Family trusts are under fire from Labor, but that's not the only trust issue Aussie SMEs have at the moment. Beyond the scope of an attack on the kind of tax arrangement many family-run businesses in Australia employ, there’s the greater issue of trust between small business and other institutions.
Bill Shorten has conceded the proposal to tax discretionary trusts at a flat 30% rate could end up hitting about 200,000 small businesses run by families using such trusts. The ATO has been chipping away at family trusts for a couple of years now, but Labor’s proposal could seriously dent the way family businesses share income between themselves and undertake succession planning.
Small business owners are probably not greatly surprised at all this. They’ve become used to being the punching bag for bullies, from big banks to the ATO, through to government bureaucracies and lowlife scammers. It seems like small businesses are constantly having to look over their shoulders to see who wants to mug them next.
As a result, the idea of trust that is so necessary to the successful operation of our economy becomes severely eroded.
National Australia Bank chairman Ken Henry hit it on the head when he pointed out the trust issue is infecting how we all think about the major institutions in our society.
"There is a lack of trust in institutions, and there is a large number of reasons for this, and they're very complex," he said. "It's going to take a long time ... for the trust in institutions to be rebuilt," Henry was quoted in the SMH as saying.
The ATO seems always at the ready to prosecute the case against small business owners, going as far as to closely monitor what SMEs are up to via their social media postings.
Big corporates leave small businesses hanging in the cash flow abyss with their slow payment times. SMEs can expect to wait a couple of months for payment from the big end of town.
In fact, the Payment Times and Practices Inquiry report released earlier this year found almost half of all the small businesses surveyed were owed more than $20,000 from late payments and 14% of businesses have more than $100,000 owing.
(You have to love the title to the introductory chapter of this report: “Payment times matter” or “How I started using small businesses to finance my multinational conglomerate”.)
This is before we even take into account how difficult it is for many solo and small business operators to get funding for their businesses from banks and other financial institutions. Or how tough it can be to actually hire or fire staff as required. Or to get any sort of paperwork seen to or processed in a timely manner by local, state or federal government.
There are 2.17 million actively trading small businesses (from solo to medium-sized enterprises) in Australia employing about 4.7 million people. The SME sector has been variously described as the engine room, or backbone, of the economy by plenty of people. We all know it’s an important part of not only our economy, but our broader society too. Small businesses are often the glue that keeps many local communities together.
So why do these hard-working business owners have to put up with all this? Is it any wonder there’s no trust left in the system? Maybe when we all start to treat small business owners with a little more respect and goodwill, we’ll start to see trust restored throughout our economy.This article was first published by www.switzer.com.au
Author: Words by Fi Bendall