Mid-size businesses (MSB) in Australia make an outsize contribution to the Australian economy. With combined annual turnover in excess of $1.1 trillion, the MSB sector injects an estimated $241 billion into the economy annually in wages and salaries. Yet despite their economic heft, they’re curiously invisible to government and generally under-supported. While small businesses are rewarded in this budget, many are questioning whether it is friend or foe to the MSB.
In New South Wales alone, MSBs generate around four million jobs. But they’re the quiet achievers of the economy, obscured as they tend to be, between the populous small business sector and the heft of the large corporates, with their ability to generate and influence media attention and policy.
There were four measures that this budget could have delivered to support MSBs growth:
- Lifted the cap on export market development grants to $250 million to support international expansion
- Delivered better departmental resourcing for faster and more efficient processing of business visas to allow MSBs to manage talent for growth
- Reduced the company tax rate for MSBs because the middle market currently carries a disproportionate share of the tax burden
- Supported more flexible financing options from non-traditional sources
Whilst the Government has not delivered these specific measures, the changes build the foundation for moving towards greater support for MSBs - the engine room of the Australia economy. There are a number of measures that demonstrate the laying of the foundation.
Supporting exports and international expansion through Free Trade Agreements between Australia and China, Japan, Korea and, in the future, India, as well as the $5 billion of infrastructure investments in northern Australia will be welcomed by the mid-market who are primed for export.
The Budget provides targeted spending on new jobs initiatives aimed at employers and young and old job seekers alike to encourage greater participation in the workforce. Mid-size businesses managing their talent pool will no doubt draw on these incentives as they look to grow.
While support for small businesses (with turnover of less than $2 million), including reducing the company tax rate to 28.5% and access to immediate asset write offs for new investments up to $20,000 in value will no doubt be welcome for some, this relief should be extended more broadly across the economy to create a level playing field in Australia and internationally.
Encouraging crowdfunding to help start-ups and small businesses is certainly a welcome measure, and we encourage the Government to expand this thinking to include other adjustments to policy and regulatory settings to create an environment for more non-traditional funding for Australian businesses. Superannuation and pension funds providing capital to MSBs as well as peer-to-peer lending could create a much more competitive funding landscape for the mid-market.
In listening to our MSB clients Government needs to put in place policy settings to boost investment, confidence and jobs and restore trust in the political process.
This Budget is a budget that both sides of Parliament should be able to arrive at a comprise that allows for the implementation of a majority of measures in part or full and will deliver the much needed political and economic certainty that MSBs are seeking from Federal Government.
Overall, we give the 2015/16 Federal Budget a 3/5 in its support of Australia’s quiet chorus, MSB.
Our report - Federal Budget 2015/16: Friend or foe to mid size businesses? outlines what we believe the Federal Budget means for the growth of mid-size businesses in Australia.
Industry perspectives - Grant Thornton industry leaders provide insights into the impact of the Federal Budget on industry including mid-size business growth, ability to innovate, export and productivity.
View your industry here: