The Coalition is yet to fully explain how it will create 400,000 new small businesses, a week after its major campaign pledge

Industry groups and business experts have welcomed the Coalition government’s pledge to establish 400,000 new small businesses if re-elected, but have called for further detail on the policy positions driving that claim.

Last week, Prime Minister Scott Morrison, Small Business Minister Stuart Robert, and Energy Minister Angus Taylor delivered a joint statement declaring a re-elected Morrison government would drive 80,000 new business entries a year through to 2027.

The announcement centred on a new pledge to invest $17.9 million in the Business Energy Advice Program (BEAP), helping small businesses discern which electricity deals work best for them.

Other measures highlighted in the 2022-23 federal budget, including $5.6 million in funding for a small business unit at the Fair Work Commission, and $8 million for the Australian Small Business and Family Enterprise Ombudsman, earned a mention.

Notably it also praised the impact of both the instant asset write-off scheme and the loss carry back initiative on business investment, although both schemes are currently set to end in June 2023.

“Our plan for a strong economy and a stronger future for all Australians relies on strong small businesses,” Morrison said.

Numbers without detail a “non-story”: COSBOA

Professor Daniel Samson, a senior management academic at the University of Melbourne and former advisor to NAB and Toyota, says the statement lacks detail on how the Coalition intends to reach that goal.

The $17.9 million investment in the BEAP is “nowhere near strong enough to be related to any effect,” Samson says, with potential small business founders unlikely to be wooed into starting a business by the advisory scheme.

“If you think about the world in terms of cause and effect, he’s telling us what the effect is, what the outcome is, without telling us any detail about what he’s going to do,” he said.

Lack of detail extends to the 400,000 figure itself, Samson said.

When accounting for net new businesses entries — that is, new entries minus total business exits — the Australian economy added roughly 333,000 between 2017-2018 and 2020-2021.

“400,000 is not that big a bump,” Samson said.

“And unless we are told what the cause of that additional effect is, then it’s just a number.

“It’s just a made up number until we see the evidence and can judge what is the cause of that effect. We have no basis for saying whether it’s credible or incredible.”

Alexi Boyd, CEO of the Council of Small Business Organisations Australia (COSBOA), said: “A high-level figure like that with no detail is a non-story.”

The small business community would benefit from a more detailed assessment of how the Coalition’s policy positions would influence the sector, she says.

“It’s not a good indicator of the state of the small business economy, to just say there are ‘X’ number of new businesses starting,” she said.

“What needs to be done is an analysis into which sectors are growing, which are shrinking, and then talk to the industry about why those numbers are what they are.”

The 400,000 figure could also obscure the difference between small business and independent contractors, a distinction which became a flashpoint in Sunday’s leadership debate.

Championing a large number of new business registrations could obscure an increase in “sham contracting”, Boyd says, whereby employers push people to obtain ABNs so they can avoid claim insurance, for example, for a worker on a job site.

“So I think it’s really important that these high level numbers not necessarily seen as an economic indicator that is always positive.”

SmartCompany has contacted the offices of the Prime Minister and Minister Robert for comment.

Instant asset write-offs a continued focus

The statement claims the expanded instant asset write-off scheme, which allows small businesses to claim large deductions up-front instead of calculating depreciation over the life of an asset, has resulted in $21.8 billion of business investment.

But the statement made no mention of extending it past June 2023. Speaking to ABC RN Breakfast on Thursday, Finance Minister Simon Birmingham would not commit the Morrison government to a further extension.

“The fact recent statements highlight the positive impact of the write-off suggests the Morrison government is “almost hinting that there might be an extension of those, by saying they’ve been terrific,” Samson said.

Without drawing a line between renewing the scheme and the creation of 400,000 new small businesses, Boyd says the instant asset write-off mechanism “was an excellent piece of policy”.

“And we are incredibly disappointed that it is not continuing beyond June 23, and we will continue to lobby the government to ensure that it is.”

Beyond the write-off policy, and hopes for its renewal, Samson and Boyd say policies cutting red tape and clarifying business obligations around tax, superannuation, and even food wastage would encourage business registrations.

Further government investment to provide new businesses with advisory services would build the number of successful enterprises, Samson added.