Small is beautiful

Amidst tough times for business in Australia, there’s solid backing for small business from government. A series of recent reforms offer help and hope to our economy’s engine room. By Tim James

Menzies famously spoke of the “forgotten people” of small business owners, shopkeepers, skilled artisans, professionals and farmers who were the “great generators of enterprise and jobs in the nation”.

They still are today. These are the quiet Australian enterprises. Many are family businesses, local small businesses and sole traders. They have neither big voices nor powerful lobby groups to advocate for them.

Small and family businesses are reported to employ six million Australians, about half of all business roles. 99.8% of all Australian businesses are considered small to medium enterprises, causing research firm McCrindle to state that we are the small business nation. 

The small business sector has been particularly buffeted by bushfires and a pandemic this year.  Small and medium enterprises simply don’t have the reserves and capabilities to manage through hard times as big business does.

Don’t doubt however the determination of small business owners and operators to work smarter (and harder), to make sacrifices, to innovate and adapt in order to stay alive. These businesses are fiercely focused on survival, adaptation, jobs and serving their customers and communities. Unlike too many in big business these days, these small businesses have neither the time nor interest to focus on politics or populism. 

The Government has been getting busy backing small business and it’s timely at the start of this financial year to reflect on just how. 

The Morrison Government’s small business tax cuts commenced on 1 July 2020.  Small businesses (with turnover of less than $50m) have had corporate tax reduced from 27.5% to 26%. In one year from now it will go down to 25%. In total, almost 10% less company tax will be paid overall by small businesses. There’s more to do in taxation of course.  For instance, while some states such as NSW are reducing payroll tax (albeit slowly), it remains a tax that should be disposed of altogether for its impact on small business and jobs.

Cash flow for small business is critical and strongly shaped by payment terms. Earlier this year the government committed to paying invoices within 5 days (where e-invoicing is carried out by both entities). There will be greater focus and accountability around government payment terms and practices via the Payment Terms Reporting Bill introduced by Minister Karen Andrews in May.

News stories of big business struggling and failing to keep up with the Australian awards system have been inescapable. If big business with its array of corporate functions can’t comply, there’s no question that small business is finding it impossible. There’s a new energy and focus on IR reform thanks to Scott Morrison and Christian Porter. The opportunities to simplify and unify are underway with five new working groups having commenced meetings two weeks ago.

The Small Business and Family Enterprise Ombudsman, Kate Carnell, continues to be a strong and independent advocate for small business, and importantly has legislated powers to resolve disputes. This role and resource has been an important step forward and valuable voice for small business, and indeed has been a highly active in recent months. 

A raft of programs and policies have been rapidly deployed to support small business through COVID-19. For some businesses the position, sadly, will be irretrievable. But many are availing themselves of JobKeeper, PAYG relief, cash flow boosts, instant asset write-off extensions and much more in order to make it through.

Ultimately it will be permanent reforms to our economy, productivity, taxation, regulation and industrial relations systems that will most see small business survive and thrive.

One of Menzies’ most powerful and memorable quotes which the MRC constantly celebrates and relentlessly works towards is that “the greatest function of a democratic government is to create a climate in which enterprise will flourish and productivity will increase”.

This remains the great challenge and opportunity for government today amidst the conditions rendered by COVID-19. Small business will be the engine room for growth and getting policy settings right to bring this about is well underway. We look forward to further positive and essential reform for the small business sector.