Was Tuesday night’s budget good for your business?

federal budget 


What's the verdict? 

Tuesday night’s budget announcement described by the Prime Minister as a “Fair go” for small business & the Treasurer went a step further naming it the “Have a go” budget.

Are you feeling like having a red hot go? Budget or no budget I really hope you do. The economy & the community are depending on you.

Firstly I’ll explain the 2 main points of the budget for Small Business & save all the finer details for discussion with your accountant to explain & exploit at tax time 

Company tax cut & planning profit

The first main point is quite simple - a reduction in company tax rates of 1.5% from 30% to 28.5%. Any tax cut is a good tax cut in my opinion but the more important question to ask yourself is what are you going to do with profit?

It’s really interesting that many small business owners don’t have a plan for profit. An important lesson I learned many years ago from the great Jim Rohn was ‘that if you don’t make your own plan you become part of someone elses’ plan…. & their plan for you might not be that much!!’

That’s the same with profits – if you don’t plan for them & what to do with them you end up with not that much. Design beats default every time in every area of life & in no place more evident that when it comes to business profits.

As we teach through our Financial Mastery Modules generated profits end up in 1 of 3 areas, all found in your Balance Sheet. It’s why the Balance sheet is the most important report in your business. Profits can be invested in increasing your assets, whether that’s stock, equipment or left in the bank. Alternately you can use your profits to reduce liabilities such as paying off a loan or reducing your overdraft. The third area is in Equity. It’s from equity where you can draw dividends. Equity also provides a cushion, an insurance of sorts, strengthening your balance sheet & giving your business some extra financial space in the ebbs & flows of business & the funding of growth. It’s exactly why banks like to see it on your balance sheet when assessing risk for credit. Equity represents your value, the accumulation of your successes, much of us earning it the hard way via sweat equity.

So how are you going to invest your extra 1.5%?

Now is the best time to start your profit planning both for the end of this financial year & the next.

The second point, which applies to 96% of the Small Business economy in Australia, those with annual revenue of less than $2m,is an instant asset write off for assets up to $20,000. What that means is rather than depreciate an asset over time, which is a claimable tax reducing expense, the Government will permit you to write off 100% of the cost instantly allowing you to depreciate it all in just 1 year, reducing your net profit on paper & therefore reducing your company tax liability.

Is this good for you? Is there an advantage to be gained for your business?

The perspective I like to take on any asset purchase, or for that matter any expense, is to look at it from the eyes of an investor. An investor looks at 3 main criteria:

  1. The value of an investment i.e. the cost/price
  2. The rate of return.
  3. How long it takes to get their money back.

For example lets look at a shiny new piece of equipment that costs us $10,000. If that piece of equipment makes you more efficient, allows you to produce more, save cost or allow you to expand your product range & for the sake of this example we will assume we calculated a return of $5,000 of direct benefit each year – the benefit is the Gross Profit or contribution not the total sales amount (beginners mistake!!). The investors’ perspective is a 50% rate of return & 2 years to get their money back. Sounds like a great investment to me. What do you think?

The devil is really in the detail here & the only way to make the commercial argument is to equate those benefits in dollar terms. Therefore if you can work out the return, you are comfortable with the rate of return & the pay back time then I would suggest you go for it. If you can’t be bothered working it out I would suggest you don’t bother spending your company’s cash until you do.

But before you go off & start pumping up the greater economy here’s a few other questions before you hand over your credit card details. It’s my little checklist that will help you make a better investment decision for your business?

  1. Are you generating enough profit to take advantage of the tax write off in the first place?
  2. If you didn’t have the tax deduction would you still buy it?
  3. Will this investment genuinely give you a return or are you just after a newer toy?
  4. If you are borrowing money to make an investment you have to add the interest costs & associated finance charges to your costings. This will further extend your payback time & reduce your rate of return.
  5. Never forget that cash-flow & profit are different. Just because something is profitable doesn’t mean you can cash-flow (afford) it.
  6. Do you REALLY need it.


My personal opinion is that it was a good budget for Small Business & placing Small Business at the front & centre is great for everyone. For way to long small business, the backbone of not just the local but the global economy & employment, tends to be last on the list. Great to see us on top!!

Let us know if you need any help working out the numbers to make better investment decisions in your business.

Keep growing…

If you'd like to speak to Damien about your business you can apply for a Complimentary Strategy Call. 


About the Author

Damien Digby 

A seasoned veteran in the world of small business, starting his first successful business at the age of 15, Damien has bought, built & sold more than 20 businesses, achieving his goal of retiring in the Mediterranean before the age of 40.

Thankfully his retirement was short lived & for the last 12 years has imparted his knowledge & experience coaching many other businesses to success across 3 continents & dozens of industries. He has personally coached more than 80 businesses, built a National franchise from scratch & developed a system for business success that is used all over the world to grow businesses. A passionate small business advocate, Damien is now the Managing Partner of Unlimited Business & heads up client program development – Unlimited Business is a World Class centre for supporting, coaching & training Small Business owners.

damien digby business coach