How the government can boost small business

Minister for Employment Michaelia Cash. Picture: AAP

For countless decades big government, big unions and big companies have set the business rules and ignored our largest employment generator: small enterprises. Both major parties have made looking after mates more important that employment generation. If we are going to recover from the long term impact of the COVID -19 pandemic we will need to set rules that make it easier to employ people. To date the only solutions on the table are spending more money but that will not work (and will harm the economy) unless we tackle the underlying causes of the problem. .

That’s why the COVID-19 Recovery Plan prepared by small business ombudsman, Kate Carnell is the first plan that has been prepared that looks at the wider actions that are required. The money involved is not huge. Its all about reversing neglect.

Callam Pickering, APAC Economist at global job site Indeed, sets out the depth of the problem: one in five women under 20, has lost their job, compared to one in eight young men. While job losses have been concentrated among younger workers, particularly those working part-time, they are sizeable across every age group, including those aged 50-59.

Carnell says that our small businesses – which represent more than 98 per cent of all businesses – are “shoehorned” into working in an environment designed to benefit and meet the needs of large business. Government needs to carve out a system that suits the small business sector to achieve significant productivity and employment growth.

Reversing the neglect

To reverse generations of neglect has required a vast number of recommendations from Carnell but here is my top 10.

1. Legislate 30 day payment terms for small businesses. This is desperately needed to lift cash flow.

2. Introduce a government provided, revenue-contingent small business loan to allow for the phase out of JobKeeper payments. The “hibernation” approach to managing the COVID-19 situation sees debts being deferred and temporary reductions of rent, which will soon disappear. Help is needed and banks don’t have the capacity.

3. Replace depreciation schedules and temporary schemes with a permanent instant asset tax write-off for small business of $150,000, indexed annually and reviewed every three years. That will enable long term planning and greater employment hiring confidence.

4. Allow small businesses to make a single payment to the ATO to cover PAYG (W), superannuation guarantee and GST payments in line with their Single Touch Payroll reporting, with the ATO distributing superannuation to the relevant funds. What a difference that would make to the paperwork jungle.

5. Reduce the period of review for small business tax returns to one year following lodgement.

6. Introduce a new Small Business Award which includes a single category for all staff, irrespective of duties to be performed, with a single minimum hourly rate and loadings for weekend, public holiday, and late-night rosters. The award will include the provision for “permaflexi” staff who are employed on a permanent basis but with flexible hours each week. Using this award would be optional.

7. Unfair contract terms should be automatically void, rather than voidable, with substantial penalties and compensation payments. The unfair contract terms regime should apply to all contracts, including government. Unfair contracts where large enterprises and governments force contracts on small enterprises that allow the large organisation to change most of the contract terms but the small enterprise has no such rights are one of the great scourges on the small business community and the nation.

8. Remove Fringe Benefits Tax from small business. Small businesses pay FBT on items that large businesses provide in-house. A large business is able to provide on-site childcare, access to a gym located within their premises and on-site lunches and café services solely to their people, while claiming some services as business expenses and not paying FBT on any. When small business provides these same benefits to their teams offsite, FBT is payable. This differential helps larger enterprises recruit quality staff.

9. Create a small business procurement panel for small businesses with less than $10m turnover whereby when a government contract has to go to tender, and it is under an annual value of $10 million, the tender must be offered through the Small Business Panel before being opened to the wider market. Some 94 per cent of total Government contracts are valued under $1 million, with 59 per cent below $80,000 yet the successful small business successful tender content is small.

10. Improving the enterprise collapse rules including increasing thresholds for creditors being able to issue a statutory demand on a company from $2,000 to $5,000. The statutory time frame for a company to respond to a statutory demand should be increased to 45 days. ASIC to ensure that liquidator costs charged are proportionate to the size of the business and complaints against liquidators are investigated properly.

Among the other recommendations are improving the farm debt mediation system and ensuring that it is nationally consistent (perhaps this should have been in the top 10); ensuring least cost routing for electronic payments to address increased costs of touch and go payments; reduce small business disruption by government infrastructure projects; improve access to skills for small business; fund an extensive “Buy Small Business Australia” program; Retain National Cabinet to deal with cross border regulatory and other barriers.

Small Business minister Michaelia Cash has a lot if work ahead of her.