Small and medium enterprises play a major role in the Australian economy. Of the 10.6 million people employed in the private non-financial sector, 42 per cent were employed by small businesses and 24 per cent by medium businesses.
There are more than two million small businesses in Australia, of which almost two-thirds are sole traders and a further quarter have between one and four employees. About 10 per cent, or 200,000 small businesses, employ between four and 19 people.
The Australian Chamber’s 2013 “Small Business. Too Big to Ignore” campaign has set the agenda for small business policy as part of economic reform.
Government economic initiatives can provide the platform for business and consumer confidence, creating the right setting for small businesses to create jobs and wealth.
In recent years the mining, energy and engineering sectors have been Australia’s economic powerhouse, but smaller business have not been leading participants or direct beneficiaries of this growth.
Smaller enterprises are more common in housing construction, services, retail, hospitality, tourism and manufacturing – all sectors under increasing pressure. It is therefore no surprise business confidence is low among SMEs.
Many small businesses are hibernating until the economic sunshine reappears. Business lending remains flat as proprietors play it safe and avoid extending facilities amid uncertain demand. SMEs also report that when they want to invest, access to capital can be difficult. This limits spending on plant, equipment, building and structures. The small business package in the 2015 Federal Budget included tax cuts and increased access to instant asset write-offs. But it will take time for business sentiment to recover.
The Australian Chamber’s quarterly Small Business Survey is large and long-running. Recent surveys have shown subdued performance, finding that general economic conditions, sales revenue, profitability, investment and employment have been in contractionary territory with specific indicators at or near historic lows.
The Australian Chamber’s policies are designed to make Australia a better place to do business, and so are relevant to SMEs. Our small business agenda is distilled in “The Big 4 You Can’t Ignore”:
Cut down on the red tape
Simplify the tax system
Make it easier to employ people
Build better infrastructure
CUT DOWN ON THE RED TAPE
At every level of government excessive regulation is tying down small business. The time and money involved in complying with excessive regulations is bad and the unnecessary duplication makes it worse. Let’s cut the red tape and give small business a break.
Red tape has a direct cost on alters decision-making by business owners. Federal, state, territory and local governments need to recognise the impost and reduce its burden.
Regulation is growing in most economies. To stem the tide lawmakers need to resist legislative responses as their first reaction to a perceived problem and acknowledge governments cannot eliminate all risk.
While larger businesses have more resources to meet their compliance obligations, many small businesses do not. Governments should listen to the concerns of these small businesses.
SIMPLIFY THE TAX SYSTEM
Improving the state of government finances involves tax reform and lower taxes, which between them can encourage economic activity.
Our tax system should provide incentives for people to join the workforce and for small businesses to invest. The current fiscal reality means much debate over our tax system has a long time horizon. But governments can still set out their aspirations. The Tax White Paper process is the right forum to do this.
The economic slowdown affecting our trading competitors has masked the need for improvements to our tax system. But the policy stall has left us with a tax system that harms productivity and competitiveness.
Our tax system is complicated for many small business operators. The income tax law is almost 6000 pages, even after the repeal of more than 4100 pages in 2006. This creates unnecessary costs for small businesses, many of which need to employ specialists. Resources devoted to compliance with the tax system could be channelled to more productive activities.
MAKE IT EASIER TO EMPLOY PEOPLE
Australia is a costly place for small businesses to hire, retain and dismiss staff. When times are tough that means jobs and hours get cut. It is also too hard to get workers with the right skills. Let’s make it easier to employ people and create jobs.
Excessive labour costs mean many small businesses do not open their businesses on the evenings, weekends or public holidays. If they do open during these hours it is often small business owners and their families who are working.
Excessive penalty rates hurt people who want to work at these hours but cannot due to business closures. When businesses close customers miss out and governments lose revenue.
Employers and employees should be free to enter mutually beneficial arrangements that suit their circumstances, while enjoying the protection of a safety net.
Trade unions often use workplace bargaining to advance causes unrelated to the direct relationship between employers and employees, for example limiting the use of independent contractors. We need to limit unions’ bargaining demands to matters directly related to employment relationships.
Recent increases to the superannuation levy make it more costly for small businesses to employ people. Often the increases come straight from the bottom line of struggling small businesses. We need to give small businesses a break and make sure they do not pay for other people’s retirements at the expense of their own.
BUILD BETTER INFRASTRUCTURE
Small business people rely on roads, rail and ports to transport their goods – and themselves. Yet our main roads are congested, our ports are bottlenecked and our rail networks are groaning with overuse. Energy costs are skyrocketing and making us less competitive.
This affects us all, but is particularly hard on small business. It’s time to do something about it by building better infrastructure.