Strong economy key when having a go

LAST week Joe Hockey implored us to get out there and have a crack: “Now is the time to have a go … to borrow some money and invest”.

06/02/2009 BUSINESS: Scott Pape. The Barefoot Investor. HWT staff.

LAST week Joe Hockey implored us to get out there and have a crack: “Now is the time to have a go … to borrow some money and invest”.

Well, in Tuesday’s Budget, he put his money where his mouth is — tempting small business owners (and those thinking about throwing their hat in the ring) to spend to gain generous investment-related deductions.

Small businesses with a turnover of less than $2 million will get an immediate tax deduction for assets they buy that cost less than $20,000 — up from $1000. And they’ll also receive a 1.5 per cent tax cut (sole traders, partnerships or trusts will get up to a $1000 a year tax discount), which the big end of town misses out on.

Hockey is also tempting you to set up shop. We’re an entrepreneurial bunch, us Aussies. In 2013-14 we set up 280,000 small businesses — proportionately, we’re second only to the US in the entrepreneurial Olympics.

So how is the Government tempting you to flip the bird to your boss? Basically by cutting red tape. It’s simplifying the process of setting up a small business via a single online registration, allowing start-ups to immediately write off the professional costs of setting up a business, and making it easier to access crowdsourcing funding (banks rarely lend to start-ups, and superannuation funds largely stick to listed public companies).

Partly, these reforms are a recognition that small business is the lifeblood of our economy. Some 96 per cent of all Aussie businesses are small businesses, and they employ more than 4.5 million people.

But these changes also make total economic sense for our future: if we are going to move up the economic food chain from merely digging stuff out of the ground, we need to encourage entrepreneurs to take a risk, employ a bunch of people, and do something great. So, giddyup and spend, spend, spend small business owners.

Right? Well, not so fast. The golden rule of investing is that you don’t make your decisions based solely on getting a tax benefit, and that’s especially true of the riskiest (but potentially most lucrative) investment — your own business.

So, as a small-business owner myself, I welcome these changes (especially the tax cut), yet in order to get us to really ‘have a go’ and invest for the long-term, what we really need is a strong economy and confident consumers. And as the Treasurer’s economic outlook showed, for the first time in 24 years, that’s certainly not a given.

Originally published as Strong economy key when having a go