SME Tax Cuts Can Fund Growth

When a government announces tax cuts for business, there is always a simple premise behind the move: it is aimed at encouraging growth. The recent Australian Federal Budget is no different, and businesses will seize the opportunity to invest in themselves.

Targeting businesses with an annual turnover of less than $50m, the government recently promised to fast-track a company tax rate cut to 25% for small and medium-sized companies, and is also extending its instant asset write off threshold to $30,000, which bigger SMEs will also be able to use.

The write off threshold move is significant because it will offer businesses tax relief on their purchases all at once, instead of it being spread over five years. That money could be used to fund investments.

Cash to Invest

As we’ve explained many times on these pages, cash in your hand today is worth significantly more than a promise of the same amount of money – in this case through tax relief – in years to come. For SME’s in an era when business funding is not always easy to come by, that cash can be a valuable source of funding for their plans and ambitions.

Comparisons of business funding options don’t usually include “using the business’ own money” because, in a sense, it’s too obvious, but actually, there are various ways of doing just that and they are often the most cost-effective and safe ways to fund expansion plans.

Obviously, most businesses use their own money where they can to fund operational expenses. However, if they are able to get an extra sum at some point – through a reduction in their tax bill, for example – then that extra can be used for capital investment, or simply to scale up operations.

In this respect, government tax cuts don’t work exactly how some proponents believe. Ideological supporters of lower taxes tend to emphasise the increase in incentives for people in business, but most business owners are looking for long term success. Instead of taking their money now, they re-invest it in their venture, which of course drives growth.

Get More of Your Money Working

While tax cuts are nice to have and the instant asset write off changes should also offer some extra liquidity to Australian SMEs in the year of their introduction, they do not put actual cash into the business. There are other ways of using your own money to invest and grow.

Specifically, cash flow finance works on this same premise, except that the business actually gets physical cash in to invest and grow. Invoice financing allows a business to access the money tied up in its accounts receivables ledger immediately, that would otherwise only be received 30, 60 or even 90 days after invoicing a customer. It is not free, (even OptiPay charges a small fee, which can be seen as akin to an early payment discount, but it is a very straightforward and safe way of accessing the cash you are owed now and using it to invest in operations, which will ultimately make you more money. It is your money that OptiPay is giving you today instead of waiting weeks and weeks for. Similarly, specialist business funding such as Import Finance is based on providing a cash advance on orders and therefore giving businesses the option of investing in themselves rather than having to arrange long-term and costly funding such as a business loan or equity financing.

Owners of successful businesses are people who have effectively proved that they can use their money to create jobs, value and growth. The least we can do is make sure they have access to their own money in order to make the investments they need. Find out how much of your own money you could access right now by getting in touch with OptiPay today on 1300 694 686.

Get tomorrow’s cash flow today.

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