A good plan can ensure a slice of the action. Photo: Aaron Brown
I RUN a small bakery business with three locations in Sydney. We have been able to maintain a modest amount of growth by branching out from simply baked goods to things such as coffee. Like most small business owners I have watched the government and media intensely during the past few weeks to see what the federal budget will do to help me. I was disappointed to see there would not be a cut in company tax but I was encouraged by business write-offs for vehicles, especially since we are planning to deliver our products in the near future. The carry-back scheme seems like a good idea, but will it really promote innovation? I know I would prefer to reduce my debt with any refunds rather than put myself into more. But what else in the budget will help my business and other small businesses? I know there are many who are doing it a lot tougher than me - as consumer confidence continues to flutter and with the banks not really helping, falling short of the RBA's 50 basis points.
THE budget did some favours for small business, and it looks like you're across the list.
One of the cornerstones of the government's management of the GFC that really had a positive outcome was the investment allowance for new plant equipment and motor vehicles. The current initiative is similar and will hopefully have that same flow-on effect for small-business confidence.
One point of clarification regarding the vehicle write-off you are referring to is that it's for more than just vehicles. Basically what was announced in the budget was that the Tax Office would allow an immediate deduction for the first $5000 for a new or used vehicle and an immediate deduction for new business assets costing less than $6500 for as many assets as you purchase. Good news for that new coffee machine of yours!
I don't necessarily agree with you that the loss carry-back scheme won't promote innovation. I've seen some negative media commentary about this initiative, specifically about it being available only to a small number of SMEs, but I think it will apply to a decent number of businesses.
The mechanics of the loss carry-back initiative for qualifying recipients will allow you to claim losses up to $1 million against previous year's profits. In practice, the operation of this idea means that if a business makes a loss in the year ending June 30, 2013, but it made a profit and paid tax in 2012, it can effectively combine the two years' results and get a refund of a portion of the tax paid. In the following financial year the ''look-back'' period will be two years.
We're in a volatile environment and many of the small businesses I talk to tell me that their results are anything but consistent from year to year. So if you're prepared to take a calculated risk and it doesn't pan out as expected, this tax refund can certainly soften a potential blow.
From the sounds of things,you seem to be right in tune with what's going on in the news, but my best advice to you and to any small business is to take matters into your own hands rather than wishing, waiting and hoping for some relief from the top. Get back to basics, watch your spending and don't try to grow faster than what you're able to facilitate. You're very focused on Wayne Swan's budget, but take a look at your own. I always tell people to have their budget forecast done by the time the Treasurer announces his. Many people think about their business plan and budget, but can't do a summation in five key figures. Make sure you're not one of them - it's the best thing you can do to plan against uncertainty.
Mark Bouris is executive chairman of Yellow Brick Road, a wealth-management company and small-business adviser that sells products and services for home loans, financial planning, insurance, superannuation, investments, accounting and tax. His advice here is intended as guidance only.
If you have a question for Mark Bouris, email it to Max Mason at email@example.com.