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Australian Small Business and Family Enterprise Ombudsman 3 mins read

The Australian Small Business and Family Enterprise Ombudsman, Bruce Billson, says the small business community is exasperated by the delay in passing vital incentives to invest and create jobs that will expire on Sunday.

The Ombudsman called for new safeguards to give small and family businesses certainty and a minimum 6 months to properly use government incentive schemes.

“With just days to go before the end of the financial year, Federal Parliament last night finally passed two pieces of legislation from the 2023 Budget that were announced more than a year ago and will expire on 30 June,” Mr Billson said.

“The small business community is cranky and exasperated about the incredibly slow way these measures have progressed.

“Incentives are designed to encourage a type of behaviour you want to see more of but if there is so little time to act, the purpose and value of the incentive is undermined.”  

Fourteen months ago, the Australian Government announced the Small Business Energy Incentive tax break worth up to $20,000 to support electrification and more efficient use of energy. It also set a new $20,000 threshold for the Instant Asset Write Off. Both promises were contained in Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023.

“It’s absurd to think a small business can evaluate options, get advice about whether a possible investment is eligible for the incentive, confirm that stock and installation help is available, now buy, install and be using the equipment in line with the rules by 30 June,” Mr Billson said.

“We’ve heard from confused small businesses and their representatives that they just wanted certainty. But until a Bill passes Parliament, they cannot know what the final law will say and if an intended investment is eligible.

“We’re talking about a small or family business spending $100,000 to get the full value of the electrification and energy efficiency tax incentive. That’s a big commitment, and as recognised by the Government, the tax break may be the critical difference in being able to afford to do this.

“This week we are celebrating World Micro, Small and Medium-sized Enterprises Day (on Thursday 27 June) but the Parliament is hardly treating small and family businesses with respect by this behaviour.

“It is fine for opposition parties to seek to change government legislation and it is equally fine for the Government to say no.

“But it is not fine for political squabbling to run down the clock so there is no realistic prospect a small business can have certainty to provision for and spend this money with confidence the tax deduction is real.”

Mr Billson called for new safeguards to give small business certainty.

“Small businesses need time to know the announcement has become law, so they can confidently plan in a sure-footed way for important investments that uplift the capacity, the productivity and drive innovation in their business and not be forced in the final days of the financial year when they have so many other deadlines to meet, to rush such big financial commitments,” he said.

“Laws with a time deadline should come with a minimum implementation period. We would suggest no less than 6 months from Royal Assent until the time a scheme ends.

“Incentives like these programs help energise enterprise. That’s why they are announced in the first place.

“The policy was designed to encourage small businesses to spend money it would otherwise not have spent, but a lack of certainty over the program may have deterred them.”

This Energy Incentive promising a bonus 20 per cent depreciation is available to businesses with a turnover below $50 million to save money on energy bills by electrifying their heating and cooling systems, upgrading to more efficient fridges and induction cooktops, and installing batteries and heat pumps.

“The Government said the $314 million scheme had been ‘specially timed’ to help small businesses lay the foundations for their future growth,” Mr Billson said. “Yet, time has almost run out.”

Mr Billson said he feared that the limited time available could mean the bonus tax deduction will only benefit businesses that were going to purchase energy efficiency upgrades before the policy was announced.

“I’d hate to see economists questioning the value of these settings because they’re only rewarding behaviour that otherwise would have happened anyway,” he said.

Each year the Instant Asset Write-Off resets to $1000 unless new legislation is passed to increase it. In the May 2023 Budget the Government announced it would be $20,000 for eligible small businesses with a turnover up to $10 million.

“We need to give more encouragement for people to turn an idea into an investment and to make that big decision to turn scarce resources into new capability, new equipment, new technology to help with the success and ‘future readiness’ of that enterprise and the livelihoods that depend upon it,” Mr Billson said.

“Repeatedly we hear it said that small business is the engine room of the economy yet that engine is being forced to operate below capacity.

“Small businesses need to be able to trust Parliament to give them enough time to understand changes and with certainty factor them into their planning.”

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