Australia’s mid-market businesses are generally upbeat about their future, despite widespread concerns of what will happen when the government’s business support packages are turned off, KPMG Enterprise’s annual pre-Budget survey has found.
The responses of over 80 CEOs, CFOs and Directors of mid-tier Australian businesses* showed that more than half (52 percent) were optimistic about their prospects for the next five years, with just 11 percent pessimistic – actually down from the 17 percent who gave this answer last year, before the COVID-19 pandemic.
Less than half (42 percent) said the COVID-19 crisis had had a negative effect on their business, with 37 percent neutral and 21 percent positive. The most significant impacts were costs and margin pressures; lower demand and revenue; and the changing habits and spending patterns of consumers seen during the pandemic, with these three answers being given by over half of respondents.
Nearly 40 percent of businesses were confident they could fully recover within three months of the crisis ending, with just under 30 percent saying it would take over a year. But in terms of the wider economy, 65 percent believed the withdrawal of government spending packages would see a significant decline in economic activity and increases in unemployment.
In other findings, JobKeeper had been accessed by 42 percent of respondents; almost 60 percent said a downturn in the property market would damage their business; while one-third reported that obtaining loans was more difficult now than in previous years.
In terms of repaying the country’s debts, by far the most well-supported answers were raising GST and taking measures to boost Australia’s productivity to grow the economy.
Clive Bird, KPMG Enterprise National Tax Head, said: “It is encouraging to see businesses in the crucial mid-tier sector, the engine room of Australia’s economy, still feeling upbeat about the future, despite the turmoil of this year. While concerns over cost pressures and reduced revenues were to be expected, a sizeable number believe they could be fully ready in a matter of months of the crisis easing. Only a relatively small minority felt recovery would take a year or not happen at all.”
He added: “Interestingly, raising GST was the only tax-raising measure considered an effective option for the government. Nobody wanted direct tax increases, and only 9 percent favoured reduced government spending. Previous KPMG modelling has shown that overall economic welfare is improved if the GST base is expanded, even if the rate is kept at 10 percent and other ‘inefficient taxes’, like insurance taxes and stamp duties on motor vehicles, are abolished. The level of compensation needed to ensure lower income households are no worse off under a broader-based GST has meant the economic benefit is reduced. But given the financial pressures we are facing as a result of COVID-19, difficult decisions like this may have to be reconsidered.”
The survey also showed that mid-tier companies were confident that their tax governance procedures were robust enough to deal with the anticipated increase in audit activity by the ATO, under its Justified Trust program of tax reviews. Compliance activity has eased off considerably during the COVID-19 crisis.
Clive Bird said: “The ATO will shortly be commencing its ‘next 5000′ project, which will put many companies’ documentation and compliance procedures to the test. While our survey showed most felt prepared, they should not underestimate the work involved to be ready.”
* survey responses included listed companies just outside the ASX200, private companies, family businesses and some public sector organisations.