Small business in the market for budget relief and bank inquiry revenge

Small business is looking for some relief in today’s budget and some revenge in the next round of the bank inquiry hearings.

Commissioner Kenneth Hayne. (Eddie Jim/Pool)

Small business, on its own reckoning, accounts for about 40 per cent of the nation’s GDP, which means it will be looking for some relief in today’s budget and some revenge in two weeks when the banking royal commission shines a spotlight on small business loans.

The budget break could come in the form of a doubling in the amount allowed as an instant write off.

The limit is now $20,000 which wouldn’t pay for much at all, so some increase may be justified.

The royal commission attention will perhaps be more illuminating because small business has long been a source of easy funds for the banks.

Many loans are tied to mortgages on business owner homes but a higher rate is charged on a business loan even though it is basically a home loan.

The banks are meant to have redrawn small business loan contracts but, so far, Westpac hasn’t made its contract publicly available. The new contracts are also meant to be headed by a one page brief explaining the key terms and obligations but CBA has, on some counts, yet to deliver on this score.

Small business is defined by the Australian Taxation Office as one which has 20 staff or less, so, by definition, it doesn’t enjoy the same ability to work through the terms and regulations as well as say BHP.

Regulations like the 960 sections in the Fair Work Act covering 250,000 words and 122 different awards take some time to work through.

The banks obviously design loans on an individual basis but also tend to review them on a sectoral basis, drawing red lines at various times on say anything to do with boats in WA, construction in North Queensland or small hotel groups.

If the sector is on the nose then there is potential to write off large swathes of loans even though individual contracts were being met and paid off on time.

This is where the royal commission could shine a light on affairs starting with the CBA Project Magellan review of the loan book it acquired through the Bankwest takeover.

The issue has been through several Parliamentary inquiries but some tactics remain unchanged.

Granted its focus is historical but, like the advice provisions, the sector should provide some fertile evidence for Ken Hayne’s team.