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Looking For Opportunities In 2011 Federal Budget

Penny Elbery - Monday, May 23, 2011

Business Success Is In Your Hands

Predictably, there was little direct help for small business in the recent federal budget. In spite of the contribution small businesses make to the general economy and to employment, the small business sector is widely ignored at budget time by federal governments of all political persuasions. As we've said before, you can't expect the government to contribute towards the viability of your business (you're not a bank after all). That's your job.

Tough or All Talk?

The government has stuck doggedly with its plan to bring the budget into surplus by 2012/13 – I'll leave it to the economists out there to discuss whether that's in the best interests of the country.

The government spruiked the budget as being "tough" but there was very little in the way of hard or controversial decisions.  It's clear that a minority government is going to steer a steady path through controversy (carbon tax and offshore refugee processing aside).

Look Strategically Beyond the Cuts and Handouts

Our advice to small business owners is to look past the immediate handouts and see whether the economic landscape has been reshaped in a way which offers indirect benefits to the strategically canny businessman.

Thinking strategically means looking at the spending as well as the savings to see what opportunities exist for your business.

There Are Opportunities

One way or another, Australia's population will have to increase to cope with the demand for labour, and all associated services will have to catch up with demand. As a business owner you need to ask yourself if you have an opportunity to supply growth areas and travel in the fast lane of WA's two-speed economy.

Looking at the budget in terms of strategic opportunities, here are some pointers:

• There is going to be spending on roads, rail, ports, health care, especially mental health.

• There are structural changes to training and workforce participation and, wait for it, a program for the installation of digital set-top boxes for pensioners.

• Education and training is a major initiative in this budget and $558m has been made available to provide training opportunities for 130,000 skilled workers.  

The Labour Outlook Remains Bleak

The education and training initiative may not be a major benefit to small businesses (unless you're in the skills training arena) because 130,000 new workers is a drop in the ocean compared to the 2.4 million skilled workers that Skills Australia estimate will be needed by the mining industry alone by 2015. So don't expect any supply driven labour cost savings in the next 10 years.

Not Only Wage Costs Will Go Up

Any strategic planning you do against the backdrop of this spending should also take into account that interest rates will probably rise - at least once over the next 6 months - and power costs will continue to increase.

Here's The Small Print

Many of the direct tax adjustments for small business are timing differences which offer short term cash flow positives but no absolute savings.  Changes include:

• lower PAYG instalments with PAYG payments set at last year's taxable income plus 4% (rather than 8%) but this only applies in the 2011/12 year.

• Businesses have the ability to claim an immediate $5,000 deduction on the cost of motor vehicles purchased in 2012/13 (plus 15% on the remainder in the first year and 30% per annum thereafter)

• In 2012-13 small business will be able to claim an immediate deduction for assets costing less than $5,000 (previously $1,000)

• Changes to the statutory formula for the calculation of FBT on motor vehicles will be phased in over the next 4 years to replace the four tier structure based on mileage with a flat 20%. If you are supplying a vehicle to employees as part of their salary package you may need to revisit the way you are calculating FBT and ensure you are minimising any cost impacts on your business.

Not a lot of cheer I'm afraid but there is little doubt that we are on the cusp of a major resources boom and substantial private funds will flow into major infrastructure. Supply to the resources sector will see continued demand and lifting State Royalties will not appreciably affect this growth. All business owners need to consider the opportunities.

John Thompson commented on 24-May-2011 01:12 PM
Hi Jon, Thanks for this information – very interesting and certainly flags the need to shift ones view and access opportunity if one wants to engage with the top tier of the two speed economy. It seems to me that there will be plenty of opportunity for
those companies and businesses who are already experienced in dealing with this level of corporate business activity. There appears to be urgency around the upcoming resources boom and I guess efficiency of providing services and getting the job done will
be important. Under normal circumstances I would expect the corporations directly involved in the boom utilizing the familiar networks and companies they have depended upon in the past. However, it sounds like not only will there be a shortage of skilled workers
but there will be a shortage of businesses who can provide the support and services the corporations need. So in the way they are looking outside of the normal networks for skilled workers (I heard an interview on radio national where this was being discussed
– The Canadians are concerned the Australians are going to Poach back the workers they previously poached from Australia, and more.) do you think they will be looking outside of their normal business networks for services and support. If that is the case it
presents a challenge to small businesses. Whilst there is plenty of training and support to transition skilled and unskilled workers from their old jobs into the resource work requirements and culture, I am not aware of two much training and support being
available to small business to assist them with gaining an entry point into providing services to this huge market. For example I have a product and service that can increase the efficiency and productivity of staff individually and collectively and there
must be a need for this. However I am not skilled in talking to people at this level about my products and services or even have experience with gaining an entry point for the discussion to take place. Are their government agencies or I courses available that
can assist those of us in small business who would like to access this booming industry. Surely this would benefit all involved. John Thompson Neurotribe.
Jon commented on 26-May-2011 10:34 AM
Hi John, Thanks for your comments. You raise a number of interesting points here: 1) It is usually the larger businesses that contract directly with the Chevron's and BHP's but once a contract is let, there is a filtering down to second, third and fourth
rung contractors. So although small business may find it hard to deal direct at the source, they need to network at the appropriate level based on their relative size and capability 2) I think that the short supply of skilled workers is going to be a problem
for many years to come. The Federal Government is speeding up the process of 457 visas and there is no doubt that skilled migration is an imperative. There are (and have been for many years) recruitment agencies working overseas specialising in recruitment
for the Australian market. 3) The last point you raise is how, if you have a new product do you get heard above the chatter and find an entry point to the multi-national businesses that might benefit from knowing about your capabilities. There are a number
of Government agencies and consultants who can help with marketing to a certain level of understanding but what you probably need to do is think outside the norm and look at specifically targeting entities that you know will benefit from your offering. This
takes planning and persistance. You have to find a contact who can give you access to an appropriate level, you have to educate and enlighten and make that first sale. It sounds difficult and there is plenty of other low-hanging fruit out there but it may
be that the more difficult targets give a more substantial result in the long run. Jon Elbery

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