Government hopes business Budget will spur investment and hiring, but some firms have other plans

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It is being dubbed the Budget for business and a lot is riding on firms taking up the incentives and tax breaks offered by the Government — nearly 1 million jobs by the Treasurer’s estimate.

For many Australian business owners still battling the ramifications of the pandemic, there is a lot to feel positive about in the Budget, but others feel let down by the hype.

Here’s what businesses around the country made of the hiring and investment incentives contained in Budget 2020.

‘We can now buy sewing machines’

What do you buy when the Government tells you that you can now instantly write-off multiple assets, claiming them upfront as a tax deduction?

For Pushpinder Singh, the answer is sewing machines.

Mr Singh runs a company in regional Victoria that turns sustainably sourced fabrics into uniforms for other companies.

While business has been hit hard by COVID-19, it is still lucky enough to have some money in the bank to invest in equipment.

“Our turnover has been considerably reduced with COVID-19 so any purchase we have to think over a million times.

“Just knowing that the Government will offset the purchase of equipment is an extra boost.”

The company is also hoping to hold pop-up stalls at markets once border restrictions ease, using the new JobMaker program to bring on younger casuals under the age of 35 years old and receive $200 a week for each.

“Just that $200 will allow us to employ more people.”

Many incentives ‘useless’ in locked down Victoria

Adventure company owner Adrian Manikas was initially buoyed by the Budget.

His company runs tour groups for school students and hiking expeditions around the Grampians National Park in regional Victoria.

Like many business owners in the southern state, he has been devastated by its second wave — Absolute Outdoors has not taken a booking since March.

“Actually watching the Treasurer give out the speech, there were a lot of things that seemed positive,” he said.

“Especially as we’ve been expecting to hire an apprentice next year, so some of the wage subsidies were a positive thing and the tax deductions sounded great.

“But the deeper we dived into it, it seems many aren’t applicable for us.”

For instance, the company could have used new expensing benefits to buy a new 4WD and then claim it as a full tax deduction.

However, they cannot do that without money in the bank.

“The instant asset write-off is only useful if you’re in a cash position to invest and for that investment to be useful to generate more revenue. Or else it’s useless,” Mr Manikas said.

He also does not want to even consider using new employment incentives such as JobMaker to hire more staff until border restrictions in Victoria open up the potential for more tourism. Right now, they are even locked off to Melbourne hikers.

“Employing more staff is only good if there’s work for them to do,” he said.

‘The Government can’t ensure a pandemic is not going to happen again’

The Government’s hoping its big tax breaks for business will spur investment and help the economy climb out of recession, but Nomad Bouldering Gym in Sydney will not be opening its coffers just yet.

After restrictions forced the business to shut its doors for three months, manager Emma Horan says it will not be making a major investment, no matter the tax deduction it receives.

“That tax write-off would be nice if you had any money in the bank,” she said.

“I guess that’s the whole essence of small business, you’re not necessarily going to have that money lying around.”

And even when Nomad does build its cash reserves back up, they are likely to stay in the bank.

“Definitely, we are going to be far more cautious with our spending and a lot of small businesses are going to be less likely to be expanding and taking as many risks,” Ms Horan said.

“Rather than having three months’ worth of savings in the bank in case shit happens, you’re going to have 12 months.

“I don’t think businesses are going to be that comfortable to spend any cash because the Government can’t ensure a pandemic’s not going to happen again.”

As for the credit for businesses hiring under-35-year-olds, Nomad mainly employs younger people anyway.

And Ms Horan says their hiring process is quite selective given it is a specialised gym.

“The limited amount we would get from it wouldn’t outweigh the skills that we needed.”

Demand, not tax breaks, drive investment for fashion label

Unlike many small businesses, fashion label Citizen Wolf is hiring.

While the first few months of the pandemic hit business hard, things have now picked up.

Co-founder Zoltan Csaki is pleased with the JobMaker incentive to hire younger workers and says it should encourage the business to add to its already-youthful workforce.

His company uses laser-cut printing and an algorithm to produce made-to-order fitted clothing, so he is no stranger to spending big on equipment.

But he is not going to bring investments forward to take advantage of new tax breaks unless there is a compelling business case.

“As a small independent business we make big investment decisions based on demand and growth, not based on whether or not we’re going to get a tax break,” he said.

He is disappointed about income tax cuts that offer no incentives for recipients to spend any extra money with local companies, rather than overseas brands.

‘Hiring young people is a mute conversation’

ASX-listed resources start-up ASM is eyeing off the Federal Government’s $1.3 billion Modern Manufacturing Initiative.

The Dubbo-based company has less than 20 employees but it is seeking finance to launch a mine in central-western NSW that could turn rare earths into products for wind turbines, electric car batteries, 3D metal printing, and other technologies in growing demand.

“COVID-19 could be a catalyst for Australia to rebuild itself as a manufacturing nation,” the company’s general manager David Woodall says.

But apart from hopefully accessing that fund to develop its project, ASM will not reap many benefits from the Budget’s announcements in the short term.

The company is not expecting to post significant losses until it starts building its project, so it will not get any benefit from the Budget’s temporary “carry-back” measure, unless it is extended for years to come.

It is the same with the Federal Government’s new youth employment initiative, JobMaker.

Just like with JobSeeker and JobKeeper, that program’s longevity is unclear.

“JobMaker might be gone by the time we’re ready to hire. It’s a bit of a mute conversation.”

‘I’m talking to my accountant’

Tech company owner Saxon Phipps feels the Budget is a “step into the future”.

His company Year13 produces an online platform that helps young Australians navigate higher education. Only yesterday it published a survey that found 80 per cent of young people are feeling concerned about their employment opportunities during the pandemic.

The company has found a silver lining in the push towards online education during COVID-19.

They are now up to 35 employees and all of them, bar one, are under the age of 35.

Mr Phipps now hopes to use JobMaker to bring on several more younger employees.

One Budget measure that has received less widespread attention is the scrapping of a proposed and controversial $4 million cap on the amount of money that smaller companies could write-off as research and development.

For a tech company like Year13, that is promising.

“We’re talking to our accountant right now to figure out what that all means. It could save us tens of thousands of dollars,” Mr Phipps said.

By business reporters Emilia Terzon and Stephanie Chalmers (Original ABC Article)

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