That same survey revealed business owners are particularly concerned about falling property prices, with 44 per cent of them saying falls in Australians housing market are “already making it harder to access business funding”.
William Buck tax director Greg Travers says the flow-on effects of key election policies, including Labor’s negative gearing policy, are as yet unknown and “creating uncertainty” for businesses.
However, the Labor party insists it has “a superior tax offering for small businesses”, shadow treasurer Chris Bowen says.
The plan to axe negative gearing for newly built homes and investment properties could prove a challenge for small businesses, as many owners borrow against their property holdings to grow their businesses, Travers says.
Labor insists the impact on businesses will be minimal.
“All investments made prior to this date will not be affected by the changes and will be fully grandfathered – this means anyone negatively gearing right now will still continue to be able to negatively gear into the future. Our reforms will mean that investors will only be able to claim losses against other investment income,” Bowen says.
“They will still be able to carry forward any unused losses to offset against any eventual capital gain. Our policy only applies to non-business related investments, which means that if a small business is investing in a new business asset, it will not be affected.”
The plan to tax trust distributions at 30 per cent will also catch out a large group of business owners if it eventually becomes law, Travers believes. This would mean companies operating trust structures “will now have a 30 per cent tax rate”, while other businesses would have a 25 per cent tax rate.
Business loan unknowns
Another unknown is the future of Division 7A business loans, a topic that is “not going to have massive appeal” during election discussions but is very important for company owners, Travers says.
Division 7A loans govern how an individual can borrow money from their business and the Coalition government had been considering proposed changes to shorten the repayment periods of these loans which could end up costing companies thousands.
The 2019 budget papers put these changes on hold until 2020. The Labor party says if elected, it will “continue this consultation approach to ensure there are no unintended consequences of the measure”.
Travers says because the timeline on these changes are not known, it could impact business planning.
“For the companies genuinely using this to fund business activities, it does make it harder to plan out multiple years. It’s harder to do that when you’re not sure where the rules are going to change.”
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Emma is the small business reporter for The Age and Sydney Morning Herald based in Melbourne.