On May 3, the whole (well some) of Australia waited with bated breath to hear what the 2016 Federal Budget would hold. Some thought negative gearing could get ditched, others predicted GST changes – both were wrong.
Instead, one of the major announcements coming into play is the complete change in how small businesses are perceived by the tax man. While previously a small business – at least for tax purposes – was one with annual turnover of $2 million or less, that has been extended five-fold to $10 million.
Corporate tax has also been reduced to 27.5%, which is thought to help some 870,000 companies keep more money for themselves and maintain a better cash flow. That could be great news for insurance brokers whose clients struggle with the affordability of cover.
So, what else should insurance brokers be aware of with the brand-new Budget?
More buying power
Last year brought large changes to the depreciation schedules of many SMEs. The 2015 Federal Budget stated that newly purchased assets could receive instant depreciation as long as the buying company was "small" and the equipment cost less than $20,000.
"There are now more opportunities for brokers with larger clients to have these discussions and to really emphasise their role as trusted adviser to clients of all sizes."
National Insurance Broker Association's CEO Dallas Booth said this policy, which runs until next year, combined with the new rules around small businesses, gives companies more buying power.
"Small-business owners are still able to access full tax deductibility for asset purchases costing less than $20,000 until 30 June 2017, and any purchases of this kind may well impact on the business's sum insured," Mr Booth began.
"And with the definition of 'small business' being applied to businesses where the annual turnover is $10 million, there are now more opportunities for brokers with larger clients to have these discussions and to really emphasise their role as trusted adviser to clients of all sizes."
As more and more small businesses increase their asset bases, they'll have more equipment to put on their insurance policies. A broker may be busy updating and adding to their clients' policies, though it's no doubt a good sign for growth.
