An insolvency practitioner’s view on the upcoming 2024-25 Federal Budget – Insolvency/Bankruptcy

Are small businesses left to fend for themselves?

On 14 May 2024, the Australian Federal Budget for the 2024-25
financial year will be released by the Treasurer, Jim Chalmers.

The following are my key insights from an insolvency
practitioner’s point-of-view on the government’s messages,
as well as the potential implications for businesses amid a
challenging economic climate.

The Government’s headline features of the upcoming Budget
are well publicised, being:

1. Stage 3 income tax cuts;




2. Superannuation contributions on Government paid parental leave;
   and




3. Funding for remote housing in the Northern Territory.

The main opportunity for further insight into the
Government’s thinking regarding the Budget came from Mr
Chalmers’ pre-Budget speech on 13 March 2024. One key takeaway
I had following Mr Chalmers’ speech was that many businesses
appear to be largely left to fend for themselves. Mr Chalmers
highlighted:

• The three biggest drivers of their thinking about this budget
  are global uncertainty, persistent cost-of-living pressures and
  slowing growth.




• There will be no further big cash splashes, with the stage 3
  income tax cuts already representing the Government’s main
  attempt to assist Australians with costs of living pressures.




• Important spending targets in the Budget include education and
  skills, health, aged care and renewable energy transition.

While the Government aims to avoid exacerbating inflation, which
is now sitting around 3.4 percent in February 2024, after peaking
at 8 percent at the end of 2022. It remains uncertain how much
disposable income from Australian households will support
industries that are already struggling from the cost of living
crisis. Additional insights from the Treasurer’s communication
include:

• Minimal further Government intervention is expected to relieve
  cost of living pressures on households; and




• Certain already at-risk industry sectors (construction,
  discretionary retailers and hospitality) are likely to face another
  tough and challenging year.

With Government help likely not on the way for many businesses
from the upcoming federal Budget, here are a few suggestions for
small businesses navigating difficult economic conditions:

• Be pro-active in assessing your business performance,
  trajectory and reserves. Discuss with your financial advisors
  opportunities to strengthen your business, such as diversifying
  revenue streams, exploring new market opportunities and reducing
  costs where possible.




• Stay on top of your statutory tax debts. The Australian
  Taxation Office (ATO) is the largest driver of insolvencies in
  Australia. In the past 18 months, the ATO has increased its debt
  collection activities in an attempt to collect and reduce the
  collectable debt; which on its books sits at $52.4 billion as of 31
  December 2023.

When facing serious financial troubles; don’t put your head
in the sand. Talk to a trusted insolvency advisor. Early
consultation typically results in more options and better outcomes
for all stakeholders involved.

For client’s experiencing financial difficulties, we highly
recommend reaching out to your local Worrells principal for a
complimentary consultation that could help preserve your
client’s business.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.