Tax reform, red tape changes vital for small business

COSBOA suggests to protect the engine room of our economy, we need a once-in-a-generation reboot centred on the twin engines of tax reform and red tape reduction.

The pressure on small businesses across Australia is relentless. Mum-and-dad operators – the heart of our local communities and the backbone of our economy – are bearing the brunt of a perfect storm of rising costs, slowing demand and increasing compliance burdens.

For many small business owners, their life’s work is tied to their homes, with mortgages used as collateral to fund their operations. Yet with sticky inflation and stubbornly high interest rates, their profitability and future are under threat.

Recent data from The Council of Small Business Organisations Australia and Square Small Business Data Report paints a troubling picture: nearly half of small businesses aren’t breaking even, and insolvencies have reached record highs. In the past year, 46 per cent of small businesses have raised prices to survive, while others have streamlined operations and shifted marketing strategies. Even so, optimism remains low – 49 per cent of small business owners feel pessimistic about the economy over the next 12 months.

Despite these challenges, the federal government has yet to respond with the bold, visionary support these businesses desperately need. In COSBOA’s pre-budget submission for the Australian federal budget, we outline the urgent actions required to prevent higher inflation and lower living standards from becoming entrenched.

Engines of reform: tax and red tape

Australia’s small businesses are being left behind by policy settings that fail to recognise their unique needs. Rising costs from complex industrial relations changes, cyber security requirements and compliance processes are strangling growth. These burdens fall disproportionately on smaller operators, who lack the resources of larger businesses to navigate mounting red tape.

To protect the engine room of our economy, we need a once-in-a-generation reboot centred on the twin engines of tax reform and red tape reduction.

Tax reform must prioritise reducing the financial burdens on small businesses. Key steps include:

• Modernising the tax system to reward entrepreneurship and allow small businesses to retain more of their income.

• Returning the Technology Investment Boost to enable businesses to invest in vital digital tools and cyber security measures.

• Harmonising payroll tax across states and raising thresholds to encourage small business employment.

• Making the Instant Asset Write-Off permanent and increasing the threshold to $150,000, creating genuine investment incentives.

At the same time, we must address the red tape that saps the time and energy of small business owners.

COSBOA is calling for:

• Mandatory provisioning of small business impact statements before any new policy proposal is brought before cabinet.

• A dedicated “small business flying squad” within the Regulatory Reform group to identify and eliminate unnecessary compliance barriers.

• A more user-friendly approach to government agencies, ensuring that small business owners can easily access support from entities like the Australian Taxation Office, Fair Work Ombudsman and Fair Work Commission.

• A comprehensible industrial relations system that supports all workforce segments, including casuals, contractors, and the self-employed.

The third pillar: recognition

While reforming tax and red tape is critical, we also need to recognise the invaluable contributions small businesses make to our economy and society. This starts with restoring funding for the Australian Small Business and Family Enterprise Ombudsman, ensuring small business owners have access to vital support services.

We need a greater focus on small business impact within central agencies like Treasury and Finance. Initiatives such as the establishment of a Prime Minister’s Small Business Champion Awards and quarterly Small Business Statements in parliament would highlight the importance of this sector and foster a culture of support and appreciation.

The challenges faced by Australia’s small business sector are not insurmountable, but they require bold and creative leadership. Without decisive action, the consequences will be dire: more insolvencies, fewer businesses, reduced competition and entrenched inflation.

The federal government has a responsibility to back the small businesses that employ more than 5.1 million Australians and drive our local economies. Tax reform, red tape reduction and recognition are the foundation for a thriving small business sector that benefits all Australians.

The Council of Small Business Organisations Australia is ready to help make these reforms a reality. Small businesses are not just part of the economy – they are the heartbeat of our communities.

Luke Achterstraat is the CEO of the Council of Small Business Organisations Australia.