• Family Business and the Federal Budget

A number of measures announced in Federal Budget 2014 have a nasty sting in the tail for Australian family businesses.

A number of measures announced in Federal Budget 2014 have a nasty sting in the tail for Australian family businesses.

Although it had been previously announced, the Federal Budget confirmed the creation of the Small Business and Family Enterprise Ombudsman, which will replace the Small Business Commissioner with the allocation of $8 million towards its establishment. While this is a positive development, there is still clearly a need for education of our policy makers, particularly given that family businesses are not by definition small businesses. In fact many of Australia’s largest most successful and recognisable businesses are owned and operated by family groups.

The proposed abolition of certain government programs will hurt a large number of family enterprises. In particular, many have taken advantage of the assistance provided by Commercialisation Australia and Enterprise Connect over a number of years, including grants for research and development, financial assistance, free business coaching and reviews, and dollar-for-dollar funding of advisory costs.

Some state government programs may help fill this gap but these are inconsistent between the states.

At face value, the proposed cut in the company tax rate from 30% to 28.5% for mid-sized businesses will help those family enterprises that operate within a company structure. Those companies which distribute profits to family shareholders, however, will cause an increase in the incurred top-up tax payable by the family shareholders. This problem is exacerbated by the scheduled increases in the top marginal personal tax rate and Medicare levy, and the introduction of the 2% Budget Repair Levy. We expect many owners of family enterprises will engage in some feverish tax planning activity over the next few years as they become aware of this situation.

Click here to view our in-depth compilation of the 2014 Federal Budget.