Small businesses left behind in budget misstep

Small businesses are the clear losers in this budget. The government needs to address these issues through a fundamental shift in policy. Small business owners who are financing their businesses through bank loans and personal guarantees and working nights and weekends to keep their businesses afloat will feel dejected and left behind in this budget.

The Institute of Public Accountants has reported a disturbing trend based on the Australian Small Business and Family Enterprise Ombudsman report issued in August 2024. Small businesses' contribution to GDP has plummeted from 40 per cent in 2006 to just 33 per cent today, while their share of private sector employment has fallen from 53 per cent to 42 per cent. Nearly half of our small businesses are operating at a loss, and most self-employed owners earn less than the average full-time wage—which is unsustainable.

It is difficult to see how the proposed energy bill relief and the delayed income tax changes will make any material difference to small businesses compared to the additional costs these businesses have experienced in recent years. The budget includes a $150 energy rebate for small businesses, but this is a temporary measure and unlikely to offset the rising energy costs in the long term. Similarly, the modest income tax cuts do not provide significant relief for small business owners who are already struggling to make ends meet.

The budget is silent on investing in small business innovation and nurturing grass-roots research and development. This is a critical oversight, as innovation is essential for small businesses' growth and competitiveness. The continuation of the ‘instant asset write-off measures’, which expire on 30 June 2025, was also not addressed in the budgetary papers. This measure has been a vital tool for small businesses to invest in new equipment and technology, and its absence will be keenly felt.

Notwithstanding the government's $75 billion procurement budget, small businesses secure only $8 billion, or 11 per cent, of those contracts. This is a stark reminder of the challenges small businesses face in competing with larger firms for government contracts. Additionally, excessive electronic transaction fees cost the sector an estimated $1 billion annually. These fees are a significant burden on small businesses, which often operate on thin margins.