Are small businesses left to fend for themselves?
On 14 May 2024, the Australian Federal Budget for the 2024-25 financial year will be released by the Treasurer, Jim Chalmers.
The following are my key insights from an insolvency practitioner's point-of-view on the government's messages, as well as the potential implications for businesses amid a challenging economic climate.
The Government's headline features of the upcoming Budget are well publicised, being:
- Stage 3 income tax cuts;
- Superannuation contributions on Government paid parental leave; and
- Funding for remote housing in the Northern Territory.
The main opportunity for further insight into the Government's thinking regarding the Budget came from Mr Chalmers' pre-Budget speech on 13 March 2024. One key takeaway I had following Mr Chalmers' speech was that many businesses appear to be largely left to fend for themselves. Mr Chalmers highlighted:
- The three biggest drivers of their thinking about this budget are global uncertainty, persistent cost-of-living pressures and slowing growth.
- There will be no further big cash splashes, with the stage 3 income tax cuts already representing the Government's main attempt to assist Australians with costs of living pressures.
- Important spending targets in the Budget include education and skills, health, aged care and renewable energy transition.
While the Government aims to avoid exacerbating inflation, which is now sitting around 3.4 percent in February 2024, after peaking at 8 percent at the end of 2022. It remains uncertain how much disposable income from Australian households will support industries that are already struggling from the cost of living crisis. Additional insights from the Treasurer's communication include:
- Minimal further Government intervention is expected to relieve cost of living pressures on households; and
- Certain already at-risk industry sectors (construction, discretionary retailers and hospitality) are likely to face another tough and challenging year.
With Government help likely not on the way for many businesses from the upcoming federal Budget, here are a few suggestions for small businesses navigating difficult economic conditions:
- Be pro-active in assessing your business performance, trajectory and reserves. Discuss with your financial advisors opportunities to strengthen your business, such as diversifying revenue streams, exploring new market opportunities and reducing costs where possible.
- Stay on top of your statutory tax debts. The Australian Taxation Office (ATO) is the largest driver of insolvencies in Australia. In the past 18 months, the ATO has increased its debt collection activities in an attempt to collect and reduce the collectable debt; which on its books sits at $52.4 billion as of 31 December 2023.
When facing serious financial troubles; don't put your head in the sand. Talk to a trusted insolvency advisor. Early consultation typically results in more options and better outcomes for all stakeholders involved.
For client's experiencing financial difficulties, we highly recommend reaching out to your local Worrells principal for a complimentary consultation that could help preserve your client's business.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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