What a Morrison Government means for franchising

By Nick Hall | 21 May 2019 View comments

With the dust still settling on an unprecedented Coalition victory in Saturday’s federal election, attention is quickly turning to small business reform. So, what can the sector expect from the Morrison Government’s franchising focus?

Over the past two months, the media has been fixated on Bill Shorten and the Labor Party’s proposed updates for small business owners.

Shorten had promised to improve conditions for workers across the country, calling for the implementation of a ‘living wage’ and promising to backtrack on penalty rate downgrades.

However, it was Prime Minister Scott Morrison’s small business proposals that captured the attention of the franchising sector.

A vast number of prospective business owners outlined tax, wages and access to finance as their primary concerns leading up the election, and the party responded.

With the Morrison Government’s franchising reform certain to impact the sector, Inside Franchise Business covers the most important updates for franchisees and franchisors.

Tax cuts

A headline feature of the Coalition’s campaign was the nationwide roll-out of tax cuts for low-income earners.

According to the government, more than 10 million Australians earning up to $126,000 per year will receive tax breaks of up to $1080 from 1 July.

The expected result is a boost to consumer spending, which has been welcomed with open arms by the nation’s small business owners.

Kate Carnell, Australian Small Business and Family Enterprise Ombudsman (ASBFEO) said the tax cuts were just one of many ways in which the government was expected to support the sector.

“There was a range of commitments made to small businesses during the election campaign and in the budget and we look forward to working with the government to deliver on these to ensure SMEs continue to be the ‘engine room of the economy’,” she said.

Franchising taskforce

Earlier this month, Shadow Minister Assisting for Small Business Madeleine King confirmed that the Labor party would introduce a franchising taskforce should it win the election.

“The taskforce will have Terms of Reference guided by the inquiry’s report, of which it will be accountable to,” King told Inside Franchise Business.

“In my capacity as Shadow Minister Assisting for Small Business, I’ve heard horror stories about the franchising industry, so I’m acutely aware of the need for reform and oversight.”

The Coalition responded quickly, announcing the formation of a taskforce just days after King’s admission.

Now with the party clinching a majority win, the Morrison Government’s franchising taskforce looks set to enforce the joint committee’s recommendations.

“The Morrison Government is committed to supporting effective and fair reforms to the franchising sector,” Small Business Minister Michaelia Cash said in a statement provided to Inside Franchise Business. “The Taskforce has been established and is operational.”

The taskforce will provide advice to the Federal Government regarding the current operational standards within the sector. This advice will then form the basis for the Morrison Government’s franchising response to the inquiry and form a plan for reform.

Share market confidence returns

It’s been only days since the election results were announced, and yet the share market has already seen a resurgence in confidence. On Tuesday, the ASX boomed to an 11-year high.

Shares in the big four banks surged by between five and seven per cent, with the nation’s health insurers also reaping the rewards of a Coalition victory.

It was a welcome turn of events for the financial sector, which is still reeling from the effects of the banking royal commission.

“Investors won’t need to work through the consequences of the Labor Party’s proposed changes to negative gearing, franking credits and taxation scales,” CommSec chief economist Craig James said.

Prospective franchisees will be hoping the strong consumer shift piggybacks on the government’s previously announced Business Securitisation Fund, which promises easier access to finance.

The $2bn fund supports non-bank lenders in an effort to improve finance for SME businesses.

Prime Minister Morrison also recently announced a $100m outlay in taxpayer money for the Australian Business Growth Fund. The Coalition victory will see the fund continue to provide high-potential SMEs with access to affordable loans.

Penalty rate downgrades continue

Early in the election campaign, Labor announced that it would reverse the Coalition’s penalty rate cut, should it win office.

While the policy proposal had merit among casual working voters, many franchisees and small business owner feared the impending wage cost.

Russell Zimmerman, executive director of the Australian Retailers’ Association said the Coalition win meant that small business owners would not be burdened by the rising cost of wages.

“Every retailer in Australia, whether you’re a big retailer like a Woolworths or Coles or a mum-and-dad operation, has a wages budget to work within,” Zimmerman said.

“If you’re faced with a position where that budget may get completely blown out… I’m not sure retail can really stand those kinds of costs at the moment.”

The Coalition’s victory sees penalty rates continue on their downgrade.

Instant asset write-off

At the end of last year, the government moved to improve taxation conditions for small businesses. The result was an extension and increase to the instant asset write-off scheme.

Saturday’s election victory sees small businesses turning over less than $50m retain their ability to instantly write off new assets costing from $30,000, up from $25,000 previously.

Back in January, Dominique Lamb, CEO of the National Retail Association said the policy had the potential to greatly impact local business owners in a number of key areas.

“We expect this will encourage many business owners to make purchasing decisions that might otherwise have remained in the planning phase until next financial year,” Lamb said.

Morrison Government’s franchising focus

While the Federal Election results may have come as a shock to some, for franchisees, it spells a familiar focus.

The Coalition victory allows Morrison to continue small business reform, while implementating additions set to benefit the franchise sector.