Despite criticisms of “political retreat”, the 2015 Federal Budget has won the support of at least one group – the building and construction industry.
Announced by Treasurer Joe Hockey last night, the Budget includes a $5.5 billion Jobs and Small Business Package that provides an immediate tax deduction of all assets under $20,000 to help small businesses invest in as many items they need under that amount as they like, including new tools or machinery. This measure was effective from last night, 12 May 2015 and will end in June 2017.
The tax burden for small business owners with an annual turnover of under $2 million was also reduced to 1.5 per cent, while smaller, unincorporated companies such as sole traders and partnerships will be given a five per cent tax discount.
Boasting more than 300,000 small businesses (more than any other industry), the building and construction industry is one of the big “winners” of the Budget, with the news particularly welcomed after the latest Master Builders (MBA) National Survey recorded a fall in business conditions for building firms in the March quarter.
“Builders experienced a fall back in building activity and confidence in the March quarter and this was reflected in a softening of hiring intentions as the index measuring builder’s intention to employ more tradespeople and apprentices declined from the more optimistic outlook recorded in the December quarter 2014,” MBA Chief Economist Peter Jones had said.
“A reboot in confidence is fundamental to nurturing the green shoots of sustained activity in the commercial construction sector which is struggling to recover to pre GFC levels.”
The Package is expected to be the source of this much-needed ‘reboot’, and will work to boost business investment, confidence and activity in the industry. According to the Federal Government, increasing the depreciation threshold will mean improved cash flow for small businesses, and encourage them to bring forward investment in the assets they need to form and grow their businesses.
“In an industry as capital intensive as building and construction, the immediate write off of assets up to $20,000 will provide an immediate stimulus,” says MBA CEO, Wilhelm Harnisch.
“Measures to cut tax for both small companies and sole traders will also underpin a reboot of confidence for builders, home-buyers and consumers.
“Master Builders called for short term tax measures to boost building activity and maintain the momentum of the housing upturn and these measures have exceeded builders’ expectations.”
Residential building construction: greater focus on skills and training needed
The Housing Association of Australia (HIA) has also welcomed the Package, noting that it would provide important support to small businesses in the residential construction industry.
However, with HIA Chief Executive, Industry Policy and Media Relations, Graham Wolfe says that the “$131 million taken from training and education programs can only be described as a backward step”, pointing to the Government’s aims of reducing expenditure on training programs by $1 billion over five years. Abandoned programmes include the ‘Australian Apprenticeships Mentoring Programme’ and ‘Incentive Programme – Tools for your Trade’, which provided a grant to apprentices to cover the costs associated with their training.
“There needs to be a greater focus on skills and training to nurture and develop the skilled labour force required to house Australia’s growing and ageing population,” says Wolfe.
“Much of the budget savings achieved by cutting these programs has been reallocated to the establishment of an ‘Industry Skills Fund’. At present, little detail is known about the workings of the fund. However, it appears it may have more limited scope than the schemes it replaces. It is unclear whether the residential building industry will be eligible for funding under the new programme,” adds the HIA.
Welcoming the Federal Government’s acknowledgment of the problems surrounding the data collection, analysis and reporting functions of the Australian Bureau of Statistics, the HIA has also decided to provide an extra $235 million to the Bureau over the next five years to “enhance these essential activities”.