Small-business owners are feeling the skyrocketing cost of doing business right now, and many say that the pressure of taxes is a major contributor to their expenses.
With a federal election looming this year, major parties are beginning to court the small-business vote with varying promises of tax changes. But what reforms would actually help? ISB asked small-business owners what tax changes would really help them right now – here’s what they said.
1. Overhauling or removing payroll tax
When it comes to small-business owners’ least favourite taxes, payroll tax has long been a throughline. The tax, which applies to any business whose taxable employee wages exceed the state threshold, was mentioned by several business owners that reached out to ISB.
“To have a single extra tax purely based on the amount of payroll we have that’s separate to all PAYG, income tax, and GST feels like insanity,” said Nathan Schokker of MODC Digital Business Cards.
Schokker added that the tax is a major disincentive to expanding his onshore team, despite the fact that his growing tech company needs the talent.
“They don’t bother to index it to CPI, nor do they pay attention to the benefits in increased employment, productivity, business growth and all associated tax gains by removing it,” said the business owner. “Blows our minds… get rid of it!”
2. A rightsized GST system
Goods and Services Tax (GST) may be just as complained-about as payroll tax among small-business owners. Business coach Tom Adam said it’s a universal problem for the small businesses that he works with.
“Small businesses under 20 employees that are service-based see their GST and PAYG tax components being over 12 per cent of their revenues each month,” said Adam. “The time has come to consider a scaled GST system to give small businesses a break.”
3. More small-business concessions across the board
Other burdensome taxes mentioned by business owners included fringe benefits tax, capital gains tax, and company tax.
Regardless of the tax, the common theme was that small-business owners wanted more concessions made for companies of their size. They called for higher exemption thresholds, simplified rules, and more generous rollover provisions in the case of the FBT.
4. More clarity around tax incentives
Several small-business owners also mentioned that they would like tax incentives to be made more accessible and predictable. A few mentioned the popular instant asset write-off as an example. This incentive has been a popular tax incentive since its 2011 inception under the Gillard government. Despite this, no government has yet committed to making the measure permanent. A lack of clarity around what tax incentives they can expect makes long-term planning difficult for small-business owners.
“We need to see [the instant asset write-off] supported as soon as it is announced, not last minute before the end of the tax year, as it was last financial year,” said Rachel Power, who runs a small cafe in rural Tasmania.
With an election approaching, lobbying for all the initiatives mentioned above has been intensifying. The Council of Small Business Organisations Australia (COSBOA) recently urged the Government to make the instant asset write-off permanent and raise the threshold, as well as to lower taxes and raise payroll tax thresholds.
“A perfect storm of rising costs, slowing demand, and mounting regulatory pressures is putting immense strain on small businesses – many of which are family-owned and built on personal sacrifices,” said COSBOA CEO Luke Achterstraat. “Without urgent reforms, we face record insolvencies, fewer entrepreneurs, and weaker competition. Ultimately, this means higher prices and lower living standards for all Australians.”
