Treasurer Josh Frydenberg will deliver the 2021-22 Federal Budget next Tuesday, 11 May. It’s been a massive year for the Australian economy, with the country currently experiencing the highest net operating deficit in history (in the hundreds of billions) and the nation’s small business landscape experiencing the greatest impact of all.

The vast majority (over 90%) of Australian businesses are small businesses. They account for 33 per cent of Australia’s GDP, employ over 40 per cent of Australia’s workforce, and pay around 12 per cent of total company tax revenue. So in the lead up to next week’s much-anticipated announcement, let us take a closer look at what small business really wants – and needs – from Budget 2021-22.

A balancing act

Frydenberg has no small task ahead of him. He’ll need to provide an economic vision that successfully encompasses the need for economic recovery from the COVID-induced 2020 recession, the impact of the government’s debt explosion to above $1 trillion, and the political implications inherent in a budget speech delivered in the shadow of a forthcoming election.

We’re likely to see a fall in real government spending thanks to the ending of JobKeeper and the termination of the JobSeeker supplement; a level of fiscal austerity that will be heavily scrutinised as economists weigh up the prospects of a return to full employment, inflation, and wages growth.

Australians have witnessed a significantly improved economic outlook in recent months, a relief after the devastating events leading up to and including the 3rd quarter of last year. High levels of risk remain in key sectors such as tourism and higher education, so it’s difficult to quantify what impact the various vaccine setbacks, for example, might have on those sectors, and the economy as a whole.

Consumer confidence would be bolstered by wages growth, which is not something the government is guaranteed of incorporating. Added to the mix is the ongoing uncertainty about the re-opening of international borders, pivotal for the economic wellbeing of key industries and regions.

Budget repair during an election year

Budget repair is bound to be drawing the government in one direction, whereas the promises inherent in an election year is likely drawing it in another.

They’ll also likely be making mention of policies that will reflect the recommendations from the Aged Care and Banking Royal Commissions, surely to gain a lot of attention from small business. While a broader base on the GST would be a solid move for economic growth, it’s not a vote-getter; so don’t hold your breath for anything of that nature.

Changes to capital gains tax rollovers, however, are more likely, as they would provide greater incentives to small business owners to generate more efficiencies in their business structures. Targeted sector incentives are more than likely, considering the aforementioned industries still impacted by the pandemic.

Small businesses benefitting from the Tourism Support Package would surely benefit from the program’s extension; a comparatively small investment from the government that could see significant wins (at least from a PR standpoint).

Super for the future

Also, a superannuation shake-up – small as it’s likely to be – could involve the government renegotiating future increases of the super guarantee to 10% and above by making employers apply superannuation to all payments made to their employees in the years leading up to an increase. Only time will tell.

Small businesses want this next federal budget to instil them with a sense of confidence to allow them to better plan and achieve their growth over the next financial year. Smaller incentives, such as additional instant asset tax write-offs would also be beneficial as ‘place holders’ until greater, more long-lasting financial incentives are brought about.

Top of our wish list? We are looking forward to Budget 2021-2022 acknowledging the vital role of small business in Australia’s economy, and seeing the rollout of programs that embrace them.

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