeting those that grow emerging technologies as well as local manufacturers that already hold a competitive advantage.
Six areas within manufacturing are of particular interest: space, defence, food and beverage manufacturing, medical products, recycling and clean energy projects and resources technologies.
Among the talk of tax breaks and stimulus, there’s also a more direct concern for Australia’s business advisors: how to best help their clients in times of need without becoming an added burden?
The fact is, many accountants and bookkeepers are incredibly generous with their time. Some are even generous to the point of being detrimental to their own business — this was the case even before coronavirus.
Advisors want to know they can afford to continue in investing time and effort in training and educating their own staff (sometimes multiple times a week at the moment!), without pricing their services out of the market. This becomes even more difficult when your clients happen to be going through unforeseen financial difficulties.
But there are some technological solutions that can make the challenge a little easier, starting with one initiative championed by Small Business Ombudsman Kate Carnell.
The Ombudsman is asking the Government to consider a new Small Business workplace award which would include a new “permaflexi” classification that would provide an alternative to a casual work classification and include holiday and sick leave, while retaining flexibility.
Carnell said the new system would require new technology in the form of a ‘RegTech’ system — in order to streamline compliance for SMEs (and so reduce complexity for their advisors).
“The good news is that the technology exists already. The Fair Work Ombudsman just needs to accredit RegTech solutions for this purpose,” said Carnell.
“The Government has a golden opportunity here to modernise complex systems and cut red tape.”
Likewise, the Institute of Certified Bookkeepers (ICB) has joined with Chartered Accountants Australia and New Zealand, CPA Australia, the Institute of Public Accountants, the ASBFEO and the Council of Small Business Australia to propose a different system to make it easier for beleaguered businesses to navigate the months ahead: a voucher system that will cover the cost of advisory services for up to $5,000 for eligible businesses.
Executive director of the ICB, Matthew Addison said the voucher system would be preferable to a cash handout because it would help with further support into the future.
“A voucher system is preferable to a cash handout to ensure funds are directed only to prequalified and accredited professionals,” Addison said.
“Funding can be staggered with timing to reflect initial engagement and periodic review. Where the offer is not taken up by micro and small business owners, there is no cost to the budget.
“Access to professional advice is essential to enable businesses to manage through a crisis, adapt to the new environment and aid in their recovery,” said CPA Australia chief executive Andrew Hunter.
In the case of both of these initiatives, we’re yet to have an indication whether the Government is likely to go one way or the other — but there are other small wins to be had in the meantime.
eInvoicing, which would see Australian businesses get paid faster, would have significant knock-on impacts for advisors and it’s been a key issue for MYOB in the lead up to the Budget.
MYOB bookkeeping subject matter expert Chris McComb said she’s seen first-hand the challenges businesses are facing right now.
“Particularly in Victoria, where I’m on the ground with my clients, confidence is low and the uncertainty of ‘what’s next?’ is something I hear every day.
Any initiative from the government that supports businesses to take on advisory services to help them rebuild will be considered a relief to many. Cash flow in business is primary as well, so any new technology or process to improve flow of business and payment? Bring it on.’
Last week we learned the Government was investing funds into making eInvoicing mandatory for all Government agencies by 2025 as part of the JobMaker Digital Business Plan — here’s hoping it’s not the only announcement we see in this vein come tomorrow night.