Small business: The forgotten portfolio
every interaction that small businesses have with government agencies is built on the same assumption: that the business is doing the wrong thing and must prove otherwise. by david hughes.
First published in the MRC’s Watercooler newsletter. Sign up to our mailing list to receive Watercooler directly in your inbox.
Just when you thought the attacks on business couldn’t get any worse. This month, the Government has quietly introduced legislation that discriminates against businesses that don’t have union agreements. This extraordinary piece of legislation grants the Government the right to preference businesses who have unionised workforces covered under a union enterprise agreement. In the Government's own words, this preferential treatment covers “making a grant of financial assistance or procuring goods or services”.
In other words, if you run a business and don’t have a unionised workforce covered by a union-written enterprise agreement then good luck getting any Government contracts or financial assistance. If you run a small building company in Victoria, your survival hinges on phoning John Setka (then again, what’s new).
It raises the question: why do we bother with private enterprise in a country that treats you as the enemy?
A typical small business answers to as many as 15 separate government agencies like the ATO, the Fair Work Commission, licensing bodies, local councils. All conditioned to treat business as the enemy and to read every action or request as malicious. Every interaction is built on the same assumption: that the business is doing the wrong thing and must prove otherwise. There isn't a single government body dedicated to helping small business owners. There is no agency whose job is to make it easier for businesses to employ, to invest, to open the doors.
Consider what we ask of these people. We make them collect the GST on our behalf. We charge them payroll tax for the privilege of employing another Australian. We require them to pay superannuation on top of wages, and to calculate it, report it and remit it themselves. The small business owner is conscripted as tax collector, compliance officer and bookkeeper long before anyone lets them be an entrepreneur, or pay themselves.
Overregulated to farcical proportions
A café in Victoria needs 36 separate licences and approvals before it can pour a single coffee. A tradie on the Gold Coast pays hundreds of dollars in permits just to fix a tap across the border in New South Wales.
As a result, a record 14,722 companies went under last year. Since this Government took office, 46,500 have failed. Behind every failed business is a family, a payroll and a pile of unpaid bills. They are not the dodgy operators Labor likes to cast them as. They are cafés, builders, shops and tradies who did everything right and still can’t keep their heads above rising costs and regulation. Power bills are up, despite promises they would fall. Insurance has jumped by as much as 30 per cent. Wages rise faster than takings. And the rule book grows thicker every year.
How many Cabinet Ministers have ever filled out a quarterly Business Activity Statement, or tried to call the ATO to vary a tax installment? The answer is two out of 23. If there were more, they would know that as a business owner, you cannot get through to the ATO for the better part of a year. The only way to guarantee a call with a human is to be late on your tax installments (often based on the ATO’s incorrect estimates). You cannot fix what you have never had to endure.
It is against this backdrop that the recent Budget must be read. Tax something and you get less of it: less investment, less enterprise, less small business.
Even before the new tax hikes we were already lagging. Our small business tax rate of 25 per cent is above the OECD average, and higher than almost every country we compete with for capital and talent. It’s 17% in Singapore and 21% in the US. Even the godfather of bureaucracy, the UK, has a lower rate at 19%.
The alternative to this assault on aspiration is pretty simple. Back the people who back themselves, and get out of their way. Our small business tax rate should be closer to 20% than 25%. We should bring in a dedicated small business agency — who unlike the ATO, actually picks up the phone — and give it powers to help rectify mistakes made by regulators. Then fix the basics: make energy cheaper and amend the patchwork definition of “small business” that punishes a company for going from 14 to 15 employees.
Australia's small business owners are not asking for a handout. They ask only to be left alone to have a go. We need to stop seeing small business as a resource to be taxed and start seeing it as a great social and economic good, one that employs more than 5 million people and provides a counterbalance to the unproductive government sector.
