Resellers react to budget 2016

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Resellers react to budget 2016

The federal government Tuesday night announced its budget for 2016, which included a number of tax breaks for small and medium businesses.

As part of a ten-year enterprise tax plan, the tax rate for small businesses will be reduced from 28.5 percent to 27.5 percent. The rate will continue to lower to 25 percent by 2026-27.

Businesses with a maximum annual turnover of up to $10 million will be eligible for the new tax rate, up from the current $2 million.

The threshold will rise to gradually cover larger businesses: $25 million in 2017, $50 million in 2018-19 and $100 million in 2019-20.

The $20,000 accelerated depreciation intiative for small businesses, which debuted in last year's budget, has had its life extended to June 2017.

There were also a number of other announcements affecting businesses, including:

  • $213 million in various initiatives to improve Australia’s cyber security practices
  • $679 million to establish a 1000-person tax avoidance taskforce within the Australian Taxation Office
  • $199.4 million to build a new payment processing system for the Department of Education, Department of Human Services and Department of Social Services
  • Multinational companies will be taxed higher rates of 40 percent on profits they shift offshore

The channel verdict: where's the innovation?

CRN spoke to a number of solutions providers in the Australian channel to gauge their thoughts on whether the new budget initiatives would help their business.

Brisbane-headquartered consultants Business Analysts are one of the estimated 870,000 businesses eligible for the new small business tax rate with a turnover of less than $10 million.

Chief executive Tim Coventry said he doesn’t know yet what impact the new tax bracket will have on his company. The biggest issue with the budget, according to Coventry, was a lack of support for the underlying factors that encourage innovation.

“There’s a lot of talk around the idea that we want to move to a new economy of innovation and disruption, but I don’t see anything that actually talks about the skillsets that sit behind it,” said Coventry.

“[The government] has to realise that just chucking money at it is not the answer. You can’t expect to throw money at people and expect them to suddenly have technical capabilities. There’s a skillset around being able to innovate that involves understanding the cycle of innovation, understand the current state we’re in and then looking at the current possibilities for disruption.

Chief executive eNerds Jamie Warner said it was a safe budget, but praised the government’s support for small and medium businesses. He added that a lot of the innovation initiatives had already been implemented prior to the budget.

“Anything that helps small business be more profitable is a win. I think the $20,000 depreciated asset write-off is probably the biggest win for IT providers looking to sell infrastructure because smart companies will use it as part of their sales process.”

Warner also praised the government’s export market and development grant, eligible for businesses looking to productise and export their intellectual property to the global market. Businesses can be reimburses up to 50 percent of promotional expenses above $5000 provided the total expenses are at least $15,000.

“There weren’t too many changes to innovation in the budget because a lot of those initiatives are already in effect. Ultimately, eNerds is a software development company and we’ve taken advantage around incentives for R&D in our new business. Those tax concessions can be significant when they’re done properly.”

The channel verdict: boost in confidence

Director Joshua Boys from Perth cloud provider Ignia said the biggest thing for his company was a boost in spending confidence.

Boys was particularly happy with the tax incentives for startup investors passed in the senate this morning. The Tax Laws Amendment bill was part of last year’s $1.1 billion innovation fund that includes a 20 percent tax offset on investments to “innovative businesses”.

“It’s a fairly safe budget, but our key interests are innovation. Even if it doesn’t necessarily affect us, it’s positive even if it creates competitors. Our philosophy is around doing what’s next, and I relish the competition and the vibrancy in the industry it creates,” said Boys.

“Continuing to fund innovation isn’t just good, it’s needed.”

Lincoln Computer Centre owner Greg Williams was also more enthused about boosting industry confidence, rather than a tax cut.

"I don't look at it as how it will benefit my business but my market. If my small business customers are happy then we do well. If it increases confidence then our future is secure," said Williams.

The South Australian business owner also said that the immediate tax rate cut is helpful but it does not make a material difference unless businesses are already making a lot of money. He believes the real difference will be when the rates reach the 25 percent promised in ten years' time.

The channel verdict: accelerated depreciation

Owner of Townsville reseller Dennis’ Computers and Backup Service, Dennis Evans, said that dropping the tax rate for small businesses helps, even if it doesn’t directly impact his own company.

The only direct impact this might have for his businesses, said Evans, is that companies may be more willing to invest in new server infrastructure after years of holding off. This is because the government has extended the threshold that businesses can apply for a $20,000 instant asset depreciation scheme to companies with an annual turnover up to $10 million.

CPS general manager Tony Warhurst agreed, adding that small businesses will have more room to spend and invest.

"It allows businesses to increase revenue and therefore invest in productivity and infrastructure," said Warhurst.

He was also cautious over the ‘safe budget’, saying it could be just “another election stall”.

The channel verdict: NBN

Budget papers also revealed that the national broadband network will run out of public funding by the end of the 2016-17 financial year.

The government will fork out its last payment of $8.8 billion of a $29.5 billion funding cap for the NBN before the end of next year. That leaves an extra $16.5 billion and $26.5 billion that needs to be covered by the private sector to finish the NBN rollout.

Chief executive Rene Sugo of publicly-listed telecommunications and hosted voice provider MNF said he was disappointed that the government didn’t write off part of the network build in the budget.

“The NBN business case is under serious threat. Failure for the scheme to reach a critical mass of activations could ultimately affect the viability of the whole telco industry and leave consumers worse off,” said Sugo.

“In order to reach its targets, NBN has to be the ‘number one choice’ for data services for consumers and be available at a viable price point for service providers of all sizes to resell.  As it stands, this is not going to be realistic.”

“A fair model would allow middle players to step up and effectively compete in the market, driving NBN uptake and balancing out the challenge of the NBN bypass services.”

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