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$484.2 million for entrepreneurs


Alexandra Cain

Buried deep in the budget papers, the Coalition had something special for early stage ventures. But at what cost?

Vinomofo CEO Andre Eikmeier wants policy changes to help early stage ventures.

Vinomofo CEO Andre Eikmeier wants policy changes to help early stage ventures.

The small business sector will benefit from a $484.2 million Entrepreneurs' Infrastructure Program announced in the 2014 federal budget. The Coalition expects this will “improve the capabilities of small to medium enterprises and streamline business access to government programs.”

There's little detail about what the program will deliver. And the news is not all good for early stage ventures. A number of bodies designed to help start-ups will be cut, including Commercialisation Australia, the Enterprise Solutions program, Innovation Investment Fund, Enterprise Connect program and Industry Innovation Precincts scheme.

It’s time to get our fiscal house in order. 

In terms of other budget announcements that will affect small business, SMBs that are companies will benefit from a reduction in the company tax of 1.5 per cent. An initiative to reduce red tape by $1 billion a year should also assist smaller enterprises.

But the decision to index fuel excise will result in increased costs for many enterprises.

What do you think of the federal budget? Post a comment and let us know.

Craig Whatman, a partner with accounting firm Pitcher Partners, says the increase in fuel excise through the re-introduction of indexation will have an impact on businesses across a wide range of industries including transport, logistics and mining. It will also flow through to retailers on their transport costs and to other industries that incur fuel costs such as the construction industry.

“The question will be whether businesses will absorb some or all of the increased cost of fuel or whether they can pass it on to their customers. I think they will be keen to pass it on to their customers as far as possible. But for businesses in a competitive market place on low margins, they may not be able to simply increase their prices to cover the additional fuel cost,” says Whatman.

“If businesses can’t pass it on, it will have a direct and continuing impact on their bottom line. Our clients will have no choice but to manage their fuel costs more closely, carefully manage their cash flow, and work out whether they can pass on the extra cost through increased prices for their products,” he said. 

Business owners have mixed views on the budget. Andre Eikmeier (42),
co-founder and CEO of online wine business Vinomofo, wasn’t expecting much from the budget. He was hoping for changes in policy to help small business and to lift the economy.

“A great start-up ecosystem has to come from people. I would have liked to see policy changes so that crowdfunders can get equity in a start-up business, and a relaxation of payroll tax for SMEs,” says Eikmeier.

“Bigger picture, we need to get GDP down, not up. I'd like to see a scaled consumption tax based on the resources needed to produce a product. The more inputs, the higher the tax. This would to help drive low-impact consumption. I want to see initiatives to educate people to change the way they consume goods. Australia could lead the world by example," he says

Given he’ll have to pay it, Eikmeier says he’s "not thrilled about the deficit levy, but I'll take it. As a profitable company, the reduction in company tax is a nice surprise.” A temporary three-year levy of 2 per cent will be imposed on individuals’ taxable income in excess of $180,000 a year from 1 July this year.

There was not much for small farms in last night’s budget. Kerry (49) and Eddie Galea (52) own Werombi Farm Produce west of Sydney in the Macarthur Region.

They grow produce such as lettuce, broccoli, cauliflower, spinach and celery. While they would have benefited from lower wages in the budget, which some commentators had foreshadowed, they understand it would have been hard for staff on the minimum wage to make ends meet. Given their combined annual income is lower than $50,000 they know only too well how hard it is to make a living working in agriculture.

What they really wanted to see was funding for advertising to encourage people to eat more vegetables. “We need campaigns to re-educate people about how to use fresh food,” says Kerry.

Any change to the fuel rebate would have also hurt their farm. But they see the increase in the fuel excise price in line with inflation as just another price hike they have to absorb.

Grant Rule, executive director of SMS marketing business MessageMedia, agrees with Eikmeier that it’s time to “get our fiscal house in order. The Costello-Howard government failed to realise tax receipt increases in the 2000s were temporary. In hindsight they should have delivered far higher surpluses, rather than increasing handouts and providing tax cuts.”

“The Rudd-Gillard government was a fiscal fiasco. The tide has turned and this government has the courage to increase taxes and make the necessary cuts. Fiscal responsibility is similar to climate change – the longer we put our heads in the sand the more drastic our response will ultimately need to be.”

He says the government’s drip-feed approach to releasing information before it handed down the budget was “superbly executed. It goes to show that with a dose of courage and a modicum of intelligence it’s possible to take tough decisions. This somewhat renews my faith in the Australian political system.”

Rule says the reduced company tax rate will be a benefit to his business. “Our tax rate in Australia is lower than the corporate tax rate for our America operation. Our senior executives and I will pay the deficit levy and personally I’m happy to do so. It’s great to see a Liberal government have the courage to make this sort of call.”

He says he has no real concerns about the budget cuts seriously reducing economic activity. “I’m also confident the announced infrastructure investments will effectively take the place of declining mining investment.”

20 comments so far

  • Yes, good.

    If I had some cash lying around earning a pittance in the bank, I'd invest in a gaming startup or two.

    # When players get hooked on a game, they pay well to keep playing it.

    Date and time
    May 14, 2014, 10:40AM
    • Entrepreneurs take risks. The consequences of taking risks without a safety net, including Medicare, are extremely intimidating when you're not born rich. The government is intent on destroying the safety net. This represses innovation. What the government has done is make it harder for real entrepreneurs, they've made it harder for them to bootstrap themselves and capitalize on their own ideas and work.

      Everything this government does raises the hurdles for the weak and strengthens the status quo. Take the NBN for example, they've undermined potential new industry and future economic growth in order to protect Telstra and Murdoch's media interests. Wealth is not created or distributed by protecting established monopoly interests.

      This is the most selfish, myopic government we have ever had.

      Date and time
      May 14, 2014, 10:42AM
      • "Wealth is not created or distributed by protecting established monopoly interests."

        So, are you saying that competition is good and deregulation breaks monopolies?

        Date and time
        May 14, 2014, 11:33AM
      • And yet your whole argument is based on establishing a newly entrenched monopoly in the market for broadband. It is amazing despite all of the evidence released by NBN themselves there are still people out there that don't understand that the ALP's FTTH model would never have been delivered within the budget or timeline promised.

        Date and time
        May 14, 2014, 5:39PM
    • He says he has no real concerns about the budget cuts seriously reducing economic activity. “I’m also confident the announced infrastructure investments will effectively take the place of declining mining investment.”

      You must be joking. The government has slashed and burned and upped taxes for average Australian consumers. Healthcare, Education, Petrol, cuts to support benefits.

      You think that won't have an effect on 'economic activity'?

      Good luck.

      Enjoy the recession.

      Nice to be Deluded
      Date and time
      May 14, 2014, 10:56AM
      • Better to keep racking up debt on the ol' 'labor cares for our future' credit card eh- let the kids pay for it and all that hey?

        # duty now for the future.

        Date and time
        May 14, 2014, 11:35AM
      • Oh yes Alex, as I recall the biggest growth in spending will be the gold plated Paid Parental Leave Scheme.

        Duty now for the future (and the middle class mums) you think? Tony Abbott and Joe Hockey will NOT reign in middle class tax minimisation such as superannuation, car leasing rorts, negative gearing etc.


        Because there is no' budget emergency' (as you know Alex).

        Date and time
        May 14, 2014, 8:55PM
      • Oh yeah! It doesn't take you long to pick up the new Abbott phrases, does it?

        Unfortunately you have no ability to discriminate between truth and fiction and neither does he. In fact, listening to him and Hockey today reminded me of the fairy stories of my childhood - always that little bit plausible although you know it is not real!!

        Tired of Spin
        Date and time
        May 14, 2014, 9:15PM
    • But what about the reduction to the R&D tax breaks? This will impact on a number of smaller companies just getting out of the start up phase.

      Date and time
      May 14, 2014, 1:06PM
      • Instead of backing the funds and providing certainty of tax treatment for investors into venture capital limited partnerships, it looks the Government might be making the BIG mistake of going into the business of picking winners and losers. Sounds like a recipe for disaster

        Date and time
        May 14, 2014, 2:10PM

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