Stimulation of innovation and fintech
The encouragement of sustainable and fair competition is the key challenge for our mutual banks, credit unions and mid-sized business in the Financial Services industry. While the 2015 budget has done a good job in boosting the chances for small businesses with turnover of up to $2m, it does not directly assist our mid-sized businesses in the financial services industry. However, our view is that this has the potential to provide opportunity for mid-sized financial services business through the encouragement and stimulation of innovation and technology.
While the ‘disruptors’ entering the financial services space at present may be viewed as a threat to the traditional banking model, we believe that this type of innovation, including for example, peer-2-peer lending and improved payments technology actually provides an opportunity for our clients to invest in and take advantage of alternatives in a collaborative way. The Financial Services sector will indirectly benefit from the small businesses package that will see start-up fintech companies flourish, which in turn is expected to encourage innovation and competition within the financial services sector. The changes to arrangements for employee share schemes will make them more accessible and provide assistance to eligible companies through a start-up concession.
Alternative access to finance
The financial system inquiry’s call for “a level playing field” can only be achieved through encouraging a more competitive financial system with the right access to funding. Greater access to non-traditional financing options was one of the key items on Grant Thornton’s pre budget wishlist. The Government has promised funding to ASIC to implement and monitor a regulatory framework to facilitate the use of crowd-source equity funding, including simplified reporting and disclosure requirements. This is a welcome approach to encouraging diversification of funding and will have the potential to provide small business and start-ups with access to non-traditional financing options. For mutual banks and ADIs who have a high concentration of reliance on retail deposits for funding, it is time to think ‘outside the box’ in terms of alternatives to ensure sustainable growth. We would like to see these initiatives expanded beyond small business to support mid-sized businesses.
No bank deposit levy
The Government’s decision not to proceed with the deposit levy of 0.05% on bank deposits up to $250,000 is welcomed by our mutual ADI clients. Such a measure would have been absurd in the current environment with an aging workforce, record low interest rates and concerns over the future of retirement funds. The Government owes it to ordinary Australians to allow them to save in a fair and sustainable way. We also acknowledge that this levy would have resulted in a particular disadvantage for our mid-sized banks and smaller ADIs who would have struggled to absorb the costs of administration. We trust that the revocation of this reform remains and that it is not back on the agenda next year!
No superannuation changes
The Government’s decision to also steer clear of substantial changes to superannuation thresholds and tax rates is welcomed by Grant Thornton. This will result in sighs of relief from the superannuation industry including SMSFs, and from the 67% of Australians who save for their retirement through superannuation. Many predicted the end of the tax free superannuation regime for over 60s – while that day may come it is not budget 2015.