Announcing the NSW 2021/22 Budget, Treasurer Dominic Perrottet was cock-a-hoop as he spoke about how well the local economy had performed in the past year. “Our economic rebound has certainly been stronger than predicted”, the Treasurer said. Whilst predicting an $8.6 billion deficit for the year ahead, he was sufficiently optimistic to believe that NSW will return to surplus by 2024/2025.
Quoted in the Australian Financial Review, Treasurer Perrottet continued: “My view in the long run is governments should not be judged on how well they’ve recovered from the COVID pandemic, but what they’ve actually done to imagine what comes next.” This was calculated to create an ‘eyes forward’ mentality and economic analysts have lapped it up, hailing the budget as genuinely reforming.
So, what is in it for our SME clients?
Key elements in NSW Budget 2021-2022 for SMEs
Funding support for the Small Business Commission. Aimed to assist in low-cost mediation in corporate tenancy disputes, provide better information and support to small businesses. The funding should see an increased advocacy voice supporting key coalface issues facing SMEs in 2021. This might benefit small pockets of clients but let’s hope that most of you are not in this position in the first place.
The Shorter Payment Terms Policy is aimed at improving your cashflow in the circumstances where you are subbing to large corporations with contracts valued over $7.5m. Those large players will now be required to pay smaller contractors within 20 business days. Sandbagging payments can cripple smaller contractors, so that will have economic benefits and provide surety for smaller contractors.
Changes to SME & Regional Procurement Policy are designed to improve SME access to Government spending. The policy changes announced by the Treasurer will allow small business and regional businesses to provide goods and services to government agencies up to the value of $150,000 even when a whole-of-government contract is in place. This is a good move and I can see a positive impact in bigger regional centres. The changes also request Government agencies to seek SMEs for procurement and to make sure value is placed on delivering wider economic, ethical, environmental, and social outcomes when deciding on contract suppliers. For larger Government agency projects ($3m+), a local participation and SME plan is to be included.
The Payroll Tax rate will remain at 4.85% above a threshold of $1.2m. Payroll tax is minimally offset by a continuation of the $1,500 rebate on local government fees and charges for SMEs. We’re still pretty nonplussed that business, especially small business, has to pay payroll tax at all! It is a disincentive to hiring more people. This stuff is an anchor on business growth. Let businesses grow, prosper and create wealth. Then assess the wider economic, ethical, environmental and social outcomes. I think it would be a far more prosperous solution. (Rant over!)
Meanwhile, the Dine and Discover program has been extended to the end of July 2021. A good way to stimulate small businesses in the hospitality sector. Regional tourism is also feeling positive vibes from this. And the vibe on Fridays in the Sydney CBD over the coming months will be pretty good considering a $50m voucher program has been introduced. At least the vouchers will have a more positive effect on people’s moods. Much more exhilarating than getting roof insulation batts installed or a school hall built. We just hope we’ll all be allowed to head into town and enjoy a few drinks standing up, just like the good ol’ days!
Other commentary regarding the NSW 2021/22 Budget
If you haven’t caught up with it, there is also a plan to boost electric vehicle uptake by phasing out the stamp duty on certain electric vehicles priced at the lower-end of the EV market. Apart from the chance to drop a dozen car related puns to the media, the Treasurer and Environment Minister were adoring of its effect on the NSW of the future. I don’t want to be the one to dampen their spirits but I have a couple of misgivings about it. Number one is the near certainty that EV drivers will be slugged with a charge somewhere down the track to make up for the Government’s lost revenue to petrol taxes.
Secondly, that the majority of the profits from electric car purchases will head back overseas to the manufacturers. That might (or might not by the way) benefit the environment, but how does that help the NSW economy? Car dealers will recoup some nice earns from it…when and if they can get their hands on stock, that is. It’s all a bit too gushy for mine and smacks of grandstanding. Too harsh? Maybe.
And then there is the extra tax on developers. Most of us are happy for taxes to fall on someone other than us. So, if you’re not a developer, you may not immediately react to this at all. Otherwise, you might be in the camp that says, “yeah, they’re rich, tax those dirty rotten capitalist developers heaps!”.
Yep, they should pay their share. You wouldn’t argue any other way. And when they become the beneficiary of certain infrastructure spending or rezoning, they certainly can and do cash in.
But the majority of developers I know work pretty damn hard and take investment risks that others might not take. So, the counter view is to say “well, good on ‘em, they deserve every success they have.”
And guess who will end up paying the price anyway? Yep, you and I and our children too, because any tax increases will certainly be factored in as price increases. After all, there’s only so much money to go around (unless you keep printing the stuff…)!